Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify Rule 11.25 To Permit Mid-Point Peg Orders Entered as Periodic Auction Eligible Orders To Contain an Instruction To Not Execute in a Locked Market, 10602-10605 [2023-03478]
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10602
Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
uses. Additionally, any latency imposed
by the Pre-Trade Risk Controls proposed
here is de minimis and would not have
a material impact on the order flow of
ETP Holders that choose to employ nonexchange providers (such as HPR) to
provide them with risk control
solutions.
Finally, the Exchange believes it
would be an unfair burden on
competition for the Commission to
suspend and ultimately disapprove the
pre-trade risk controls proposed here,
where substantially identical controls
are already in place on numerous of the
Exchange’s competitor exchanges.32
Since 2017, equities exchanges have
been adding pre-trade risk controls to
their trading systems. It would be an
unjustifiable burden on competition and
on the Exchange for the Commission to
permit all equities exchanges to offer
such functionality except for the
Exchange and its affiliates mentioned in
the HPR Letter. Specifically, the
Exchange would be at a significant
competitive disadvantage vis-a`-vis other
equities exchanges that already offer the
type of pre-trade risk controls proposed
in this filing as ETP Holders may choose
to direct order flow away from the
Exchange until it is able to offer such
competing pre-trade risk controls.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 37 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
Paper Comments
• Send paper comments in triplicate
to: Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEARCA–2023–13. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
lotter on DSK11XQN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 33 and Rule
19b–4(f)(6) thereunder.34 Because the
foregoing proposed rule change does
not: (i) significantly affect the protection
of investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 35 and
subparagraph (f)(6) of Rule 19b–4
thereunder.36
32 See
supra notes 9–12.
U.S.C. 78s(b)(3)(A)(iii).
34 17 CFR 240.19b–4(f)(6).
35 15 U.S.C. 78s(b)(3)(A)(iii).
36 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEARCA–2023–13 on the subject
line.
33 15
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description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
37 15 U.S.C. 78s(b)(2)(B).
PO 00000
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Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEARCA–2023–13 and
should be submitted on or before March
14, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–03481 Filed 2–17–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96916; File No. SR–
CboeBYX–2023–001]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Modify Rule
11.25 To Permit Mid-Point Peg Orders
Entered as Periodic Auction Eligible
Orders To Contain an Instruction To
Not Execute in a Locked Market
February 14, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
2, 2023, Cboe BYX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
38 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposal to modify
Rule 11.25 to permit Mid-Point Peg
Orders entered as Periodic Auction
Eligible Orders to contain an instruction
to not execute in a locked market. The
text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/byx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
lotter on DSK11XQN23PROD with NOTICES1
The purpose of this proposed rule
change is to amend Rule 11.25(b)(2)(B) 5
in order to permit Mid-Point Peg
5 Rule 11.25 governs Periodic Auctions on the
Exchange. The Commission approved the
Exchange’s proposal to introduce Periodic Auctions
for the trading of U.S. equity securities on March
26, 2021. Periodic Auctions are price forming
auctions that are executed at the price level which
maximizes the total number of shares in both the
auction book and the continuous market that are
executed in the auction and do not interrupt trading
on the continuous market. See Securities Exchange
Act Release No. 91423 (March 26, 2021), 86 FR
17230 (April 1, 2021) (SR–CboeBYX–2020–021)
(Notice of Filing of Amendments No. 3 and No. 4,
and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendments No. 3 and No. 4, to Introduce Periodic
Auctions for the Trading of U.S. Equity Securities).
See also Securities Exchange Act Release No. 94012
(January 20, 2022), 87 FR 4060 (January 26, 2022)
(SR–CboeBYX–2021–024) (Notice of Filing of
Amendment No. 2 and Order Approving on an
Accelerated Basis a Proposed Rule Change, as
Modified by Amendment No. 2, To Make Clarifying
Changes Regarding Its Periodic Auctions) (together,
the ‘‘Original Proposal’’).
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Orders 6 entered as Periodic Auction
Eligible Orders (‘‘Mid-Point PAE
Order’’) 7 to be designated as ineligible
to trade on the Continuous Book 8 when
the national best bid or offer (‘‘NBBO’’)
is locked and to provide that such
instruction will not apply during a
Periodic Auction.9 Rule 11.25(b)(2)(B)
currently prohibits the entry of such
orders. The proposed change would not
apply to Mid-Point Peg Orders
designated as Periodic Auction Only
Orders, as Periodic Auction Only Orders
are not eligible for execution on the
Continuous Book.10 The System 11
currently rejects Mid-Point PAE Orders
containing an instruction to not execute
during a locked market because the
System would not be able to prevent
such orders from participating in a
Periodic Auction where there is a
locked market at the time that the
Periodic Auction occurs.12
However, User 13 feedback has
indicated a desire to enter Mid-Point
PAE Orders that are eligible to
participate in Periodic Auctions, while
simultaneously prohibiting these orders
from trading on the Continuous Book
during a locked market.14 Accordingly,
6 See Rule 11.9(c)(9). A ‘‘Mid-Point Peg Order’’ is
a limit order whose price is automatically adjusted
by the System in response to changes in the NBBO
to be pegged to the mid-point of the NBBO, or,
alternatively, pegged to the less aggressive of the
midpoint of the NBBO or one minimum price
variation inside the same side of the NBBO as the
order.
7 See Rule 11.25(b). A ‘‘Periodic Auction Eligible
Order’’ is a non-displayed limit order eligible to
trade on the Continuous Book that is entered with
an instruction to also initiate a Periodic Auction, if
possible, pursuant to Rule 11.25. Periodic Auction
Eligible Orders will not trade on the Continuous
Book during a Periodic Auction Period in the
security.
8 See Rule 11.25(a)(2). The term ‘‘Continuous
Book’’ shall mean the System’s electronic file of
Continuous Book Orders. A Continuous Book Order
shall mean an order on the BYX Book that is not
a Periodic Auction Only Order or a Periodic
Auction Eligible Order.
9 Supra note 5.
10 See Rule 11.25(b)(1). A ‘‘Periodic Auction Only
Order’’ is a non-displayed limit order entered with
an instruction to participate solely in Periodic
Auctions pursuant to Rule 11.25.
11 See Rule 1.5(aa). The term ‘‘System’’ shall
mean the electronic communications and trading
facility designated by the Board through which
securities orders of Users are consolidated for
ranking, execution and, when applicable, routing
away.
12 See Rule 11.25(a)(8). The term ‘‘Periodic
Auction Period’’ shall mean the fixed time period
of 100 milliseconds for conducting a Periodic
Auction.
13 See Rule 1.5(cc). The term ‘‘User’’ shall mean
any Member or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Rule 11.3.
14 Mid-Point Peg Orders are often used by
Members seeking price improvement over
displayed liquidity. When Mid-Point Peg Orders
execute during a locked market, the Member does
not receive any price improvement.
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10603
the Exchange now seeks to permit the
System to accept Mid-Point PAE Orders
containing an instruction prohibiting
trading on the Continuous Book during
a locked market.15
As noted above, the System currently
rejects Mid-Point PAE Orders that are
designated as ineligible to execute
during a locked market.16 However, the
System does permit Non-PAE Mid-Point
Orders (i.e. Mid-Point Peg Orders that
do not also contain a Periodic Auction
Eligible Order instruction) to be
designated as ineligible to execute
during a locked market.17 Based on the
feedback from Users described above,
the Exchange is proposing that MidPoint PAE Orders be handled by the
System in the same manner as Non-PAE
Mid-Point Orders. As noted above,
Periodic Auction Eligible Orders are
eligible to trade on either the
Continuous Book or initiate a Periodic
Auction, if possible. Mid-Point PAE
Orders trade on the Continuous Book
until such orders match with contraside Periodic Auction Orders 18 and
initiate a Periodic Auction Period. Once
a Periodic Auction Period has been
initiated, Periodic Auction Eligible
Orders, including Mid-Point PAE
Orders, are ineligible for trading on the
Continuous Book until the Periodic
Auction Period is completed. Outside of
the ability to initiate a Periodic Auction
Period, Mid-Point PAE Orders behave
just as a Non-PAE Mid-Point Orders.
Accordingly, Users should be able to
designate their Mid-Point PAE Orders as
ineligible to execute during a locked
market while trading on the Continuous
Book.19
The Exchange plans to implement the
proposed rule change during the first
quarter of 2023 and will announce the
implementation date via Trade Desk
Notice.
15 The proposed rule change will not prevent
Mid-Point PAE Orders from initiating and
completing a Periodic Auction, as the instruction to
not execute in a locked market will be ignored
when a Periodic Auction Period begins and will
only apply when a Mid-Point PAE Order is trading
on the Continuous Book.
16 See Rule 11.25(b)(2)(B).
17 See Securities Exchange Act Release No. 91423
(March 26, 2021), 86 FR 17230 (April 1, 2021) (SR–
CboeBYX–2020–021) (Notice of Filing of
Amendments No. 3 and No. 4, and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendments No. 3 and No. 4, to
Introduce Periodic Auctions for the Trading of U.S.
Equity Securities) at footnote 27.
18 See Rule 11.25(a)(6). The term ‘‘Periodic
Auction Order’’ shall mean a ‘‘Periodic Auction
Only Order’’ or ‘‘Periodic Auction Eligible Order’’
as those terms are defined in Rules 11.25(b)(1)–(2).
19 The Exchange is not proposing to broadly
change Mid-Point Peg Order functionality. Rather,
the proposal seeks only to modify Mid-Point Peg
Orders entered as PAE.
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10604
Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.20 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 21 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 22 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
change is consistent with just and
equitable principles of trade as the
Exchange will allow the System to
accept Mid-Point PAE Orders
containing an instruction to prohibit
trading on the Continuous Book during
a locked market, which is consistent
with how the System accepts Non-PAE
Mid-Point Orders containing the same
instruction pursuant to Rule 11.9(c)(9).
Further, the proposed change will
provide Users with enhanced control
over their Mid-Point PAE Orders as the
System will be permitted to accept MidPoint Peg PAE Orders containing an
instruction to prohibit trading on the
Continuous Book during a locked
market, and these orders will continue
to have the benefit of initiating a
Periodic Auction should the order
match with a contra-side Periodic
Auction Order. The Exchange believes
that by accepting Mid-Point PAE Orders
containing an instruction to prohibit
trading on the Continuous Book during
a locked market, additional Users would
begin using the Periodic Auction
Eligible Order type, which would in
turn may create additional liquidity in
Periodic Auctions.
The Exchange believes the proposed
Rule change removes impediments to
and perfects the mechanism of a free
and open market and a national market
20 15
21 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
22 Id.
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Jkt 259001
system by permitting the System to
accept Mid-Point PAE Orders
containing an instruction to prohibit
trading on the Continuous Book during
a locked market without concern that
the order could initiate a Periodic
Auction and would be unable to execute
at the conclusion of the Periodic
Auction Period due to the presence of
a locked market. The Exchange
introduced Periodic Auctions with the
intent of providing a competitive
mechanism for the execution of orders
in thinly-traded securities. The System’s
current practice of rejecting Mid-Point
PAE Orders containing an instruction to
prohibit trading during a locked market
limits Users’ desire to utilize the MidPoint PAE Order instruction, which in
turn may limit the liquidity in Periodic
Auctions. Some Users have indicated to
the Exchange that they prefer the use of
Non-PAE Mid-Point Orders that are
ineligible to execute during a locked
market over use of Mid-Point PAE
Orders because Non-PAE Mid-Point
Orders that are ineligible to execute
during a locked market provide Users an
opportunity to receive midpoint price
improvement. Mid-Point PAE Orders,
however, may execute during a locked
market while trading on the Continuous
Book and therefore may not receive
midpoint price improvement. The
proposed rule change will encourage the
use of Mid-Point PAE Orders while
removing the possibility of an execution
during a locked market while these
orders are trading on the Continuous
Book.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change would not impose
any intramarket burden on competition
for Users currently using Periodic
Auction Orders as there will be no
change as to how Mid-Point PAE Orders
interact with Periodic Auction Orders.
Mid-Point PAE Orders will continue to
remain eligible to initiate a Periodic
Auction if matched with contra-side
Periodic Auction Orders. The proposed
rule change will only affect how MidPoint PAE Orders behave during a
locked market when these orders are
trading on the Continuous Book. The
Exchange also believes that the
proposed rule change will encourage
Users to submit this particular order
type, thereby increasing Users’
participation in Periodic Auctions. The
Exchange notes that the ability to
restrict Mid-Point PAE Orders from
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Fmt 4703
Sfmt 4703
executing during a locked market will
be available to all Users of the MidPoint PAE Order type and will be
available on an optional basis. While the
proposal directly benefits Users of MidPoint PAE Orders, all Exchange market
participants may benefit from the
potential increased utilization of
Periodic Auctions that may occur if
Mid-Point PAE Orders are able to
initiate additional Periodic Auctions.
While Periodic Auctions are a unique
feature to the Exchange, the proposed
rule change will not burden intermarket
competition as the ability to restrict
Mid-Point Peg Orders from executing
during a locked market on the
Continuous Book already exists on other
markets.23 Users are free to determine
whether to utilize the Mid-Point PAE
Order functionality offered by the
Exchange when making order routing
determinations. The Exchange notes
that it operates in a highly competitive
market in which market participants can
readily choose between competing
venues if they deem participation in the
Exchange’s market is no longer
desirable. The Exchange believes its
proposed change will promote
competition among trading venues by
making the Exchange a more attractive
trading venue for participants and
investors.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 24 and Rule 19b–
4(f)(6) thereunder.25
23 See NYSE Rule 7.31(d)(3)(B); MIAX Pearl
Equities Rule 2614(a)(3)(B).
24 15 U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
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Federal Register / Vol. 88, No. 34 / Tuesday, February 21, 2023 / Notices
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),26 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay. The Exchange states
that it is seeking to offer the same
functionality to Mid-Point PAE Orders
that it already provides for Non-PAE
Mid-Point Orders under Rule 11.9(c)(9).
The System accepts Non-PAE MidPoint Orders with an instruction to not
execute in a locked market when trading
on the Continuous Book, and the only
proposed change is to allow Mid-Point
PAE Orders to similarly be ineligible
from trading during a locked market
while trading on the Continuous Book.
The proposed order instruction is also
voluntary, and Users may continue to
designate Mid-Point PAE Orders to
execute in a locked market. For these
reasons, the Commission finds that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest.
Accordingly, the Commission hereby
waives the operative delay and
designates the proposed rule change
operative upon filing.27
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
lotter on DSK11XQN23PROD with NOTICES1
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBYX–2023–001.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–96914; File No. SR–
CboeEDGX–2023–008]
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeBYX–2023–001. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeBYX–2023–001, and
should be submitted on or before March
14, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–03478 Filed 2–17–23; 8:45 am]
BILLING CODE 8011–01–P
CFR 240.19b–4(f)(6)(iii).
purposes only of accelerating the operative
date of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
February 14, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
1, 2023, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend its fee schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
26 17
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Frm 00111
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15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
E:\FR\FM\21FEN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 34 (Tuesday, February 21, 2023)]
[Notices]
[Pages 10602-10605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03478]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96916; File No. SR-CboeBYX-2023-001]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
Rule 11.25 To Permit Mid-Point Peg Orders Entered as Periodic Auction
Eligible Orders To Contain an Instruction To Not Execute in a Locked
Market
February 14, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 2, 2023, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Exchange filed the proposal as
a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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[[Page 10603]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposal
to modify Rule 11.25 to permit Mid-Point Peg Orders entered as Periodic
Auction Eligible Orders to contain an instruction to not execute in a
locked market. The text of the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/byx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to amend Rule
11.25(b)(2)(B) \5\ in order to permit Mid-Point Peg Orders \6\ entered
as Periodic Auction Eligible Orders (``Mid-Point PAE Order'') \7\ to be
designated as ineligible to trade on the Continuous Book \8\ when the
national best bid or offer (``NBBO'') is locked and to provide that
such instruction will not apply during a Periodic Auction.\9\ Rule
11.25(b)(2)(B) currently prohibits the entry of such orders. The
proposed change would not apply to Mid-Point Peg Orders designated as
Periodic Auction Only Orders, as Periodic Auction Only Orders are not
eligible for execution on the Continuous Book.\10\ The System \11\
currently rejects Mid-Point PAE Orders containing an instruction to not
execute during a locked market because the System would not be able to
prevent such orders from participating in a Periodic Auction where
there is a locked market at the time that the Periodic Auction
occurs.\12\
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\5\ Rule 11.25 governs Periodic Auctions on the Exchange. The
Commission approved the Exchange's proposal to introduce Periodic
Auctions for the trading of U.S. equity securities on March 26,
2021. Periodic Auctions are price forming auctions that are executed
at the price level which maximizes the total number of shares in
both the auction book and the continuous market that are executed in
the auction and do not interrupt trading on the continuous market.
See Securities Exchange Act Release No. 91423 (March 26, 2021), 86
FR 17230 (April 1, 2021) (SR-CboeBYX-2020-021) (Notice of Filing of
Amendments No. 3 and No. 4, and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendments No. 3 and No.
4, to Introduce Periodic Auctions for the Trading of U.S. Equity
Securities). See also Securities Exchange Act Release No. 94012
(January 20, 2022), 87 FR 4060 (January 26, 2022) (SR-CboeBYX-2021-
024) (Notice of Filing of Amendment No. 2 and Order Approving on an
Accelerated Basis a Proposed Rule Change, as Modified by Amendment
No. 2, To Make Clarifying Changes Regarding Its Periodic Auctions)
(together, the ``Original Proposal'').
\6\ See Rule 11.9(c)(9). A ``Mid-Point Peg Order'' is a limit
order whose price is automatically adjusted by the System in
response to changes in the NBBO to be pegged to the mid-point of the
NBBO, or, alternatively, pegged to the less aggressive of the
midpoint of the NBBO or one minimum price variation inside the same
side of the NBBO as the order.
\7\ See Rule 11.25(b). A ``Periodic Auction Eligible Order'' is
a non-displayed limit order eligible to trade on the Continuous Book
that is entered with an instruction to also initiate a Periodic
Auction, if possible, pursuant to Rule 11.25. Periodic Auction
Eligible Orders will not trade on the Continuous Book during a
Periodic Auction Period in the security.
\8\ See Rule 11.25(a)(2). The term ``Continuous Book'' shall
mean the System's electronic file of Continuous Book Orders. A
Continuous Book Order shall mean an order on the BYX Book that is
not a Periodic Auction Only Order or a Periodic Auction Eligible
Order.
\9\ Supra note 5.
\10\ See Rule 11.25(b)(1). A ``Periodic Auction Only Order'' is
a non-displayed limit order entered with an instruction to
participate solely in Periodic Auctions pursuant to Rule 11.25.
\11\ See Rule 1.5(aa). The term ``System'' shall mean the
electronic communications and trading facility designated by the
Board through which securities orders of Users are consolidated for
ranking, execution and, when applicable, routing away.
\12\ See Rule 11.25(a)(8). The term ``Periodic Auction Period''
shall mean the fixed time period of 100 milliseconds for conducting
a Periodic Auction.
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However, User \13\ feedback has indicated a desire to enter Mid-
Point PAE Orders that are eligible to participate in Periodic Auctions,
while simultaneously prohibiting these orders from trading on the
Continuous Book during a locked market.\14\ Accordingly, the Exchange
now seeks to permit the System to accept Mid-Point PAE Orders
containing an instruction prohibiting trading on the Continuous Book
during a locked market.\15\
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\13\ See Rule 1.5(cc). The term ``User'' shall mean any Member
or Sponsored Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.
\14\ Mid-Point Peg Orders are often used by Members seeking
price improvement over displayed liquidity. When Mid-Point Peg
Orders execute during a locked market, the Member does not receive
any price improvement.
\15\ The proposed rule change will not prevent Mid-Point PAE
Orders from initiating and completing a Periodic Auction, as the
instruction to not execute in a locked market will be ignored when a
Periodic Auction Period begins and will only apply when a Mid-Point
PAE Order is trading on the Continuous Book.
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As noted above, the System currently rejects Mid-Point PAE Orders
that are designated as ineligible to execute during a locked
market.\16\ However, the System does permit Non-PAE Mid-Point Orders
(i.e. Mid-Point Peg Orders that do not also contain a Periodic Auction
Eligible Order instruction) to be designated as ineligible to execute
during a locked market.\17\ Based on the feedback from Users described
above, the Exchange is proposing that Mid-Point PAE Orders be handled
by the System in the same manner as Non-PAE Mid-Point Orders. As noted
above, Periodic Auction Eligible Orders are eligible to trade on either
the Continuous Book or initiate a Periodic Auction, if possible. Mid-
Point PAE Orders trade on the Continuous Book until such orders match
with contra-side Periodic Auction Orders \18\ and initiate a Periodic
Auction Period. Once a Periodic Auction Period has been initiated,
Periodic Auction Eligible Orders, including Mid-Point PAE Orders, are
ineligible for trading on the Continuous Book until the Periodic
Auction Period is completed. Outside of the ability to initiate a
Periodic Auction Period, Mid-Point PAE Orders behave just as a Non-PAE
Mid-Point Orders. Accordingly, Users should be able to designate their
Mid-Point PAE Orders as ineligible to execute during a locked market
while trading on the Continuous Book.\19\
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\16\ See Rule 11.25(b)(2)(B).
\17\ See Securities Exchange Act Release No. 91423 (March 26,
2021), 86 FR 17230 (April 1, 2021) (SR-CboeBYX-2020-021) (Notice of
Filing of Amendments No. 3 and No. 4, and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendments No. 3
and No. 4, to Introduce Periodic Auctions for the Trading of U.S.
Equity Securities) at footnote 27.
\18\ See Rule 11.25(a)(6). The term ``Periodic Auction Order''
shall mean a ``Periodic Auction Only Order'' or ``Periodic Auction
Eligible Order'' as those terms are defined in Rules 11.25(b)(1)-
(2).
\19\ The Exchange is not proposing to broadly change Mid-Point
Peg Order functionality. Rather, the proposal seeks only to modify
Mid-Point Peg Orders entered as PAE.
---------------------------------------------------------------------------
The Exchange plans to implement the proposed rule change during the
first quarter of 2023 and will announce the implementation date via
Trade Desk Notice.
[[Page 10604]]
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\20\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \21\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \22\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
\22\ Id.
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In particular, the proposed rule change is consistent with just and
equitable principles of trade as the Exchange will allow the System to
accept Mid-Point PAE Orders containing an instruction to prohibit
trading on the Continuous Book during a locked market, which is
consistent with how the System accepts Non-PAE Mid-Point Orders
containing the same instruction pursuant to Rule 11.9(c)(9). Further,
the proposed change will provide Users with enhanced control over their
Mid-Point PAE Orders as the System will be permitted to accept Mid-
Point Peg PAE Orders containing an instruction to prohibit trading on
the Continuous Book during a locked market, and these orders will
continue to have the benefit of initiating a Periodic Auction should
the order match with a contra-side Periodic Auction Order. The Exchange
believes that by accepting Mid-Point PAE Orders containing an
instruction to prohibit trading on the Continuous Book during a locked
market, additional Users would begin using the Periodic Auction
Eligible Order type, which would in turn may create additional
liquidity in Periodic Auctions.
The Exchange believes the proposed Rule change removes impediments
to and perfects the mechanism of a free and open market and a national
market system by permitting the System to accept Mid-Point PAE Orders
containing an instruction to prohibit trading on the Continuous Book
during a locked market without concern that the order could initiate a
Periodic Auction and would be unable to execute at the conclusion of
the Periodic Auction Period due to the presence of a locked market. The
Exchange introduced Periodic Auctions with the intent of providing a
competitive mechanism for the execution of orders in thinly-traded
securities. The System's current practice of rejecting Mid-Point PAE
Orders containing an instruction to prohibit trading during a locked
market limits Users' desire to utilize the Mid-Point PAE Order
instruction, which in turn may limit the liquidity in Periodic
Auctions. Some Users have indicated to the Exchange that they prefer
the use of Non-PAE Mid-Point Orders that are ineligible to execute
during a locked market over use of Mid-Point PAE Orders because Non-PAE
Mid-Point Orders that are ineligible to execute during a locked market
provide Users an opportunity to receive midpoint price improvement.
Mid-Point PAE Orders, however, may execute during a locked market while
trading on the Continuous Book and therefore may not receive midpoint
price improvement. The proposed rule change will encourage the use of
Mid-Point PAE Orders while removing the possibility of an execution
during a locked market while these orders are trading on the Continuous
Book.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change
would not impose any intramarket burden on competition for Users
currently using Periodic Auction Orders as there will be no change as
to how Mid-Point PAE Orders interact with Periodic Auction Orders. Mid-
Point PAE Orders will continue to remain eligible to initiate a
Periodic Auction if matched with contra-side Periodic Auction Orders.
The proposed rule change will only affect how Mid-Point PAE Orders
behave during a locked market when these orders are trading on the
Continuous Book. The Exchange also believes that the proposed rule
change will encourage Users to submit this particular order type,
thereby increasing Users' participation in Periodic Auctions. The
Exchange notes that the ability to restrict Mid-Point PAE Orders from
executing during a locked market will be available to all Users of the
Mid-Point PAE Order type and will be available on an optional basis.
While the proposal directly benefits Users of Mid-Point PAE Orders, all
Exchange market participants may benefit from the potential increased
utilization of Periodic Auctions that may occur if Mid-Point PAE Orders
are able to initiate additional Periodic Auctions.
While Periodic Auctions are a unique feature to the Exchange, the
proposed rule change will not burden intermarket competition as the
ability to restrict Mid-Point Peg Orders from executing during a locked
market on the Continuous Book already exists on other markets.\23\
Users are free to determine whether to utilize the Mid-Point PAE Order
functionality offered by the Exchange when making order routing
determinations. The Exchange notes that it operates in a highly
competitive market in which market participants can readily choose
between competing venues if they deem participation in the Exchange's
market is no longer desirable. The Exchange believes its proposed
change will promote competition among trading venues by making the
Exchange a more attractive trading venue for participants and
investors.
---------------------------------------------------------------------------
\23\ See NYSE Rule 7.31(d)(3)(B); MIAX Pearl Equities Rule
2614(a)(3)(B).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-
4(f)(6) thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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[[Page 10605]]
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay. The Exchange states
that it is seeking to offer the same functionality to Mid-Point PAE
Orders that it already provides for Non-PAE Mid-Point Orders under Rule
11.9(c)(9).
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\26\ 17 CFR 240.19b-4(f)(6)(iii).
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The System accepts Non-PAE Mid-Point Orders with an instruction to
not execute in a locked market when trading on the Continuous Book, and
the only proposed change is to allow Mid-Point PAE Orders to similarly
be ineligible from trading during a locked market while trading on the
Continuous Book. The proposed order instruction is also voluntary, and
Users may continue to designate Mid-Point PAE Orders to execute in a
locked market. For these reasons, the Commission finds that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\27\
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\27\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBYX-2023-001.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBYX-2023-001. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street, NE, Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBYX-2023-001, and should be
submitted on or before March 14, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03478 Filed 2-17-23; 8:45 am]
BILLING CODE 8011-01-P
