Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.32 Regarding Certain Cancel-Replace Messages, 30810-30812 [2023-10123]
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30810
Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
Dated: May 8, 2023.
Sherry R. Haywood,
Assistant Secretary.
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
[FR Doc. 2023–10114 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97456; File No. SR–C2–
2023–011]
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rule 5.32
Regarding Certain Cancel-Replace
Messages
May 8, 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 April 25,
2023, Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘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 C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2 Options’’) proposes
to amend Rule 5.32. 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/ctwo/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
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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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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1. Purpose
The Exchange proposes to amend
Rule 5.32(e) to describe the impact on
priority of a ‘‘no-change’’ order 3 (i.e., an
order submitted to cancel or replace a
resting order that does not change any
terms of an order) and of a cancel/
replace message that does not change
the price or size of a resting order but
changes another term of an order.
Current Rule 5.32(e) describes whether
a resting order’s priority position may
change if it is modified with a cancel/
replace message. Specifically, current
Rule 5.32(e) states if the price of an
order is changed, the order loses
position and is placed in a priority
position as if the System received the
order at the time the order was changed.
If the quantity of an order is decreased,
it retains its priority position. If the
quantity of an order is increased, it loses
its priority position and is placed in a
priority position as if the System
received the order at the time the
quantity of the order is increased.
Rule 5.32(e), however, is currently
silent regarding how the System handles
a cancel-replace message comprised of a
no-change order or an order that
changes terms other than price and size.
The Exchange recently determined that
if the System receives a no-change
order, the resting order would lose its
priority position; however, if the System
receives a ‘‘no-change’’ bid or offer in a
bulk message, the resting bid or offer
would not lose its priority position. The
Exchange proposes to harmonize the
handling of all no-change orders and
quotes so that any ‘‘no-change’’ order or
bulk message bid or offer will lose
priority, as well as add to the Rules how
the System handles no-change orders.
Additionally, the Exchange proposes to
codify current System functionality that
causes a resting order to lose its priority
position if any cancel/replace message
is submitted if any term other than the
Max Floor (if a Reserve Order) 4 or the
3 In this context, the term ‘‘order’’ includes bids
and offers submitted in bulk messages. A bulk
message means a bid or offer included in a single
electronic message a user submits with an M
(Market-Maker) capacity to the Exchange in which
the User may enter, modify, or cancel up to an
Exchange-specified number of bids and offers. See
Rule 1.1 (definition of bulk message, which
provides that the System handles a bulk message
bid or offer in the same manner as it handles an
order or quote, unless the Rules specify otherwise).
4 A ‘‘Reserve Order’’ is a limit order with both a
portion of the quantity displayed (‘‘Display
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stop price (if a Stop or Stop-Limit
order 5) is modified. Therefore, the
proposed rule change amends Rule
5.32(e) to state if a User submits a
cancel/replace message for a resting
order, regardless of whether the cancel/
replace message modifies any terms of
the resting order, the order loses its
priority position and is placed in a
priority position based on the time the
System receives the cancel/replace
message, unless the User only (1)
decreases the quantity of an order (as is
currently set forth in the Rules), (2)
modifies the Max Floor (if a Reserve
Order), or (3) modifies the stop price (if
a Stop or Stop-Limit order), in which
case the order retains its priority
position.
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.6 Specifically, the
Exchange believes the proposed rule
change is consistent with the section
6(b)(5) 7 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
Quantity’’) and a reserve portion of the quantity
(‘‘Reserve Quantity’’) not displayed. Both the
Display Quantity and Reserve Quantity of the
Reserve Order are available for potential execution
against incoming orders. When entering a Reserve
Order, a User must instruct the Exchange as to the
quantity of the order to be initially displayed by the
System (‘‘Max Floor’’). If the Display Quantity of a
Reserve Order is fully executed, the System will, in
accordance with the User’s instruction, replenish
the Display Quantity from the Reserve Quantity
using one of the below replenishment instructions.
If the remainder of an order is less than the
replenishment amount, the System will display the
entire remainder of the order. The System creates
a new timestamp for both the Display Quantity and
Reserve Quantity of the order each time it is
replenished from reserve. A User may attach an
instruction for random replenishment (where the
System randomly replenishes the Display Quantity
for the order with a number of contracts not outside
a replenishment range, which equals the Max Floor
plus and minus a replenishment value established
by the User when entering a Reserve Order with a
Random Replenishment instruction) or fixed
replenishment (the System will replenish the
Display Quantity of an order with the number of
contracts equal to the Max Floor). See Rule 5.6(c).
5 A ‘‘Stop (Stop-Loss)’’ order is an order to buy
(sell) that becomes a market order when the
consolidated last sale price (excluding prices from
complex order trades if outside of the NBBO) or
NBB (NBO) for a particular option contract is equal
to or above (below) the stop price specified by the
User. A ‘‘Stop-Limit’’ order is an order to buy (sell)
that becomes a limit order when the consolidated
last sale price (excluding prices from complex order
trades if outside the NBBO) or NBB (NBO) for a
particular option contract is equal to or above
(below) the stop price specified by the User. See
Rule 5.6(c).
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
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) 8 requirement that the
rules of an exchange not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market as
well as protect investors by adding
transparency to the Rules regarding how
the System handles cancel/replace
messages that change no order terms or
change order terms other than price and
size. The Exchange believes consistency
in handling of all no-change orders and
quotes will simplify order handling and
thus further benefit investors. The
Exchange believes it is reasonable for a
user’s resting order to lose priority if
that user submits a cancel/replace order,
including a no-change order, to replace
that resting order (other than the three
exceptions). Ultimately, the purpose of
a cancel and replace message is to
replace a resting order with a new order;
therefore, it is appropriate for the
System to treat that replacement order
as a new order for purposes of priority.
Despite the fact that a cancel/replace
message does not modify the price or
size of a resting order (and thus has no
investment purpose), a user elected to
send that new order to the Exchange
despite having an identical order resting
on the Exchange’s book and use System
capacity to do so. Therefore, the
Exchange believes it promotes just and
equitable principles of trade to treat that
replacement order as a new order for
priority purposes. The Exchange
believes the proposed rule change
encourages users to submit to the
Exchange only bona fide cancel/replace
orders that have legitimate investment
purposes and discourages use of System
capacity to send unnecessary message
traffic.
As set forth in the current Rule
5.32(e), a cancel/replace order that
decreases the size of a resting order
would continue to not result in a loss of
priority position is an order. The
Exchange believes it is appropriate to
continue to not have this type of cancel/
replace order cause a loss of priority
because it is consistent with a partial
execution of that order, which would
similarly not cause a loss of priority.9
Unlike a no-change order, an order to
reduce the size of a resting order may
have a legitimate investment purpose,
such as to reduce execution risk.
Additionally, the Exchange believes it
will remove impediments to and perfect
the mechanism of a free and open
market as well as protect investors by
adding transparency to codify that a
change to the Max Floor (if a Reserve
Order) or the stop price (if a Stop or
Stop-Limit order) will not cause a
resting order to lose priority because it
is unnecessary given the handling of
those orders and the fact that at that
time there is no priority to lose. Such
handling is consistent with the
definitions and handling of both of
those order types. Specifically, as set
forth in the definition of a Reserve
Order, the Max Floor amount is relevant
for replenishment of the Display
Quantity of the order after execution,
and once replenished, the System
creates a new timestamp for both the
Display Quantity and Reserve Quantity
of the order each time it is replenished
from reserve (i.e., prioritizes it in the
book at the time of replenishment).
Therefore, there is no need for a loss in
priority due to a change in the Max
Floor amount because that order will
have its priority reset once it is
replenished with that new amount.
Similarly, as set forth in the definitions
of Stop and Stop-Limit orders, those
orders become market or limit orders,
respectively, once triggered and thus
placed on the book as market or limit
orders and prioritized based on that
time. The stop price is the piece of
information that determines when these
orders will be triggered. As a result,
there is no need for an order to lose
priority due to a change in the stop
price given that those orders have not
yet been prioritized on the Book and
will be prioritized once triggered and
entered into the Book for potential
execution.
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
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the System will handle all
cancel/replace orders from all users in
the same manner. All cancel/replace
orders, except for the three exceptions,
will cause the resting order to lose
priority. The three types of cancel/
replace orders that will not cause a
resting order to lose priority and are
consistent with current order handling
rules. The Exchange does not believe
that the proposed rule change will
impose any burden on intermarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act because the
proposed rule change only impacts
priority of orders resting on the
Exchange’s book and thus will have no
impact on terms of an order that are
disseminated to market participants or
on trading outside of the Exchange.
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:
A. significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. 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 10 and Rule 19b–4(f)(6) 11
thereunder. 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.
10 15
8 Id.
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Rule 5.32(d).
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11 17
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30811
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
12MYN1
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Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
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–
C2–2023–011 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
lotter on DSK11XQN23PROD with NOTICES1
All submissions should refer to File
Number SR–C2–2023–011. 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
offices of the Exchange. Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–C2–2023–011, and
should be submitted on or before June
2, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10123 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
12 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34909; 812–15454]
SEI Alternative Income Fund, et al.
May 8, 2023.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of an application under section
6(c) of the Investment Company Act of
1940 (the ‘‘Act’’) for an exemption from
sections 18(a)(2), 18(c) and 18(i) of the
Act, under sections 6(c) and 23(c) of the
Act for an exemption from rule 23c–3
under the Act, and for an order pursuant
to section 17(d) of the Act and rule 17d–
1 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
registered closed-end management
investment companies to issue multiple
classes of shares and to impose early
withdrawal charges and asset-based
distribution and/or service fees with
respect to certain classes.
APPLICANTS: SEI Alternative Income
Fund, SEI Investments Distribution Co.
and SEI Investments Management
Corporation.
FILING DATE: The application was filed
on April 10, 2023.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the relevant applicant with a copy of the
request by email, if an email address is
listed for the relevant applicant below,
or personally or by mail, if a physical
address is listed for the relevant
applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on June 2, 2023, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Timothy D. Barto, tbarto@seic.com and
Sean Graber, sean.graber@
morganlewis.com.
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FOR FURTHER INFORMATION CONTACT:
Trace W. Rakestraw, Senior Special
Counsel, at (202) 551–6825 (Chief
Counsel’s Office, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: For
Applicants’ representations, legal
analysis, and condition, please refer to
Applicants’ application, dated April 10,
2023, which may be obtained via the
Commission’s website by searching for
the file number at the top of this
document, or for an Applicant using the
Company name search field, on the
SEC’s EDGAR system. The SEC’s
EDGAR system may be searched at
https://www.sec.gov/edgar/searchedgar/
legacy/companysearch.html. You may
also call the SEC’s Public Reference
Room at (202) 551–8090.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10132 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97455; File No. SR–ICC–
2023–008]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change Relating to the
ICC Clearing Participant Default
Management Procedures
May 8, 2023.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4,2 notice is
hereby given that on May 02, 2023, ICE
Clear Credit LLC (‘‘ICC’’) 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
primarily by ICC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
ICC proposes a rule change to update
the ICC Clearing Participant (‘‘CP’’)
Default Management Procedures (the
‘‘ICC Default Management Procedures’’).
These revisions do not require any
changes to the ICC Clearing Rules (the
‘‘Rules’’).
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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[Federal Register Volume 88, Number 92 (Friday, May 12, 2023)]
[Notices]
[Pages 30810-30812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97456; File No. SR-C2-2023-011]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 5.32 Regarding Certain Cancel-Replace Messages
May 8, 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 April 25, 2023, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'')
filed with the Securities and Exchange Commission (``SEC'' or
``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2 Options'')
proposes to amend Rule 5.32. 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/ctwo/), 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 Exchange proposes to amend Rule 5.32(e) to describe the impact
on priority of a ``no-change'' order \3\ (i.e., an order submitted to
cancel or replace a resting order that does not change any terms of an
order) and of a cancel/replace message that does not change the price
or size of a resting order but changes another term of an order.
Current Rule 5.32(e) describes whether a resting order's priority
position may change if it is modified with a cancel/replace message.
Specifically, current Rule 5.32(e) states if the price of an order is
changed, the order loses position and is placed in a priority position
as if the System received the order at the time the order was changed.
If the quantity of an order is decreased, it retains its priority
position. If the quantity of an order is increased, it loses its
priority position and is placed in a priority position as if the System
received the order at the time the quantity of the order is increased.
---------------------------------------------------------------------------
\3\ In this context, the term ``order'' includes bids and offers
submitted in bulk messages. A bulk message means a bid or offer
included in a single electronic message a user submits with an M
(Market-Maker) capacity to the Exchange in which the User may enter,
modify, or cancel up to an Exchange-specified number of bids and
offers. See Rule 1.1 (definition of bulk message, which provides
that the System handles a bulk message bid or offer in the same
manner as it handles an order or quote, unless the Rules specify
otherwise).
---------------------------------------------------------------------------
Rule 5.32(e), however, is currently silent regarding how the System
handles a cancel-replace message comprised of a no-change order or an
order that changes terms other than price and size. The Exchange
recently determined that if the System receives a no-change order, the
resting order would lose its priority position; however, if the System
receives a ``no-change'' bid or offer in a bulk message, the resting
bid or offer would not lose its priority position. The Exchange
proposes to harmonize the handling of all no-change orders and quotes
so that any ``no-change'' order or bulk message bid or offer will lose
priority, as well as add to the Rules how the System handles no-change
orders. Additionally, the Exchange proposes to codify current System
functionality that causes a resting order to lose its priority position
if any cancel/replace message is submitted if any term other than the
Max Floor (if a Reserve Order) \4\ or the stop price (if a Stop or
Stop-Limit order \5\) is modified. Therefore, the proposed rule change
amends Rule 5.32(e) to state if a User submits a cancel/replace message
for a resting order, regardless of whether the cancel/replace message
modifies any terms of the resting order, the order loses its priority
position and is placed in a priority position based on the time the
System receives the cancel/replace message, unless the User only (1)
decreases the quantity of an order (as is currently set forth in the
Rules), (2) modifies the Max Floor (if a Reserve Order), or (3)
modifies the stop price (if a Stop or Stop-Limit order), in which case
the order retains its priority position.
---------------------------------------------------------------------------
\4\ A ``Reserve Order'' is a limit order with both a portion of
the quantity displayed (``Display Quantity'') and a reserve portion
of the quantity (``Reserve Quantity'') not displayed. Both the
Display Quantity and Reserve Quantity of the Reserve Order are
available for potential execution against incoming orders. When
entering a Reserve Order, a User must instruct the Exchange as to
the quantity of the order to be initially displayed by the System
(``Max Floor''). If the Display Quantity of a Reserve Order is fully
executed, the System will, in accordance with the User's
instruction, replenish the Display Quantity from the Reserve
Quantity using one of the below replenishment instructions. If the
remainder of an order is less than the replenishment amount, the
System will display the entire remainder of the order. The System
creates a new timestamp for both the Display Quantity and Reserve
Quantity of the order each time it is replenished from reserve. A
User may attach an instruction for random replenishment (where the
System randomly replenishes the Display Quantity for the order with
a number of contracts not outside a replenishment range, which
equals the Max Floor plus and minus a replenishment value
established by the User when entering a Reserve Order with a Random
Replenishment instruction) or fixed replenishment (the System will
replenish the Display Quantity of an order with the number of
contracts equal to the Max Floor). See Rule 5.6(c).
\5\ A ``Stop (Stop-Loss)'' order is an order to buy (sell) that
becomes a market order when the consolidated last sale price
(excluding prices from complex order trades if outside of the NBBO)
or NBB (NBO) for a particular option contract is equal to or above
(below) the stop price specified by the User. A ``Stop-Limit'' order
is an order to buy (sell) that becomes a limit order when the
consolidated last sale price (excluding prices from complex order
trades if outside the NBBO) or NBB (NBO) for a particular option
contract is equal to or above (below) the stop price specified by
the User. See Rule 5.6(c).
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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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
section 6(b)(5) \7\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and
[[Page 30811]]
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) \8\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
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In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market as well as protect investors by adding transparency to the Rules
regarding how the System handles cancel/replace messages that change no
order terms or change order terms other than price and size. The
Exchange believes consistency in handling of all no-change orders and
quotes will simplify order handling and thus further benefit investors.
The Exchange believes it is reasonable for a user's resting order to
lose priority if that user submits a cancel/replace order, including a
no-change order, to replace that resting order (other than the three
exceptions). Ultimately, the purpose of a cancel and replace message is
to replace a resting order with a new order; therefore, it is
appropriate for the System to treat that replacement order as a new
order for purposes of priority. Despite the fact that a cancel/replace
message does not modify the price or size of a resting order (and thus
has no investment purpose), a user elected to send that new order to
the Exchange despite having an identical order resting on the
Exchange's book and use System capacity to do so. Therefore, the
Exchange believes it promotes just and equitable principles of trade to
treat that replacement order as a new order for priority purposes. The
Exchange believes the proposed rule change encourages users to submit
to the Exchange only bona fide cancel/replace orders that have
legitimate investment purposes and discourages use of System capacity
to send unnecessary message traffic.
As set forth in the current Rule 5.32(e), a cancel/replace order
that decreases the size of a resting order would continue to not result
in a loss of priority position is an order. The Exchange believes it is
appropriate to continue to not have this type of cancel/replace order
cause a loss of priority because it is consistent with a partial
execution of that order, which would similarly not cause a loss of
priority.\9\ Unlike a no-change order, an order to reduce the size of a
resting order may have a legitimate investment purpose, such as to
reduce execution risk. Additionally, the Exchange believes it will
remove impediments to and perfect the mechanism of a free and open
market as well as protect investors by adding transparency to codify
that a change to the Max Floor (if a Reserve Order) or the stop price
(if a Stop or Stop-Limit order) will not cause a resting order to lose
priority because it is unnecessary given the handling of those orders
and the fact that at that time there is no priority to lose. Such
handling is consistent with the definitions and handling of both of
those order types. Specifically, as set forth in the definition of a
Reserve Order, the Max Floor amount is relevant for replenishment of
the Display Quantity of the order after execution, and once
replenished, the System creates a new timestamp for both the Display
Quantity and Reserve Quantity of the order each time it is replenished
from reserve (i.e., prioritizes it in the book at the time of
replenishment). Therefore, there is no need for a loss in priority due
to a change in the Max Floor amount because that order will have its
priority reset once it is replenished with that new amount. Similarly,
as set forth in the definitions of Stop and Stop-Limit orders, those
orders become market or limit orders, respectively, once triggered and
thus placed on the book as market or limit orders and prioritized based
on that time. The stop price is the piece of information that
determines when these orders will be triggered. As a result, there is
no need for an order to lose priority due to a change in the stop price
given that those orders have not yet been prioritized on the Book and
will be prioritized once triggered and entered into the Book for
potential execution.
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\9\ See Rule 5.32(d).
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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 Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the System will handle
all cancel/replace orders from all users in the same manner. All
cancel/replace orders, except for the three exceptions, will cause the
resting order to lose priority. The three types of cancel/replace
orders that will not cause a resting order to lose priority and are
consistent with current order handling rules. The Exchange does not
believe that the proposed rule change will impose any burden on
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed rule change
only impacts priority of orders resting on the Exchange's book and thus
will have no impact on terms of an order that are disseminated to
market participants or on trading outside of the Exchange.
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:
A. significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. 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 \10\ and
Rule 19b-4(f)(6) \11\ thereunder. 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.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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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.
[[Page 30812]]
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-C2-2023-011 on the subject line.
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-C2-2023-011. 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 offices of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-C2-2023-011, and should be submitted on
or before June 2, 2023.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10123 Filed 5-11-23; 8:45 am]
BILLING CODE 8011-01-P
