Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.8 Regarding Certain Cancel-Replace Messages, 30817-30820 [2023-10128]
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Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
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. 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–PEARL–2023–21
and should be submitted on or before
June 2, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10127 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–275, OMB Control No.
3235–0310]
lotter on DSK11XQN23PROD with NOTICES1
Submission for OMB Review;
Comment Request; Extension: Rule
22d–1
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(‘‘Paperwork Reduction Act’’) (44 U.S.C.
3501–3520), the Securities and
Exchange Commission (the
‘‘Commission’’) has submitted to the
19 17
CFR 200.30–3(a)(12), (59).
VerDate Sep<11>2014
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Jkt 259001
Office of Management and Budget
(‘‘OMB’’) a request for extension of the
previously approved collection of
information discussed below.
Rule 22d–1 under the Investment
Company Act of 1940 (the ‘‘1940 Act’’)
(17 CFR 270.22d–1) provides registered
investment companies that issue
redeemable securities (‘‘funds’’) an
exemption from section 22(d) of the
1940 Act (15 U.S.C. 80a–22(d)) to the
extent necessary to permit scheduled
variations in or elimination of the sales
load on fund securities for particular
classes of investors or transactions,
provided certain conditions are met.
The rule imposes an annual burden per
series of a fund of approximately 15
minutes, so that the total annual burden
for the approximately 3,776 series of
funds that might rely on the rule is
estimated to be 944 hours.1
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act. The estimate
is based on communications with
industry representatives, and is not
derived from a comprehensive or even
a representative survey or study.
Responses will not be kept
confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice by June 12, 2023 to (i)
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o John Pezzullo, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: May 8, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10116 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
1 This estimate is based on the following
calculation: 3,776 series × 0.25 burden hours = 944
total annual burden hours.
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30817
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97457; File No. SR–
CboeBZX–2023–029]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
21.8 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 BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘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 BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX Options’’)
proposes to amend Rule 21.8. 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/bzx/), 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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
Order),4 or the stop price (if a Stop or
Stop Limit Order) 5 is modified.
Therefore, the proposed rule change
amends Rule 21.8 to add that if a user
submits a cancel/replace message for a
1. Purpose
resting order, regardless of whether the
cancel/replace message modifies any
The Exchange proposes to amend
terms of the resting order, the order
Rule 21.8 to describe the impact on
loses its priority position and is placed
option order priority of a cancel/replace in a priority position based on the time
message, including a ‘‘no-change’’
the System receives the cancel/replace
order 3 (i.e., an order submitted to cancel message, unless the user only (1)
or replace a resting order that does not
decreases the quantity of an order, (2)
change any terms of an order). The
modifies the Max Floor (if a Reserve
Rules are currently silent regarding how Order), or (3) modifies the stop price (if
the System handles a cancel-replace
a Stop or Stop-Limit order), in which
message (that either changes or does not case the order retains its priority
change any terms of the resting order).
position.
The Exchange recently determined that
2. Statutory Basis
if the System receives a no-change
The Exchange believes the proposed
order, the resting order will lose its
priority position; however, if the System rule change is consistent with the
Securities Exchange Act of 1934 (the
receives a ‘‘no-change’’ bid or offer in a
‘‘Act’’) and the rules and regulations
bulk message, the resting bid or offer
thereunder applicable to the Exchange
will not lose its priority position. The
and, in particular, the requirements of
Exchange proposes to harmonize the
section 6(b) of the Act.6 Specifically, the
handling of all no-change orders and
Exchange believes the proposed rule
quotes so that any ‘‘no-change’’ order or
change is consistent with the section
bulk message bid or offer will lose
6(b)(5) 7 requirements that the rules of
priority and describe this behavior in
an exchange be designed to prevent
the Exchange’s Rules.
fraudulent and manipulative acts and
Additionally, the Exchange proposes
practices, to promote just and equitable
to describe in the Exchange’s Rules how principles of trade, to foster cooperation
the System in general handles all
and coordination with persons engaged
in regulating, clearing, settling,
cancel/replace messages submitted by
users, including those that change or do processing information with respect to,
and facilitating transactions in
not change the price and size of a
securities, to remove impediments to
resting order’s terms. Specifically, the
Exchange proposes to codify current
4 ‘‘Reserve Orders’’ are limit orders that have both
System functionality that causes a
a portion of the quantity displayed (‘‘Display
resting order to lose its priority position Quantity’’) and with a reserve portion of the
(including if the price of an order is
quantity (‘‘Reserve Quantity’’) that is not displayed.
Both the Display Quantity and Reserve Quantity of
changed or the quantity is increased) if
the Reserve Order are available for potential
any cancel/replace message is submitted execution against incoming orders. If the Display
if any term other than a decrease to the
Quantity of a Reserve Order is fully executed, the
System will, in accordance with the user’s
quantity, the Max Floor (if a Reserve
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
3 In this context, the term ‘‘order’’ includes bids
and offers submitted in bulk messages. A bulk
message means a bit 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 16.1 (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).
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instruction, replenish the Display Quantity from the
Reserve Quantity using one of the replenishment
instructions set forth in the Rules. If the remainder
of an order is less than the replenishment amount,
the Exchange will replenish and display the entire
remainder of the order. A user must instruct the
Exchange as to the quantity of the order to be
initially displayed by the System (‘‘Max Floor’’)
when entering a Reserve Order, which is also used
to determine the replenishment amount. A new
timestamp is created for both the Display Quantity
and the Reserve Quantity of the order each time it
is replenished from reserve. See Rule 21.1(d)(1).
5 ‘‘Stop Orders’’ are orders that become market
orders when the stop price is elected. ‘‘Stop Limit
Orders’’ are orders that become limit orders when
the stop price is elected. A Stop or Stop Limit Order
to buy is elected when the consolidated last sale in
the option occurs at or above, or the NBB is equal
to or higher than, the specified stop price. A Stop
or Stop Limit Order to sell is elected when the
consolidated last sale in the option occurs at or
below, or the NBO is equal to or lower than, the
specified stop price. See Rule 21.1(d)(10) and (11).
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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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 all cancel/replace
messages, including those that change
no order terms. The Exchange believes
consistency in handling of all no-change
orders and quotes will simplify order
handling, which will promote just and
equitable principles of trade 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
proposed 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 may 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 used
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.
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 current System
functionality regarding all cancel/
replace messages, including those that
do not cause a loss of priority position.
Under current System functionality, a
cancel/replace order that changes the
price of a resting order or increases the
size of a resting order the order loses its
priority position and is placed in a
8 Id.
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Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
priority position based on the time the
System receives the cancel/replace
message, as increasing the price or
quantity of a resting order could cause
it to gain priority over other resting
orders if it did not otherwise get a new
timestamp. Additionally, under current
System functionality, cancel/replace
order that decreases the size of a resting
order (and changes no other terms) does
not result in a loss of priority position.
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, but
would not impact its priority compared
to other resting orders (e.g., resting
orders are often decreased in size if they
receive partial execution, and the
remainders retain their priority status;
unlike an increase in size, a decrease in
size would not cause a resting order to
otherwise gain priority over other
resting orders).
Additionally, under current System
functionality, a cancel/replace message
that changes the Max Floor (if a Reserve
Order) or the stop price (if a Stop or
Stop-Limit order) and no other terms
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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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, including all no-change 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 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 9 and Rule 19b–4(f)(6) 10 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
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
10 17
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30819
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 rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2023–029 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–CboeBZX–2023–029. 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–CboeBZX–2023–029,
and should be submitted on or before
June 2, 2023.
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Federal Register / Vol. 88, No. 92 / Friday, May 12, 2023 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10128 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34910; 812–15449]
FOR FURTHER INFORMATION CONTACT:
Hennessy Funds Trust and Hennessy
Advisors, Inc.
May 8, 2023.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
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AGENCY:
Notice of an application under section
6(c) of the Investment Company Act of
1940 (‘‘Act’’) for an exemption from
section 15(a) of the Act and Rule 18f–
2 thereunder, as well as from certain
disclosure requirements in rule 20a–1
under the Act, Item 19(a)(3) of Form N–
1A, Items 22(c)(1)(ii), 22(c)(1)(iii),
22(c)(8) and 22(c)(9) of Schedule 14A
under the Securities Exchange Act of
1934, and sections 6–07(2)(a), (b), and
(c) of Regulation S–X (‘‘Disclosure
Requirements’’).
SUMMARY OF APPLICATION: The requested
exemption would permit Applicants to
enter into and materially amend
subadvisory agreements with
subadvisers without shareholder
approval and would grant relief from
the Disclosure Requirements as they
relate to fees paid to the subadvisers.
APPLICANTS: Hennessy Funds Trust and
Hennessy Advisors, Inc.
FILING DATES: The application was filed
on March 31, 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 Applicants 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 the Applicants, in the form
of an affidavit, or, for lawyers, a
certificate of service. Pursuant to rule 0–
11 17
CFR 200.30–3(a)(12).
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Jkt 259001
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. Applicant:
Teresa M. Nilsen, terry@
hennessyfunds.com.
Trace W. Rakestraw, Senior Special
Counsel, at (202) 551–6825 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ application, dated March
31, 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. 2023–10133 Filed 5–11–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–259, OMB Control No.
3235–0269]
Submission for OMB Review;
Comment Request; Extension: Rule
17f–5
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 350l–3520), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) requests for extension of the
previously approved collections of
information discussed below.
Rule 17f–5 (17 CFR 270.17f–5) under
the Investment Company Act of 1940
[15 U.S.C. 80a] (the ‘‘Act’’) governs the
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custody of the assets of registered
management investment companies
(‘‘funds’’) with custodians outside the
United States. Under rule 17f–5, a fund
or its foreign custody manager (as
delegated by the fund’s board) may
maintain the fund’s foreign assets in the
care of an eligible fund custodian under
certain conditions. If the fund’s board
delegates to a foreign custody manager
authority to place foreign assets, the
fund’s board must find that it is
reasonable to rely on each delegate the
board selects to act as the fund’s foreign
custody manager. The delegate must
agree to provide written reports that
notify the board when the fund’s assets
are placed with a foreign custodian and
when any material change occurs in the
fund’s custody arrangements. The
delegate must agree to exercise
reasonable care, prudence, and
diligence, or to adhere to a higher
standard of care, in performing the
delegated services. When the foreign
custody manager selects an eligible
foreign custodian, it must determine
that the fund’s assets will be subject to
reasonable care if maintained with that
custodian, and that the written contract
that governs each custody arrangement
will provide reasonable care for fund
assets. The contract must contain
certain specified provisions or others
that provide at least equivalent care.
The foreign custody manager must
establish a system to monitor the
performance of the contract and the
appropriateness of continuing to
maintain assets with the eligible foreign
custodian.
The collection of information
requirements in rule 17f–5 are intended
to provide protection for fund assets
maintained with a foreign bank
custodian whose use is not authorized
by statutory provisions that govern fund
custody arrangements,1 and that is not
subject to regulation and examination
by U.S. regulators. The requirement that
the fund board determine that it is
reasonable to rely on each delegate is
intended to ensure that the board
carefully considers each delegate’s
qualifications to perform its
responsibilities. The requirement that
the delegate provide written reports to
the board is intended to ensure that the
delegate notifies the board of important
developments concerning custody
arrangements so that the board may
exercise effective oversight. The
requirement that the delegate agree to
exercise reasonable care is intended to
provide assurances to the fund that the
1 See
E:\FR\FM\12MYN1.SGM
section 17(f) of the Act. 15 U.S.C. 80a–17(f).
12MYN1
]]>Agencies
[Federal Register Volume 88, Number 92 (Friday, May 12, 2023)]
[Notices]
[Pages 30817-30820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10128]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97457; File No. SR-CboeBZX-2023-029]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 21.8 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 BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
proposes to amend Rule 21.8. 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/bzx/), 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.
[[Page 30818]]
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 21.8 to describe the impact on
option order priority of a cancel/replace message, including 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). The Rules
are currently silent regarding how the System handles a cancel-replace
message (that either changes or does not change any terms of the
resting order). The Exchange recently determined that if the System
receives a no-change order, the resting order will lose its priority
position; however, if the System receives a ``no-change'' bid or offer
in a bulk message, the resting bid or offer will 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 and describe this behavior in
the Exchange's Rules.
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\3\ In this context, the term ``order'' includes bids and offers
submitted in bulk messages. A bulk message means a bit 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 16.1 (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).
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Additionally, the Exchange proposes to describe in the Exchange's
Rules how the System in general handles all cancel/replace messages
submitted by users, including those that change or do not change the
price and size of a resting order's terms. Specifically, the Exchange
proposes to codify current System functionality that causes a resting
order to lose its priority position (including if the price of an order
is changed or the quantity is increased) if any cancel/replace message
is submitted if any term other than a decrease to the quantity, the Max
Floor (if a Reserve Order),\4\ or the stop price (if a Stop or Stop
Limit Order) \5\ is modified.
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\4\ ``Reserve Orders'' are limit orders that have both a portion
of the quantity displayed (``Display Quantity'') and with a reserve
portion of the quantity (``Reserve Quantity'') that is not
displayed. Both the Display Quantity and Reserve Quantity of the
Reserve Order are available for potential execution against incoming
orders. 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 replenishment instructions set forth in
the Rules. If the remainder of an order is less than the
replenishment amount, the Exchange will replenish and display the
entire remainder of the order. A user must instruct the Exchange as
to the quantity of the order to be initially displayed by the System
(``Max Floor'') when entering a Reserve Order, which is also used to
determine the replenishment amount. A new timestamp is created for
both the Display Quantity and the Reserve Quantity of the order each
time it is replenished from reserve. See Rule 21.1(d)(1).
\5\ ``Stop Orders'' are orders that become market orders when
the stop price is elected. ``Stop Limit Orders'' are orders that
become limit orders when the stop price is elected. A Stop or Stop
Limit Order to buy is elected when the consolidated last sale in the
option occurs at or above, or the NBB is equal to or higher than,
the specified stop price. A Stop or Stop Limit Order to sell is
elected when the consolidated last sale in the option occurs at or
below, or the NBO is equal to or lower than, the specified stop
price. See Rule 21.1(d)(10) and (11).
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Therefore, the proposed rule change amends Rule 21.8 to add that 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, (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 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 all cancel/replace messages, including
those that change no order terms. The Exchange believes consistency in
handling of all no-change orders and quotes will simplify order
handling, which will promote just and equitable principles of trade 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 proposed 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 may 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 used 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.
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 current System functionality regarding
all cancel/replace messages, including those that do not cause a loss
of priority position. Under current System functionality, a cancel/
replace order that changes the price of a resting order or increases
the size of a resting order the order loses its priority position and
is placed in a
[[Page 30819]]
priority position based on the time the System receives the cancel/
replace message, as increasing the price or quantity of a resting order
could cause it to gain priority over other resting orders if it did not
otherwise get a new timestamp. Additionally, under current System
functionality, cancel/replace order that decreases the size of a
resting order (and changes no other terms) does not result in a loss of
priority position. 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, but would not impact its priority compared
to other resting orders (e.g., resting orders are often decreased in
size if they receive partial execution, and the remainders retain their
priority status; unlike an increase in size, a decrease in size would
not cause a resting order to otherwise gain priority over other resting
orders).
Additionally, under current System functionality, a cancel/replace
message that changes the Max Floor (if a Reserve Order) or the stop
price (if a Stop or Stop-Limit order) and no other terms 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, including all no-change 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 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 \9\ and
Rule 19b-4(f)(6) \10\ 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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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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. 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-CboeBZX-2023-029 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-CboeBZX-2023-029. 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-CboeBZX-2023-029, and should be
submitted on or before June 2, 2023.
[[Page 30820]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10128 Filed 5-11-23; 8:45 am]
BILLING CODE 8011-01-P
