Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Automated Price Improvement Auction Rules, 38115-38117 [2023-12415]
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Federal Register / Vol. 88, No. 112 / Monday, June 12, 2023 / Notices
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–2023–37 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.
ddrumheller on DSK120RN23PROD with NOTICES1
All submissions should refer to File
Number SR–NYSEARCA–2023–37. 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. 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–NYSEARCA–2023–
37, and should be submitted on or
before July 3, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–12414 Filed 6–9–23; 8:45 am]
BILLING CODE 8011–01–P
17 17
17:39 Jun 09, 2023
[Release No. 34–97654; File No. SR–CBOE–
2023–029]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Automated
Price Improvement Auction Rules
June 6, 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 May 25,
2023, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘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 ‘‘noncontroversial’’ 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
its automated price improvement
auction rules. 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://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.aspx), 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
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
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 5.37 (Automated Price
Improvement Mechanism (‘‘AIM’’ or
‘‘AIM Auction’’)) and Rule 5.38
(Complex Automated Improvement
Mechanism (‘‘C–AIM’’ or ‘‘C–AIM
Auction’’)) to modify the stop price
requirements for auto-match orders
submitted to AIM and C–AIM,
respectively.
By way of background, Rules 5.37 and
5.38 contain the requirements
applicable to the execution of orders
using AIM and C–AIM, respectively.
The AIM and C–AIM auctions are
electronic auctions intended to provide
an Agency Order with the opportunity
to receive price improvement (over the
National Best Bid or Offer (‘‘NBBO’’) in
AIM, or the synthetic best bid or offer
(‘‘SBBO’’) on the Exchange in C–AIM.
Upon submitting an Agency Order into
an AIM or C–AIM auction, the initiating
Trading Permit Holder (‘‘Initiating
TPH’’) must also submit a contra-side
second order (‘‘Initiating Order’’) for the
same size as the Agency Order. The
Initiating Order guarantees that the
Agency Order will receive an execution
at no worse than the auction price (i.e.,
acts as a stop). During an AIM or C–AIM
Auction, market participants submit
responses to trade against the Agency
Order. At the end of an auction,
depending on the contra-side interest
available, the contra order may be
allocated a certain percentage of the
Agency Order.5
An Initiating TPH may initiate an
AIM or C–AIM auction provided that
the Agency Order is in a class and of
sufficient size as determined by the
Exchange. Further, there are
requirements regarding the price at
which the Initiating Order must stop the
entire Agency Order, set forth in Rule
5.37(b) for AIM Auctions and Rule
5.38(b) for C–AIM Auctions.
Requirements for the stop price depend
on the order submitted, but in general,
the stop price must be either better than
the then-current NBBO (SBBO) or, in
some cases, at or better than the NBBO
(SBBO).6
Further, under Rules 5.37(b)(5) and
5.38(b)(4), an Initiating TPH, in entering
the contra-side order, must either (1)
specify a single price at which it seeks
to execute the Agency Order against the
Initiating Order, or (2) specify an initial
2 17
CFR 200.30–3(a)(12).
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5 See
6 See
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generally Rules 5.37(e) and 5.38(e).
generally Rules 5.37(b) and 5.38(b).
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38116
Federal Register / Vol. 88, No. 112 / Monday, June 12, 2023 / Notices
stop price and instruction to
automatically match the price and size
of all AIM or C–AIM responses and
other contra-side trading interest (‘‘automatch’’) at each price up to a designated
limit price, or at all prices, better than
the price at which the balance of the
Agency Order can be fully executed (the
‘‘final auction price’’). Currently, the
System will reject or cancel both an
Agency Order and Initiating Order
submitted to an AIM or C–AIM Auction
that does meet the eligibility
requirements set forth in Rules 5.37(a)
and 5.38(a), and the stop price
requirements set forth in Rules 5.37(b)
and 5.38(b).
The Exchange now proposes to amend
Rule 5.37(b)(5) to state that,
notwithstanding Rule 5.37(b)(1) through
(4), if the initial stop price is worse than
the then-current NBO (NBB) and automatch was selected, the System changes
the initial stop price for the Agency
Order to be the then-current NBO (NBB)
(or one minimum increment better than
the then-current NBO (NBB) if the
Agency Order is subject to the
requirements set forth in Rules
5.34(b)(1)(A), (b)(2), or (b)(3). Similarly,
the Exchange proposes to amend Rule
5.38(b)(4) to state that, notwithstanding
Rule 5.37(b)(1) through (3), if the initial
stop price is worse than the then-current
SBO (SBB) and auto-match was
selected, the System changes the initial
stop price for the Agency Order to be
the then-current SBO (SBB) (or one
minimum increment better than the
then-current SBO (SBB) if the Agency
Order is subject to the requirements set
forth in Rules 5.34(b)(1)(A), (b)(2), or
(b)(3)(A). Under the proposed changes,
the starting price (i.e., stop price) of the
auction would match the NBBO (for
AIM Auctions) or SBBO (for C–AIM
Auctions) at the time of auction
commencement. The proposed changes
would apply to all AIM and C–AIM
users that select auto-match.
This change is designed to address
situations where the NBBO or SBBO
changes within the time that the User
sends the order to the Exchange and the
Exchange receives it, which may cause
AIM and C–AIM orders to be cancelled.
For example, assume a TPH submits to
AIM Auction an Agency Order to buy
and an Initiating Order with a starting
price of 1.25 and an auto-match limit of
1.10, and the then-current NBBO is
1.00–1.25. While in transit, the NBBO
changes to 0.90–1.10. Under the current
rules, the orders would be rejected, as
the starting price (initial stop price) of
1.25 is now outside the current NBBO
(even though the firm has designated an
auto-match limit of 1.10, which is equal
to the NBBO at the time the Exchange
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17:39 Jun 09, 2023
Jkt 259001
receives the order). Under the proposed
rule, the orders would be accepted, and
the auction starting price will be 1.10
(due to the NBBO change), and the
auction would proceed pursuant to the
remainder of the Rule.
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.7 Specifically, the
Exchange believes the proposed rule
change is consistent with the section
6(b)(5) 8 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) 9 requirement that the
rules of an exchange not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes the proposed
rule change will promote just and
equitable principles of trade and protect
investors. In particular, the Exchange
believes that its proposal to allow an
order with an initial stop price inferior
to the then-current NBBO or SBBO to be
submitted to AIM or C–AIM Auction if
auto-match is selected will provide
Agency Orders with additional
opportunities for price improvement
and execution. Specifically, the changes
are designed to stop orders from being
rejected from AIM and C–AIM Auctions
in situations where an order may have
an initial stop price that is inferior to
the then-current NBBO or SBBO,
despite the fact that the Initiating TPH
has, through its auto-match selection,
demonstrated a willingness to execute
against the Agency Order at a price that
matches or improves upon the thencurrent NBBO or SBBO, as applicable.
The Exchange believes the changes are
consistent with the intended result of
the stop price requirement, as the
Initiating TPH is effectively
guaranteeing that the Agency Order will
7 15
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 Id.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
receive an execution at no worse than
the auction price, which is at or better
than the NBBO at the time the auction
begins, via the auto-match
mechanism.10 As such, the Exchange
believes the changes will preserve the
quality of the auctions, while providing
increased execution and price
improvement opportunities for Agency
Orders, which helps to perfect the
mechanism of a free and open market
and, in general, helps to protect
investors and the public interest.11
The Exchange notes that the AIM and
C–AIM Auctions generally deliver
meaningful opportunities for price
improvement to orders and provide an
efficient manner of access to liquidity
for customers. The Exchange believes
that the proposed changes to these
auctions will permit more Agency
Orders to receive such meaningful
opportunities, as intended, and ensure
they are not inadvertently penalized by
being rejected rather than auctioned if
markets move during the order
submission process, which ultimately
benefits investors.
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 the proposed
rule change will impose any burden on
intramarket competition because it will
apply uniformly to all Agency Orders
submitted into AIM and C–AIM
Auctions and to all TPHs. Additionally,
the Exchange notes that participation in
the AIM and C–AIM auctions is
completely voluntary. The Exchange
believes all market participants may
benefit from any additional liquidity,
execution opportunities, and price
improvement in the AIM and C–AIM
Auctions that may result from the
proposed rule change.
The Exchange does not believe 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,
as the proposed rule change relates to
price requirements for an Exchangespecific auction mechanism and will
continue to require auctions to start at
10 Note, the proposed rule change continues to
provide price improvement assurances for those for
buy (sell) Agency Orders submitted for AIM
Auction processing with less than 50 standard
option contracts (or 500 mini-option contracts or
5,000 micro-option contracts) and NBBO width of
$0.01, pursuant to Rule 5.37(b)(1)(A), which
remains unchanged.
11 See supra note 10.
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Federal Register / Vol. 88, No. 112 / Monday, June 12, 2023 / Notices
prices at or better than the NBBO at the
start of the auction.12
Finally, the Exchange notes that it
operates in a highly competitive market,
and members have numerous alternative
venues they may participate on and
direct their order flow, including other
options exchanges that have
implemented similar electronic price
improvement mechanisms with automatch pricing. Participants can readily
choose to send their orders to other
exchanges if they deem those other
venues to be more favorable.
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)(iii) of the Act 13 and
subparagraph (f)(6) of Rule 19b–4
thereunder.14
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 shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
ddrumheller on DSK120RN23PROD 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:
12 See
supra note 10.
U.S.C. 78s(b)(3)(A)(iii).
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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.
13 15
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17:39 Jun 09, 2023
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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–
CBOE–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–CBOE–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
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–CBOE–2023–029
and should be submitted on or before
July 3, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–12415 Filed 6–9–23; 8:45 am]
BILLING CODE 8011–01–P
38117
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
TIME AND DATE:
2:00 p.m. on Thursday,
June 15, 2023.
The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
PLACE:
This meeting will be closed to
the public.
STATUS:
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
Dated: June 8, 2023.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2023–12638 Filed 6–8–23; 4:15 pm]
15 17
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]]>Agencies
[Federal Register Volume 88, Number 112 (Monday, June 12, 2023)]
[Notices]
[Pages 38115-38117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12415]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97654; File No. SR-CBOE-2023-029]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Automated Price Improvement Auction Rules
June 6, 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 May 25, 2023, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its automated price improvement auction rules. 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://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 5.37 (Automated Price
Improvement Mechanism (``AIM'' or ``AIM Auction'')) and Rule 5.38
(Complex Automated Improvement Mechanism (``C-AIM'' or ``C-AIM
Auction'')) to modify the stop price requirements for auto-match orders
submitted to AIM and C-AIM, respectively.
By way of background, Rules 5.37 and 5.38 contain the requirements
applicable to the execution of orders using AIM and C-AIM,
respectively. The AIM and C-AIM auctions are electronic auctions
intended to provide an Agency Order with the opportunity to receive
price improvement (over the National Best Bid or Offer (``NBBO'') in
AIM, or the synthetic best bid or offer (``SBBO'') on the Exchange in
C-AIM. Upon submitting an Agency Order into an AIM or C-AIM auction,
the initiating Trading Permit Holder (``Initiating TPH'') must also
submit a contra-side second order (``Initiating Order'') for the same
size as the Agency Order. The Initiating Order guarantees that the
Agency Order will receive an execution at no worse than the auction
price (i.e., acts as a stop). During an AIM or C-AIM Auction, market
participants submit responses to trade against the Agency Order. At the
end of an auction, depending on the contra-side interest available, the
contra order may be allocated a certain percentage of the Agency
Order.\5\
---------------------------------------------------------------------------
\5\ See generally Rules 5.37(e) and 5.38(e).
---------------------------------------------------------------------------
An Initiating TPH may initiate an AIM or C-AIM auction provided
that the Agency Order is in a class and of sufficient size as
determined by the Exchange. Further, there are requirements regarding
the price at which the Initiating Order must stop the entire Agency
Order, set forth in Rule 5.37(b) for AIM Auctions and Rule 5.38(b) for
C-AIM Auctions. Requirements for the stop price depend on the order
submitted, but in general, the stop price must be either better than
the then-current NBBO (SBBO) or, in some cases, at or better than the
NBBO (SBBO).\6\
---------------------------------------------------------------------------
\6\ See generally Rules 5.37(b) and 5.38(b).
---------------------------------------------------------------------------
Further, under Rules 5.37(b)(5) and 5.38(b)(4), an Initiating TPH,
in entering the contra-side order, must either (1) specify a single
price at which it seeks to execute the Agency Order against the
Initiating Order, or (2) specify an initial
[[Page 38116]]
stop price and instruction to automatically match the price and size of
all AIM or C-AIM responses and other contra-side trading interest
(``auto-match'') at each price up to a designated limit price, or at
all prices, better than the price at which the balance of the Agency
Order can be fully executed (the ``final auction price''). Currently,
the System will reject or cancel both an Agency Order and Initiating
Order submitted to an AIM or C-AIM Auction that does meet the
eligibility requirements set forth in Rules 5.37(a) and 5.38(a), and
the stop price requirements set forth in Rules 5.37(b) and 5.38(b).
The Exchange now proposes to amend Rule 5.37(b)(5) to state that,
notwithstanding Rule 5.37(b)(1) through (4), if the initial stop price
is worse than the then-current NBO (NBB) and auto-match was selected,
the System changes the initial stop price for the Agency Order to be
the then-current NBO (NBB) (or one minimum increment better than the
then-current NBO (NBB) if the Agency Order is subject to the
requirements set forth in Rules 5.34(b)(1)(A), (b)(2), or (b)(3).
Similarly, the Exchange proposes to amend Rule 5.38(b)(4) to state
that, notwithstanding Rule 5.37(b)(1) through (3), if the initial stop
price is worse than the then-current SBO (SBB) and auto-match was
selected, the System changes the initial stop price for the Agency
Order to be the then-current SBO (SBB) (or one minimum increment better
than the then-current SBO (SBB) if the Agency Order is subject to the
requirements set forth in Rules 5.34(b)(1)(A), (b)(2), or (b)(3)(A).
Under the proposed changes, the starting price (i.e., stop price) of
the auction would match the NBBO (for AIM Auctions) or SBBO (for C-AIM
Auctions) at the time of auction commencement. The proposed changes
would apply to all AIM and C-AIM users that select auto-match.
This change is designed to address situations where the NBBO or
SBBO changes within the time that the User sends the order to the
Exchange and the Exchange receives it, which may cause AIM and C-AIM
orders to be cancelled. For example, assume a TPH submits to AIM
Auction an Agency Order to buy and an Initiating Order with a starting
price of 1.25 and an auto-match limit of 1.10, and the then-current
NBBO is 1.00-1.25. While in transit, the NBBO changes to 0.90-1.10.
Under the current rules, the orders would be rejected, as the starting
price (initial stop price) of 1.25 is now outside the current NBBO
(even though the firm has designated an auto-match limit of 1.10, which
is equal to the NBBO at the time the Exchange receives the order).
Under the proposed rule, the orders would be accepted, and the auction
starting price will be 1.10 (due to the NBBO change), and the auction
would proceed pursuant to the remainder of the Rule.
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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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The Exchange believes the proposed rule change will promote just
and equitable principles of trade and protect investors. In particular,
the Exchange believes that its proposal to allow an order with an
initial stop price inferior to the then-current NBBO or SBBO to be
submitted to AIM or C-AIM Auction if auto-match is selected will
provide Agency Orders with additional opportunities for price
improvement and execution. Specifically, the changes are designed to
stop orders from being rejected from AIM and C-AIM Auctions in
situations where an order may have an initial stop price that is
inferior to the then-current NBBO or SBBO, despite the fact that the
Initiating TPH has, through its auto-match selection, demonstrated a
willingness to execute against the Agency Order at a price that matches
or improves upon the then-current NBBO or SBBO, as applicable. The
Exchange believes the changes are consistent with the intended result
of the stop price requirement, as the Initiating TPH is effectively
guaranteeing that the Agency Order will receive an execution at no
worse than the auction price, which is at or better than the NBBO at
the time the auction begins, via the auto-match mechanism.\10\ As such,
the Exchange believes the changes will preserve the quality of the
auctions, while providing increased execution and price improvement
opportunities for Agency Orders, which helps to perfect the mechanism
of a free and open market and, in general, helps to protect investors
and the public interest.\11\
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\10\ Note, the proposed rule change continues to provide price
improvement assurances for those for buy (sell) Agency Orders
submitted for AIM Auction processing with less than 50 standard
option contracts (or 500 mini-option contracts or 5,000 micro-option
contracts) and NBBO width of $0.01, pursuant to Rule 5.37(b)(1)(A),
which remains unchanged.
\11\ See supra note 10.
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The Exchange notes that the AIM and C-AIM Auctions generally
deliver meaningful opportunities for price improvement to orders and
provide an efficient manner of access to liquidity for customers. The
Exchange believes that the proposed changes to these auctions will
permit more Agency Orders to receive such meaningful opportunities, as
intended, and ensure they are not inadvertently penalized by being
rejected rather than auctioned if markets move during the order
submission process, which ultimately benefits investors.
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 the proposed rule change will impose any burden on intramarket
competition because it will apply uniformly to all Agency Orders
submitted into AIM and C-AIM Auctions and to all TPHs. Additionally,
the Exchange notes that participation in the AIM and C-AIM auctions is
completely voluntary. The Exchange believes all market participants may
benefit from any additional liquidity, execution opportunities, and
price improvement in the AIM and C-AIM Auctions that may result from
the proposed rule change.
The Exchange does not believe 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, as the proposed
rule change relates to price requirements for an Exchange-specific
auction mechanism and will continue to require auctions to start at
[[Page 38117]]
prices at or better than the NBBO at the start of the auction.\12\
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\12\ See supra note 10.
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Finally, the Exchange notes that it operates in a highly
competitive market, and members have numerous alternative venues they
may participate on and direct their order flow, including other options
exchanges that have implemented similar electronic price improvement
mechanisms with auto-match pricing. Participants can readily choose to
send their orders to other exchanges if they deem those other venues to
be more favorable.
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)(iii) of the Act \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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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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 shall institute proceedings to
determine whether the proposed rule 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-CBOE-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-CBOE-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 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-CBOE-2023-029 and should be submitted on
or before July 3, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12415 Filed 6-9-23; 8:45 am]
BILLING CODE 8011-01-P
