Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Automated Price Improvement Auction Rules, 41701-41703 [2023-13559]
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Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 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–
OCC–2023–005 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–OCC–2023–005. 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
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of OCC
and on OCC’s website at https://
www.theocc.com/CompanyInformation/Documents-and-Archives/
By-Laws-and-Rules48T.
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–OCC–2023–005 and
should be submitted on or before July
18, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13560 Filed 6–26–23; 8:45 am]
BILLING CODE 8011–01–P
22 17
18:54 Jun 26, 2023
SECURITIES AND EXCHANGE
COMMISSION
the most significant aspects of such
statements.
[Release No. 34–97783; File No. SR–
CboeEDGX–2023–041]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Automated Price Improvement Auction
Rules
June 21, 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 June 13,
2023, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘‘‘EDGX’’’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend its 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://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
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).
1. Purpose
The Exchange proposes to amend
Rule 21.19 (Automated Price
Improvement Mechanism (‘‘AIM’’ or
‘‘AIM Auction’’)) and Rule 21.22
(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 21.19
and 21.22 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
Member (‘‘Initiating Member’’) 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 Member 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
21.19(b) for AIM Auctions and Rule
21.22(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 21.19(b)(4) and
21.22(b)(4), an Initiating Member, in
entering the contra-side order, must
either (1) specify a single price at which
2 17
CFR 200.30–3(a)(12).
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5 See
6 See
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generally Rules 21.19(e) and 21.22(e).
generally Rules 21.19(b) and 21.22(b).
27JNN1
ddrumheller on DSK120RN23PROD with NOTICES1
41702
Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 2023 / Notices
it seeks to execute the Agency Order
against the Initiating Order, or (2)
specify an initial 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 that improve the stop 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 21.19(a) and 21.22(a), and the stop
price requirements set forth in Rules
21.19(b) and 21.22(b).
The Exchange now proposes to amend
Rule 21.19(b)(4) to state that,
notwithstanding Rule 21.19(b)(1)
through (3), 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
21.19(b)(1)(A) or (b)(2). Similarly, the
Exchange proposes to amend Rule
21.22(b)(4) to state that, notwithstanding
Rule 21.22(b)(1) through (3), if the
initial stop price is worse than the thencurrent 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 21.22(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 Member 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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18:54 Jun 26, 2023
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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
Member 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 Member is
effectively guaranteeing that the Agency
7 15
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
9 Id.
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
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
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 Members.
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) and
NBBO width of $0.01, pursuant to Rule
21.19(b)(1)(A), which remains unchanged.
11 See supra note 10.
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Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 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:
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 13 and Rule 19b–4(f)(6) 14
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.
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:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
supra note 10.
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CboeEDGX–2023–041 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–CboeEDGX–2023–041. 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
a.m. and 3 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–CboeEDGX–2023–041 and should be
submitted on or before July 18, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13559 Filed 6–26–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97769; File No. SR–
PEARL–2023–26]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Remove Additional
Separate Maker Rebates in Non-Penny
Classes From the MIAX Pearl Options
Fee Schedule
June 20, 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 June 9,
2023, MIAX PEARL, LLC (‘‘MIAX Pearl’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a 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
The Exchange is filing a proposal to
amend the MIAX Pearl Options Fee
Schedule (the ‘‘Fee Schedule’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal
office, 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 remove the
additional separate rebates from Section
12 See
13 15
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 88, Number 122 (Tuesday, June 27, 2023)]
[Notices]
[Pages 41701-41703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13559]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97783; File No. SR-CboeEDGX-2023-041]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Automated Price Improvement Auction Rules
June 21, 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 June 13, 2023, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
````EDGX'''') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
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 21.19 (Automated Price
Improvement Mechanism (``AIM'' or ``AIM Auction'')) and Rule 21.22
(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 21.19 and 21.22 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 Member (``Initiating Member'') 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 21.19(e) and 21.22(e).
---------------------------------------------------------------------------
An Initiating Member 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 21.19(b) for AIM Auctions and Rule 21.22(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 21.19(b) and 21.22(b).
---------------------------------------------------------------------------
Further, under Rules 21.19(b)(4) and 21.22(b)(4), an Initiating
Member, in entering the contra-side order, must either (1) specify a
single price at which
[[Page 41702]]
it seeks to execute the Agency Order against the Initiating Order, or
(2) specify an initial 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 that improve the stop 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 21.19(a) and 21.22(a),
and the stop price requirements set forth in Rules 21.19(b) and
21.22(b).
The Exchange now proposes to amend Rule 21.19(b)(4) to state that,
notwithstanding Rule 21.19(b)(1) through (3), 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 21.19(b)(1)(A) or (b)(2). Similarly,
the Exchange proposes to amend Rule 21.22(b)(4) to state that,
notwithstanding Rule 21.22(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 21.22(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 Member 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 Member 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 Member 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) and NBBO width of
$0.01, pursuant to Rule 21.19(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 Members. 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 41703]]
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:
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 \13\ and
Rule 19b-4(f)(6) \14\ 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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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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-CboeEDGX-2023-041 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-CboeEDGX-2023-041. 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
a.m. and 3 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-CboeEDGX-2023-041 and should
be submitted on or before July 18, 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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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-13559 Filed 6-26-23; 8:45 am]
BILLING CODE 8011-01-P
