Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.9(f) To Allow Match Trade Prevention Between Users That Access the Exchange With Both a Direct Connection and Sponsored Access, 51379-51383 [2023-16504]
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Federal Register / Vol. 88, No. 148 / Thursday, August 3, 2023 / Notices
All submissions should refer to file
number SR–NASDAQ–2023–025. 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
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you should submit only information
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submissions should refer to file number
SR–NASDAQ–2023–025 and should be
submitted on or before August 24, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–16499 Filed 8–2–23; 8:45 am]
ddrumheller on DSK120RN23PROD with NOTICES1
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98019; File No. SR–
CboeBYX–2023–012]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
11.9(f) To Allow Match Trade
Prevention Between Users That
Access the Exchange With Both a
Direct Connection and Sponsored
Access
July 28, 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 July 26,
2023, Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) proposes to
amend Exchange Rule 11.9(f) (‘‘Match
Trade Prevention (‘‘MTP’’) Modifiers’’)
to permit individual firms with Users
that access the Exchange through a
direct connection and also access the
Exchange through Sponsored Access to
enable Match Trade Prevention at the
firm level. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/byx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
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).
2 17
18 17
CFR 200.30–3(a)(12).
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51379
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 11.9(f) (‘‘Match Trade Prevention
(‘‘MTP’’) Modifiers’’) to add the term
‘‘Multiple Access identifier’’ to the
definition of ‘‘Unique Identifier’’ while
also codifying how a User may utilize
the Multiple Access identifier. Adding a
Multiple Access identifier to MTP
functionality on the Exchange would
allow Users that electronically access
the Exchange via their own Membership
and Exchange connection(s), as well as
Sponsored Participants 5 that access the
Exchange via a Sponsored Access 6
arrangement, to enable MTP at the firm
level, in addition to the current MTP
functionality based on market
participant identifier (‘‘MPID’’),
Exchange Member identifier, trading
group identifier, Exchange Sponsored
Participant identifier, or affiliate
identifier (any such existing identifier, a
‘‘Unique Identifier’’).7
Currently, the Exchange’s MTP
functionality prevents certain contra
side orders entered by a User 8 from
executing, provided that each order has
been marked with the same Unique
Identifier.9 MTP functionality is
currently available only to individual or
affiliated Users on the Exchange and
cannot be enabled by Users who choose
5 See Exchange Rule 1.5(x). The term ‘‘Sponsored
Participant’’ shall mean a person which has entered
into a sponsorship arrangement with a Sponsoring
Member pursuant to Rule 11.3.
6 See Exchange Rule 11.3(a). ‘‘Sponsored Access’’
shall mean ‘‘an arrangement whereby a Member
permits its customer to enter orders into the System
that bypass the Member’s trading system and are
routed directly to the Exchange, including routing
through a service bureau or other third-party
technology provider.’’
7 See Exchange Rule 11.9(f).
8 See Exchange Rule 1.5(cc). ‘‘User’’ is defined as
‘‘any Member or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Rule 11.3.’’ The ‘‘System’’ is ‘‘the electronic
communications and trading facility designated by
the Board through which securities orders of Users
are consolidated for ranking, execution and, when
applicable, routing away.’’ See Exchange Rule
1.5(aa). The term ‘‘Member’’ means any registered
broker or dealer that has been admitted to
membership in the Exchange. See Exchange Rule
1.5(n).
9 Supra note 7.
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Federal Register / Vol. 88, No. 148 / Thursday, August 3, 2023 / Notices
to access the Exchange through both a
direct connection as well as through a
Sponsored Access arrangement because
such Users do not have the same Unique
Identifier.
As noted above, there are currently
five Unique Identifiers that a User may
choose from when submitting an order
subject to MTP: (i) MPID; 10 (ii)
Exchange Member identifier; (iii)
trading group identifier; (iv) Exchange
Sponsored Participant identifier, and (v)
affiliate identifier.11 MTP functionality
is optional for Users and is not
automatically implemented by the
Exchange. Both the buy and the sell
order must include the same Unique
Identifier in order to prevent an
execution from occurring and to effect a
cancel instruction.
For example, a User who enables MTP
functionality using the MPID Unique
Identifier will prevent contra side
executions between the same MPID
from occurring. A User who enables
MTP using the Exchange Member
Unique Identifier would prevent contra
side executions between any MPID
associated with that User and not just a
single MPID. The trading group Unique
Identifier permits Users to prevent
matched trades amongst traders or desks
within a certain firm but allows orders
from outside such group or desk to
interact with other firm orders. Users
who enable MTP functionality using the
Exchange Sponsored Participant Unique
Identifier will prevent matched trades
between contra side orders with an
identical Sponsored Participant
identifier. The affiliate identifier is a
Unique Identifier that permits MTP to
be enabled by firms with a control
relationship. The affiliate identifier is
only available to Users where: (i) greater
than 50% ownership is identified in a
User’s Form BD; and (ii) the Users
execute an affidavit stating that a
control relationship exists between the
two Users. The Exchange is not
proposing any change in functionality
for the current Unique Identifiers
described above.
The Exchange now proposes to amend
Rule 11.9(f) and enhance its existing
MTP functionality by introducing a
sixth Unique Identifier, Multiple Access
identifier, which will allow a User to
prevent orders entered via its direct
connection from interacting with the
User’s orders entered via Sponsored
Access. Currently, MTP is only available
to individual and affiliated Users.
10 An MPID is a four-character unique identifier
that is approved by the Exchange and assigned to
a Member for use on the Exchange to identify the
Member firm on the orders sent to the Exchange
and resulting executions.
11 Supra note 7.
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However, there are certain situations
(discussed infra) in which an individual
firm may access the Exchange through
different methods (i.e., through a direct
connection and through Sponsored
Access) and therefore desires to enable
MTP in order to prevent orders
submitted through its direct connection
from interacting with those orders
submitted through Sponsored Access.
The Multiple Access identifier is
similar to the affiliate identifier that is
already in place, as it will enable firms
that currently enter orders on the
Exchange under two different Unique
Identifiers to assign the same Unique
Identifier to orders entered via its direct
connection and to orders entered via
Sponsored Access. This will permit the
firm to enable MTP and prevent contra
side orders from executing. While the
affiliate identifier requires Users to
prove that an affiliate relationship exists
between the two Users,12 the proposed
Multiple Access identifier will only
require a User to demonstrate: (i) it
maintains a Membership on the
Exchange through which it directly
submits orders to the System; and (ii) it
also operates as a Sponsored Participant
and submits orders to the System
through Sponsored Access. The
proposed addition of the Multiple
Access identifier does not present any
new or novel MTP functionality, but
rather would extend existing MTP
functionality to firms that already access
the Exchange through multiple formats
and therefore have different Unique
Identifiers appended to their orders.
By way of example, there are
situations where an individual firm
would choose to submit orders to the
Exchange through different
mechanisms. For instance, a firm may
employ different trading strategies
across different trading desks and
choose to send orders for one strategy to
the Exchange through a direct
connection while the other strategy is
sent through Sponsored Access. The
proposed functionality would serve as
an additional tool that Users may enable
in order to assist with compliance with
the various securities laws relating to
potentially manipulative trading activity
12 See Exchange Rule 11.9(f). See also 17 CFR
230.405. An affiliate of, or person affiliated with,
a specified person, is a person that directly, or
indirectly through one or more intermediaries,
controls or is controlled by, or is under common
control with, the person specified.
PO 00000
Frm 00122
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such as wash sales 13 and self-trades.14
Additionally, the proposed functionality
would provide firms an additional
solution to manage order flow by
preventing undesirable executions
where the firm submits orders in
multiple formats (i.e., direct connection
or Sponsored Access). As is the case
with the existing risk tools, Users, and
not the Exchange, have full
responsibility for ensuring that their
orders comply with applicable
securities rules, laws, and regulations.
Furthermore, as is the case with the
existing risk settings, the Exchange does
not believe that the use of the proposed
MTP functionality can replace Usermanaged risk management solutions.
The Exchange is proposing to allow
firms that submit orders to the Exchange
through both a direct connection and
through Sponsored Access to utilize
MTP by utilizing the Multiple Access
identifier.15 Specifically, the Exchange
is proposing to allow individual firms
who choose to access the System
through both a direct connection and
through Sponsored Access to use MTP
functionality in order to prevent
executions from occurring between
those separate Users that are associated
with the direct connection and
Sponsored Access. When a firm requests
MTP using the Multiple Access
identifier and the Exchange confirms
that the individual firm is both a
Member that accesses the Exchange
through a direct connection and
maintains a Sponsored Participant
relationship on the Exchange, the
Exchange will assign an identical
Multiple Access identifier to each User.
This Multiple Access identifier will be
used to prevent executions between
contra side orders entered by the Users
assigned the same Multiple Access
identifier. The purpose of this proposed
change is to extend MTP functionality
13 A ‘‘wash sale’’ is generally defined as a trade
involving no change in beneficial ownership that is
intended to produce the false appearance of trading
and is strictly prohibited under both the federal
securities laws and FINRA rules. See, e.g., 15 U.S.C.
78i(a)(1); FINRA Rule 6140(b) (‘‘Other Trading
Practices’’).
14 Self-trades are ‘‘transactions in a security
resulting from the unintentional interaction of
orders originating from the same firm that involve
no change in beneficial ownership of the security.’’
FINRA requires members to have policies and
procedures in place that are reasonably designed to
review trading activity for, and prevent, a pattern
or practice of self-trades resulting from orders
originating from a single algorithm or trading desk,
or related algorithms or trading desks. See FINRA
Rule 5210, Supplementary Material .02.
15 The Exchange will require firms requesting to
use the Multiple Access identifier to complete an
affidavit stating: (i) it is currently a Member of the
Exchange that submits orders directly to the
System, and (ii) it also submits orders to the System
through a Sponsored Access arrangement.
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to separate Users originating from the
same individual firm in order to prevent
transactions between the firm’s orders
submitted directly to the System and
through Sponsored Access.
To demonstrate how MTP will
operate with the proposed Multiple
Access identifier, the Exchange has
included examples of potential
scenarios in which MTP may be used by
individual Users utilizing the Multiple
Access identifier. For all examples
below, User A represents Firm 1
accessing the System through a direct
connection. User B also represents Firm
1 but where Firm 1 is accessing the
System as a Sponsored Participant
through a Sponsoring Member.16 User A
and User B will use a Multiple Access
identifier of ‘‘A’’ when requesting MTP
at the Multiple Access level, as both
Users submit Firm 1’s orders to the
System. User C is not related to Users
A and B and uses a Multiple Access
identifier of ‘‘C’’.
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Multiple Access Level MTP
Scenario 1: User A submits a buy
order. User B submits a sell order. User
C also submits a sell order. User A has
enabled MTP at the Multiple Access
level using a Multiple Access identifier
of A. User B has enabled MTP at the
Multiple Access level using a Multiple
Access identifier of A. User C has not
enabled MTP. User A’s buy order is
prevented from executing with User B’s
sell order as each User has enabled MTP
at the Multiple Access level using an
Multiple Access identifier of A. User A’s
buy order will be permitted to execute
with User C’s sell order because User C
has not enabled MTP.
Scenario 2: User A submits a buy
order. User B submits a sell order. User
C also submits a sell order. User A has
enabled MTP at the Multiple Access
level using an Multiple Access identifier
of A. User B has not enabled MTP. User
C has enabled MTP at the Multiple
Access level using a Multiple Access
identifier of C. User A’s order will be
eligible to trade with both User B and
User C. User A’s order is eligible to
trade with User B because User B did
not enable MTP. In order for MTP to
prevent the matching of contra side
orders, both the buy and sell order must
contain an MTP modifier. User A’s
16 See Exchange Rule 1.5(y). A ‘‘Sponsoring
Member’’ shall mean a broker-dealer that has been
issued a membership by the Exchange who has
been designated by a Sponsored Participant to
execute, clear and settle transactions resulting from
the System. The Sponsoring Member shall be either
(i) a clearing firm with membership in a clearing
agency registered with the Commission that
maintains facilities through which transactions may
be cleared or (ii) a correspondent firm with a
clearing arrangement with any such clearing firm.
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order is also eligible to trade with User
C because even though User A and User
C have both enabled MTP at the
Multiple Access level, User A and User
C have been assigned different Multiple
Access identifiers.
Scenario 3: User A submits a buy
order and a sell order. User B submits
a buy order. User A has enabled MTP
at the Multiple Access level using a
Multiple Access identifier of A. User B
has enabled MTP at the Multiple Access
level using a Multiple Access identifier
of A. User A’s buy order is not eligible
to execute with User A’s sell order
because User A has enabled MTP at the
Multiple Access level using a Multiple
Access identifier of A. User A’s sell
order is not eligible to execute with User
B’s buy order because both User A and
User B have enabled MTP at the
Multiple Access level using a Multiple
Access identifier of A.
Scenario 4: User A submits a buy
order and a sell order. User B submits
a sell order. User C submits a sell order.
User A has enabled MTP at the Multiple
Access level using a Multiple Access
identifier of A. User B has enabled MTP
at the Multiple Access level using a
Multiple Access identifier of A. User C
has enabled MTP at the Multiple Access
level using a Multiple Access identifier
of C. User A’s buy order is not eligible
to execute with User A’s sell order
because User A has enabled MTP at the
Multiple Access level using a Multiple
Access identifier of A. User A’s buy
order is not eligible to execute with User
B’s sell order because both User A and
User B have enabled MTP at the
Multiple Access level using a Multiple
Access identifier of A. User A’s buy
order is eligible to execute with User C’s
sell order because while User A and
User C have enabled MTP at the
Multiple Access level, User A and User
C have been assigned different Multiple
Access identifiers.
The Exchange plans to implement the
proposed rule change during the third
quarter of 2023 and will announce the
implementation date via Trade Desk
Notice.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
section 6(b) of the Act.17 Specifically,
the Exchange believes the proposed rule
change is consistent with the section
6(b)(5) 18 requirements that the rules of
an exchange be designed to prevent
17 15
18 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00123
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51381
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) 19 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
that the proposed Multiple Access level
MTP functionality promotes just and
equitable principles of trade by allowing
individual firms to better manage order
flow and prevent undesirable trading
activity such as wash sales’’ 20 or selftrades 21 that may occur as a result of the
velocity of trading in today’s high-speed
marketplace. The proposed Multiple
Access identifier and description of
eligibility to utilize the proposed
Multiple Access identifier does not
introduce any new or novel
functionality, as the proposed
amendment does not seek to change the
underlying MTP functionality, but
merely extends the current MTP
functionality to another trading
relationship. For instance, a User may
operate trading desk 1 that accesses the
Exchange via the User’s direction
connection, as well as trading desk 2
that access the Exchange as a Sponsored
Participant. While these desks may
operate different trading strategies, a
User may desire to prevent these desks
from trading versus each other in the
marketplace because the orders are
originating from the same entity. Here,
Users may desire MTP functionality on
a Multiple Access level that will help
them achieve compliance 22 with
regulatory rules regarding wash sales
and self-trades in a very similar manner
to the way that the current MTP
functionality applies on the existing
Unique Identifier level. In this regard,
the proposed Multiple Access level
MTP functionality will permit
individual firms associated with
different Users for purposes of
19 Id.
20 Supra
note 13.
note 14.
22 The Exchange reminds Users that while they
may utilize MTP to help prevent potential
transactions such as wash sales or self-trades, Users,
not the Exchange, are ultimately responsible for
ensuring that their orders comply with applicable
rules, laws, and regulations.
21 Supra
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submitting orders to the Exchange in a
different manner to prevent the
execution of transactions by and
between the Users. The Exchange also
believes that the proposed rule change
is fair and equitable and is not designed
to permit unfair discrimination as use of
the proposed MTP functionality is
optional, and its use is not a
prerequisite for trading on the
Exchange.
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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. MTP is an
optional functionality offered by the
Exchange and Users are free to decide
whether to use MTP in their decisionmaking process when submitting orders
to the Exchange.
The Exchange believes that the
proposed Multiple Access identifier
does not impose any intramarket
competition as it seeks to enhance an
existing functionality available to all
Users. The Exchange is not proposing to
introduce any new or novel
functionality, but rather is proposing to
provide an extension of its existing MTP
functionality to individual firms who
choose to access the System through
both a direct connection and through
Sponsored Access. Additionally, the
proposed rule specifies which Users are
eligible to use the Multiple Access
identifier and will be available to any
User who satisfies such criteria. MTP
will continue to be an optional
functionality offered by the Exchange
and the addition of Multiple Access
level MTP will not change how the
current Unique Identifiers and MTP
functionality operate.
The Exchange believes that the
proposed Multiple Access identifier
does not impose any undue burden on
intermarket competition. MTP is an
optional functionality offered by the
Exchange and Users are not required to
use MTP functionality when submitting
orders to the Exchange. Further, the
Exchange is not required to offer MTP
and is choosing to do so as a benefit for
Users who wish to enable MTP
functionality. Moreover, the proposed
change is not being submitted for
competitive reasons, but rather to
provide Users enhanced order
processing functionality that may
prevent undesirable executions by
affiliated Users such as wash sales or
self-trades.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (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 23 and Rule 19b–
4(f)(6) 24 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 25 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),26 the
Commission may designate a shorter
time if such action is consistent with the
protection of investor and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Exchange states that waiver
of the 30-day operative delay will allow
the Exchange to immediately offer its
Users that access the Exchange’s System
through a direct connection and through
Sponsored Access the ability to better
manage order flow and prevent
undesirable executions, such as wash
sales and self-trades, in the same
manner as Users who currently enable
MTP at the MPID, Exchange Member
identifier, trading group identifier,
Exchange Sponsored Participant, or
affiliate identifier levels. Because the
proposed rule change does not raise any
novel regulatory issues, the Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the operative delay and
designates the proposal operative upon
filing.27
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
23 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
25 17 CFR 240.19b–4(f)(6).
26 17 CFR 240.19b–4(f)(6)(iii).
27 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
24 17
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Fmt 4703
Sfmt 4703
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number
SR–CboeBYX–2023–012 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–CboeBYX–2023–012. 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
E:\FR\FM\03AUN1.SGM
03AUN1
Federal Register / Vol. 88, No. 148 / Thursday, August 3, 2023 / Notices
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeBYX–2023–012 and should be
submitted on or before August 24, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–16504 Filed 8–2–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98022; File No. SR–
CboeBZX–2023–054]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
11.9(f) To Allow Match Trade
Prevention Between Users That
Access the Exchange With Both a
Direct Connection and Sponsored
Access
July 28, 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 July 26,
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 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.
ddrumheller on DSK120RN23PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) proposes to
amend Exchange Rule 11.9(f) (‘‘Match
Trade Prevention (‘‘MTP’’) Modifiers’’)
to permit individual firms with Users
that access the Exchange through a
direct connection and also access the
Exchange through Sponsored Access to
enable Match Trade Prevention at the
28 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
VerDate Sep<11>2014
17:35 Aug 02, 2023
Jkt 259001
firm level. The text of the proposed rule
change is provided in Exhibit 5.
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.
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 11.9(f) (‘‘Match Trade Prevention
(‘‘MTP’’) Modifiers’’) to add the term
‘‘Multiple Access identifier’’ to the
definition of ‘‘Unique Identifier’’ while
also codifying how a User may utilize
the Multiple Access identifier. Adding a
Multiple Access identifier to MTP
functionality on the Exchange would
allow Users that electronically access
the Exchange via their own Membership
and Exchange connection(s), as well as
Sponsored Participants 5 that access the
Exchange via a Sponsored Access 6
arrangement, to enable MTP at the firm
level, in addition to the current MTP
functionality based on market
participant identifier (‘‘MPID’’),
Exchange Member identifier, trading
group identifier, Exchange Sponsored
Participant identifier, or affiliate
identifier (any such existing identifier, a
‘‘Unique Identifier’’).7
Currently, the Exchange’s MTP
functionality prevents certain contra
5 See Exchange Rule 1.5(x). The term ‘‘Sponsored
Participant’’ shall mean a person which has entered
into a sponsorship arrangement with a Sponsoring
Member pursuant to Rule 11.3.
6 See Exchange Rule 11.3(a). ‘‘Sponsored Access’’
shall mean ‘‘an arrangement whereby a Member
permits its customer to enter orders into the System
that bypass the Member’s trading system and are
routed directly to the Exchange, including routing
through a service bureau or other third-party
technology provider.’’
7 See Exchange Rule 11.9(f).
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
51383
side orders entered by a User 8 from
executing, provided that each order has
been marked with the same Unique
Identifier.9 MTP functionality is
currently available only to individual or
affiliated Users on the Exchange and
cannot be enabled by Users who choose
to access the Exchange through both a
direct connection as well as through a
Sponsored Access arrangement because
such Users do not have the same Unique
Identifier.
As noted above, there are currently
five Unique Identifiers that a User may
choose from when submitting an order
subject to MTP: (i) MPID; 10 (ii)
Exchange Member identifier; (iii)
trading group identifier; (iv) Exchange
Sponsored Participant identifier, and (v)
affiliate identifier.11 MTP functionality
is optional for Users and is not
automatically implemented by the
Exchange. Both the buy and the sell
order must include the same Unique
Identifier in order to prevent an
execution from occurring and to effect a
cancel instruction.
For example, a User who enables MTP
functionality using the MPID Unique
Identifier will prevent contra side
executions between the same MPID
from occurring. A User who enables
MTP using the Exchange Member
Unique Identifier would prevent contra
side executions between any MPID
associated with that User and not just a
single MPID. The trading group Unique
Identifier permits Users to prevent
matched trades amongst traders or desks
within a certain firm but allows orders
from outside such group or desk to
interact with other firm orders. Users
who enable MTP functionality using the
Exchange Sponsored Participant Unique
Identifier will prevent matched trades
between contra side orders with an
identical Sponsored Participant
identifier. The affiliate identifier is a
Unique Identifier that permits MTP to
be enabled by firms with a control
relationship. The affiliate identifier is
only available to Users where: (i) greater
8 See Exchange Rule 1.5(cc). ‘‘User’’ is defined as
‘‘any Member or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Rule 11.3.’’ The ‘‘System’’ is ‘‘the electronic
communications and trading facility designated by
the Board through which securities orders of Users
are consolidated for ranking, execution and, when
applicable, routing away.’’ See Exchange Rule
1.5(aa). The term ‘‘Member’’ means any registered
broker or dealer that has been admitted to
membership in the Exchange. See Exchange Rule
1.5(n).
9 Supra note 7.
10 An MPID is a four-character unique identifier
that is approved by the Exchange and assigned to
a Member for use on the Exchange to identify the
Member firm on the orders sent to the Exchange
and resulting executions.
11 Supra note 7.
E:\FR\FM\03AUN1.SGM
03AUN1
]]>Agencies
[Federal Register Volume 88, Number 148 (Thursday, August 3, 2023)]
[Notices]
[Pages 51379-51383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16504]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98019; File No. SR-CboeBYX-2023-012]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 11.9(f) To Allow Match Trade Prevention Between Users That Access
the Exchange With Both a Direct Connection and Sponsored Access
July 28, 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 July 26, 2023, Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Exchange filed the proposal as
a ``non-controversial'' proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') proposes to
amend Exchange Rule 11.9(f) (``Match Trade Prevention (``MTP'')
Modifiers'') to permit individual firms with Users that access the
Exchange through a direct connection and also access the Exchange
through Sponsored Access to enable Match Trade Prevention at the firm
level. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/byx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 11.9(f) (``Match Trade
Prevention (``MTP'') Modifiers'') to add the term ``Multiple Access
identifier'' to the definition of ``Unique Identifier'' while also
codifying how a User may utilize the Multiple Access identifier. Adding
a Multiple Access identifier to MTP functionality on the Exchange would
allow Users that electronically access the Exchange via their own
Membership and Exchange connection(s), as well as Sponsored
Participants \5\ that access the Exchange via a Sponsored Access \6\
arrangement, to enable MTP at the firm level, in addition to the
current MTP functionality based on market participant identifier
(``MPID''), Exchange Member identifier, trading group identifier,
Exchange Sponsored Participant identifier, or affiliate identifier (any
such existing identifier, a ``Unique Identifier'').\7\
---------------------------------------------------------------------------
\5\ See Exchange Rule 1.5(x). The term ``Sponsored Participant''
shall mean a person which has entered into a sponsorship arrangement
with a Sponsoring Member pursuant to Rule 11.3.
\6\ See Exchange Rule 11.3(a). ``Sponsored Access'' shall mean
``an arrangement whereby a Member permits its customer to enter
orders into the System that bypass the Member's trading system and
are routed directly to the Exchange, including routing through a
service bureau or other third-party technology provider.''
\7\ See Exchange Rule 11.9(f).
---------------------------------------------------------------------------
Currently, the Exchange's MTP functionality prevents certain contra
side orders entered by a User \8\ from executing, provided that each
order has been marked with the same Unique Identifier.\9\ MTP
functionality is currently available only to individual or affiliated
Users on the Exchange and cannot be enabled by Users who choose
[[Page 51380]]
to access the Exchange through both a direct connection as well as
through a Sponsored Access arrangement because such Users do not have
the same Unique Identifier.
---------------------------------------------------------------------------
\8\ See Exchange Rule 1.5(cc). ``User'' is defined as ``any
Member or Sponsored Participant who is authorized to obtain access
to the System pursuant to Rule 11.3.'' The ``System'' is ``the
electronic communications and trading facility designated by the
Board through which securities orders of Users are consolidated for
ranking, execution and, when applicable, routing away.'' See
Exchange Rule 1.5(aa). The term ``Member'' means any registered
broker or dealer that has been admitted to membership in the
Exchange. See Exchange Rule 1.5(n).
\9\ Supra note 7.
---------------------------------------------------------------------------
As noted above, there are currently five Unique Identifiers that a
User may choose from when submitting an order subject to MTP: (i) MPID;
\10\ (ii) Exchange Member identifier; (iii) trading group identifier;
(iv) Exchange Sponsored Participant identifier, and (v) affiliate
identifier.\11\ MTP functionality is optional for Users and is not
automatically implemented by the Exchange. Both the buy and the sell
order must include the same Unique Identifier in order to prevent an
execution from occurring and to effect a cancel instruction.
---------------------------------------------------------------------------
\10\ An MPID is a four-character unique identifier that is
approved by the Exchange and assigned to a Member for use on the
Exchange to identify the Member firm on the orders sent to the
Exchange and resulting executions.
\11\ Supra note 7.
---------------------------------------------------------------------------
For example, a User who enables MTP functionality using the MPID
Unique Identifier will prevent contra side executions between the same
MPID from occurring. A User who enables MTP using the Exchange Member
Unique Identifier would prevent contra side executions between any MPID
associated with that User and not just a single MPID. The trading group
Unique Identifier permits Users to prevent matched trades amongst
traders or desks within a certain firm but allows orders from outside
such group or desk to interact with other firm orders. Users who enable
MTP functionality using the Exchange Sponsored Participant Unique
Identifier will prevent matched trades between contra side orders with
an identical Sponsored Participant identifier. The affiliate identifier
is a Unique Identifier that permits MTP to be enabled by firms with a
control relationship. The affiliate identifier is only available to
Users where: (i) greater than 50% ownership is identified in a User's
Form BD; and (ii) the Users execute an affidavit stating that a control
relationship exists between the two Users. The Exchange is not
proposing any change in functionality for the current Unique
Identifiers described above.
The Exchange now proposes to amend Rule 11.9(f) and enhance its
existing MTP functionality by introducing a sixth Unique Identifier,
Multiple Access identifier, which will allow a User to prevent orders
entered via its direct connection from interacting with the User's
orders entered via Sponsored Access. Currently, MTP is only available
to individual and affiliated Users. However, there are certain
situations (discussed infra) in which an individual firm may access the
Exchange through different methods (i.e., through a direct connection
and through Sponsored Access) and therefore desires to enable MTP in
order to prevent orders submitted through its direct connection from
interacting with those orders submitted through Sponsored Access.
The Multiple Access identifier is similar to the affiliate
identifier that is already in place, as it will enable firms that
currently enter orders on the Exchange under two different Unique
Identifiers to assign the same Unique Identifier to orders entered via
its direct connection and to orders entered via Sponsored Access. This
will permit the firm to enable MTP and prevent contra side orders from
executing. While the affiliate identifier requires Users to prove that
an affiliate relationship exists between the two Users,\12\ the
proposed Multiple Access identifier will only require a User to
demonstrate: (i) it maintains a Membership on the Exchange through
which it directly submits orders to the System; and (ii) it also
operates as a Sponsored Participant and submits orders to the System
through Sponsored Access. The proposed addition of the Multiple Access
identifier does not present any new or novel MTP functionality, but
rather would extend existing MTP functionality to firms that already
access the Exchange through multiple formats and therefore have
different Unique Identifiers appended to their orders.
---------------------------------------------------------------------------
\12\ See Exchange Rule 11.9(f). See also 17 CFR 230.405. An
affiliate of, or person affiliated with, a specified person, is a
person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the person specified.
---------------------------------------------------------------------------
By way of example, there are situations where an individual firm
would choose to submit orders to the Exchange through different
mechanisms. For instance, a firm may employ different trading
strategies across different trading desks and choose to send orders for
one strategy to the Exchange through a direct connection while the
other strategy is sent through Sponsored Access. The proposed
functionality would serve as an additional tool that Users may enable
in order to assist with compliance with the various securities laws
relating to potentially manipulative trading activity such as wash
sales \13\ and self-trades.\14\ Additionally, the proposed
functionality would provide firms an additional solution to manage
order flow by preventing undesirable executions where the firm submits
orders in multiple formats (i.e., direct connection or Sponsored
Access). As is the case with the existing risk tools, Users, and not
the Exchange, have full responsibility for ensuring that their orders
comply with applicable securities rules, laws, and regulations.
Furthermore, as is the case with the existing risk settings, the
Exchange does not believe that the use of the proposed MTP
functionality can replace User-managed risk management solutions.
---------------------------------------------------------------------------
\13\ A ``wash sale'' is generally defined as a trade involving
no change in beneficial ownership that is intended to produce the
false appearance of trading and is strictly prohibited under both
the federal securities laws and FINRA rules. See, e.g., 15 U.S.C.
78i(a)(1); FINRA Rule 6140(b) (``Other Trading Practices'').
\14\ Self-trades are ``transactions in a security resulting from
the unintentional interaction of orders originating from the same
firm that involve no change in beneficial ownership of the
security.'' FINRA requires members to have policies and procedures
in place that are reasonably designed to review trading activity
for, and prevent, a pattern or practice of self-trades resulting
from orders originating from a single algorithm or trading desk, or
related algorithms or trading desks. See FINRA Rule 5210,
Supplementary Material .02.
---------------------------------------------------------------------------
The Exchange is proposing to allow firms that submit orders to the
Exchange through both a direct connection and through Sponsored Access
to utilize MTP by utilizing the Multiple Access identifier.\15\
Specifically, the Exchange is proposing to allow individual firms who
choose to access the System through both a direct connection and
through Sponsored Access to use MTP functionality in order to prevent
executions from occurring between those separate Users that are
associated with the direct connection and Sponsored Access. When a firm
requests MTP using the Multiple Access identifier and the Exchange
confirms that the individual firm is both a Member that accesses the
Exchange through a direct connection and maintains a Sponsored
Participant relationship on the Exchange, the Exchange will assign an
identical Multiple Access identifier to each User. This Multiple Access
identifier will be used to prevent executions between contra side
orders entered by the Users assigned the same Multiple Access
identifier. The purpose of this proposed change is to extend MTP
functionality
[[Page 51381]]
to separate Users originating from the same individual firm in order to
prevent transactions between the firm's orders submitted directly to
the System and through Sponsored Access.
---------------------------------------------------------------------------
\15\ The Exchange will require firms requesting to use the
Multiple Access identifier to complete an affidavit stating: (i) it
is currently a Member of the Exchange that submits orders directly
to the System, and (ii) it also submits orders to the System through
a Sponsored Access arrangement.
---------------------------------------------------------------------------
To demonstrate how MTP will operate with the proposed Multiple
Access identifier, the Exchange has included examples of potential
scenarios in which MTP may be used by individual Users utilizing the
Multiple Access identifier. For all examples below, User A represents
Firm 1 accessing the System through a direct connection. User B also
represents Firm 1 but where Firm 1 is accessing the System as a
Sponsored Participant through a Sponsoring Member.\16\ User A and User
B will use a Multiple Access identifier of ``A'' when requesting MTP at
the Multiple Access level, as both Users submit Firm 1's orders to the
System. User C is not related to Users A and B and uses a Multiple
Access identifier of ``C''.
---------------------------------------------------------------------------
\16\ See Exchange Rule 1.5(y). A ``Sponsoring Member'' shall
mean a broker-dealer that has been issued a membership by the
Exchange who has been designated by a Sponsored Participant to
execute, clear and settle transactions resulting from the System.
The Sponsoring Member shall be either (i) a clearing firm with
membership in a clearing agency registered with the Commission that
maintains facilities through which transactions may be cleared or
(ii) a correspondent firm with a clearing arrangement with any such
clearing firm.
---------------------------------------------------------------------------
Multiple Access Level MTP
Scenario 1: User A submits a buy order. User B submits a sell
order. User C also submits a sell order. User A has enabled MTP at the
Multiple Access level using a Multiple Access identifier of A. User B
has enabled MTP at the Multiple Access level using a Multiple Access
identifier of A. User C has not enabled MTP. User A's buy order is
prevented from executing with User B's sell order as each User has
enabled MTP at the Multiple Access level using an Multiple Access
identifier of A. User A's buy order will be permitted to execute with
User C's sell order because User C has not enabled MTP.
Scenario 2: User A submits a buy order. User B submits a sell
order. User C also submits a sell order. User A has enabled MTP at the
Multiple Access level using an Multiple Access identifier of A. User B
has not enabled MTP. User C has enabled MTP at the Multiple Access
level using a Multiple Access identifier of C. User A's order will be
eligible to trade with both User B and User C. User A's order is
eligible to trade with User B because User B did not enable MTP. In
order for MTP to prevent the matching of contra side orders, both the
buy and sell order must contain an MTP modifier. User A's order is also
eligible to trade with User C because even though User A and User C
have both enabled MTP at the Multiple Access level, User A and User C
have been assigned different Multiple Access identifiers.
Scenario 3: User A submits a buy order and a sell order. User B
submits a buy order. User A has enabled MTP at the Multiple Access
level using a Multiple Access identifier of A. User B has enabled MTP
at the Multiple Access level using a Multiple Access identifier of A.
User A's buy order is not eligible to execute with User A's sell order
because User A has enabled MTP at the Multiple Access level using a
Multiple Access identifier of A. User A's sell order is not eligible to
execute with User B's buy order because both User A and User B have
enabled MTP at the Multiple Access level using a Multiple Access
identifier of A.
Scenario 4: User A submits a buy order and a sell order. User B
submits a sell order. User C submits a sell order. User A has enabled
MTP at the Multiple Access level using a Multiple Access identifier of
A. User B has enabled MTP at the Multiple Access level using a Multiple
Access identifier of A. User C has enabled MTP at the Multiple Access
level using a Multiple Access identifier of C. User A's buy order is
not eligible to execute with User A's sell order because User A has
enabled MTP at the Multiple Access level using a Multiple Access
identifier of A. User A's buy order is not eligible to execute with
User B's sell order because both User A and User B have enabled MTP at
the Multiple Access level using a Multiple Access identifier of A. User
A's buy order is eligible to execute with User C's sell order because
while User A and User C have enabled MTP at the Multiple Access level,
User A and User C have been assigned different Multiple Access
identifiers.
The Exchange plans to implement the proposed rule change during the
third quarter of 2023 and will announce the implementation date via
Trade Desk Notice.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of section 6(b) of the
Act.\17\ Specifically, the Exchange believes the proposed rule change
is consistent with the section 6(b)(5) \18\ 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) \19\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed Multiple
Access level MTP functionality promotes just and equitable principles
of trade by allowing individual firms to better manage order flow and
prevent undesirable trading activity such as wash sales'' \20\ or self-
trades \21\ that may occur as a result of the velocity of trading in
today's high-speed marketplace. The proposed Multiple Access identifier
and description of eligibility to utilize the proposed Multiple Access
identifier does not introduce any new or novel functionality, as the
proposed amendment does not seek to change the underlying MTP
functionality, but merely extends the current MTP functionality to
another trading relationship. For instance, a User may operate trading
desk 1 that accesses the Exchange via the User's direction connection,
as well as trading desk 2 that access the Exchange as a Sponsored
Participant. While these desks may operate different trading
strategies, a User may desire to prevent these desks from trading
versus each other in the marketplace because the orders are originating
from the same entity. Here, Users may desire MTP functionality on a
Multiple Access level that will help them achieve compliance \22\ with
regulatory rules regarding wash sales and self-trades in a very similar
manner to the way that the current MTP functionality applies on the
existing Unique Identifier level. In this regard, the proposed Multiple
Access level MTP functionality will permit individual firms associated
with different Users for purposes of
[[Page 51382]]
submitting orders to the Exchange in a different manner to prevent the
execution of transactions by and between the Users. The Exchange also
believes that the proposed rule change is fair and equitable and is not
designed to permit unfair discrimination as use of the proposed MTP
functionality is optional, and its use is not a prerequisite for
trading on the Exchange.
---------------------------------------------------------------------------
\20\ Supra note 13.
\21\ Supra note 14.
\22\ The Exchange reminds Users that while they may utilize MTP
to help prevent potential transactions such as wash sales or self-
trades, Users, not the Exchange, are ultimately responsible for
ensuring that their orders comply with applicable rules, laws, and
regulations.
---------------------------------------------------------------------------
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. MTP is an optional
functionality offered by the Exchange and Users are free to decide
whether to use MTP in their decision-making process when submitting
orders to the Exchange.
The Exchange believes that the proposed Multiple Access identifier
does not impose any intramarket competition as it seeks to enhance an
existing functionality available to all Users. The Exchange is not
proposing to introduce any new or novel functionality, but rather is
proposing to provide an extension of its existing MTP functionality to
individual firms who choose to access the System through both a direct
connection and through Sponsored Access. Additionally, the proposed
rule specifies which Users are eligible to use the Multiple Access
identifier and will be available to any User who satisfies such
criteria. MTP will continue to be an optional functionality offered by
the Exchange and the addition of Multiple Access level MTP will not
change how the current Unique Identifiers and MTP functionality
operate.
The Exchange believes that the proposed Multiple Access identifier
does not impose any undue burden on intermarket competition. MTP is an
optional functionality offered by the Exchange and Users are not
required to use MTP functionality when submitting orders to the
Exchange. Further, the Exchange is not required to offer MTP and is
choosing to do so as a benefit for Users who wish to enable MTP
functionality. Moreover, the proposed change is not being submitted for
competitive reasons, but rather to provide Users enhanced order
processing functionality that may prevent undesirable executions by
affiliated Users such as wash sales or self-trades.
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 \23\ and Rule 19b-
4(f)(6) \24\ thereunder.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission
may designate a shorter time if such action is consistent with the
protection of investor and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange states that
waiver of the 30-day operative delay will allow the Exchange to
immediately offer its Users that access the Exchange's System through a
direct connection and through Sponsored Access the ability to better
manage order flow and prevent undesirable executions, such as wash
sales and self-trades, in the same manner as Users who currently enable
MTP at the MPID, Exchange Member identifier, trading group identifier,
Exchange Sponsored Participant, or affiliate identifier levels. Because
the proposed rule change does not raise any novel regulatory issues,
the Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\27\
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\25\ 17 CFR 240.19b-4(f)(6).
\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number
SR-CboeBYX-2023-012 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-CboeBYX-2023-012. 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
[[Page 51383]]
withhold entirely from publication submitted material that is obscene
or subject to copyright protection. All submissions should refer to
file number SR-CboeBYX-2023-012 and should be submitted on or before
August 24, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16504 Filed 8-2-23; 8:45 am]
BILLING CODE 8011-01-P
