Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Automated Price Improvement Auction Rules, 67400-67404 [2023-21347]

Download as PDF 67400 Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices arguments with respect to the issues identified above, as well as any other comments or concerns they may have regarding the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Section 11A or any other provision of the Act, or the rules and regulations thereunder, and the Commission asks that commenters address the sufficiency and merit of OPRA’s statements in support of the Proposed Amendment.32 Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 608(b)(2)(i) of Regulation NMS,33 any request for an opportunity to make an oral presentation.34 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– OPRA–2023–01 on the subject line. lotter on DSK11XQN23PROD with NOTICES1 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–OPRA–2023–01. 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 32 See Notice, supra note 4, 88 FR at 30989. CFR 242.608(b)(2)(i). 34 Rule 700(c)(2) of the Commission’s Rules of Practice provides that ‘‘[t]he Commission, in its sole discretion, may determine whether any issues relevant to approval or disapproval would be facilitated by the opportunity for an oral presentation of views.’’ 17 CFR 201.700(c)(2). 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 Participants’ principal offices. 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–OPRA–2023–01 and should be submitted on or before October 20, 2023. Rebuttal comments should be submitted by November 3, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.35 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–21349 Filed 9–28–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98511; File No. SR–CBOE– 2023–053] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Automated Price Improvement Auction Rules September 25, 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 September 20, 2023, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 33 17 VerDate Sep<11>2014 21:46 Sep 28, 2023 Jkt 259001 35 17 CFR 200.30–3(a)(85). 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 PO 00000 Frm 00176 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend its automated price improvement auction rules. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://www.cboe.com/ AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend provisions in Rule 5.37 (Automated Price Improvement Mechanism (‘‘AIM’’ or ‘‘AIM Auction’’)) and Rule 5.38 (Complex Automated Improvement Mechanism (‘‘C–AIM’’ or ‘‘C–AIM Auction’’)) regarding concurrent AIM and C–AIM Auctions, respectively. The Exchange also proposes to update the provisions in those Rules regarding the permissible stop price. By way of background, Rules 5.37 and 5.38 contain the requirements applicable to the execution of orders using AIM and C–AIM, respectively. The AIM and C–AIM auctions are electronic auctions intended to provide orders that Trading Permit Holders (‘‘TPHs’’) represent as agent (‘‘Agency Orders’’) with opportunities to receive price improvement (over the National Best Bid or Offer (‘‘NBBO’’) in AIM, or the synthetic best bid or offer (‘‘SBBO’’) on the Exchange in C–AIM). Upon submitting an Agency Order into an AIM or C–AIM auction, the initiating Trading Permit Holder (‘‘Initiating TPH’’) must also submit a contra-side second order (‘‘Initiating Order’’) for the E:\FR\FM\29SEN1.SGM 29SEN1 Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices 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 may submit responses to trade against the Agency Order. At the end of an auction, depending on the contra-side interest available, the Initiating Order may be allocated a certain percentage of the Agency Order.5 An Initiating TPH may initiate an AIM or C–AIM auction provided that the Agency Order is in a class and of sufficient size as determined by the Exchange.6 Upon receipt of an Agency Order, the AIM or C–AIM auction process commences. Currently, under Rule 5.37(c)(1), for Agency Orders for less than 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts), only one AIM Auction may be ongoing at any given time in a series, and AIM Auctions in the same series may not queue or overlap in any manner. One or more AIM Auctions in the same series for Agency Orders of 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts) or more may occur at the same time. The Exchange proposes amending Rule 5.37(c)(1) to allow one or more AIM Auctions in the same series to occur at the same time for Agency Orders for less than 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts). This would effectively allow for one or more AIM Auctions in the same series to occur at the same time for orders of all sizes. Concurrent AIM Auctions for these smaller-sized orders will occur in the same manner as concurrent AIM Auctions for orders of 50 or more contracts occur today.7 Similarly, under current Rule 5.38(c)(1)(A), with respect to Agency Orders for which the smallest leg is less than 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts), only one C– AIM Auction may be ongoing at any given time in a complex strategy, and C– AIM Auctions in the same complex 5 See generally Rules 5.37(e) and 5.38(e). Rules 5.37(a) and 5.38(a), respectively. 7 See Rules 5.37(c)(1) (which provides that if there is more than one AIM Auction in a series underway at a time, those auctions will conclude sequentially based on the exact time each auction commenced, including if they are terminated early pursuant to Rule 5.37(d)); and Rule 5.38(c)(1)(B) and (C) (which provides that if there is more than one C–AIM Auction in a complex strategy underway at a time, those auctions will conclude sequentially based on the exact time each auction commenced, including if they are terminated early pursuant to Rule 5.38(d)). lotter on DSK11XQN23PROD with NOTICES1 6 See VerDate Sep<11>2014 21:46 Sep 28, 2023 Jkt 259001 strategy may not queue or overlap in any manner. One or more C–AIM Auctions in the same complex strategy for Agency Orders for which the smallest leg is 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts) or more may occur at the same time. The Exchange proposes amending Rule 5.38(c)(1)(A) to allow one or more C– AIM Auctions in a complex strategy to occur at the same time for Agency Orders for which the smallest leg is less than 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts). This would effectively allow for one or more C–AIM Auctions in the same complex strategy to occur at the same time for complex orders of all sizes. The Exchange believes this proposed functionality will allow more AIM Auctions in the same series and more C–AIM Auctions in the same complex strategy to be conducted, thereby increasing opportunities for price improvement on the Exchange to the benefit of all market participants. Currently, if an Agency Order of fewer than 50 contracts (or 500 mini-option contracts or 5,000 micro-option contracts) is submitted to AIM or C– AIM while an AIM or C–AIM Auction is in progress, the Agency order is rejected. The proposal to add concurrent AIM and C–AIM Auctions for Agency Orders of any size, including for Agency Orders of fewer than 50 contracts (or 500 mini-option contracts or 5,000 micro-option contracts), would also prevent the rejection of these smaller Agency Orders that occurs when such smaller Agency Orders are submitted while an AIM or C–AIM Auction is in progress. By eliminating this rejection scenario, the Exchange would increase execution and price improvement opportunities for these smaller Agency orders to the benefit of investors. The Exchange notes that allowing more than one price improvement auction at a time in the same series for paired agency orders of fewer than 50 contracts is not new or novel and is current functionality on at least one other options exchange.8 While the Exchange is unaware of another options exchange that offers concurrent price improvement auctions for orders in complex strategies for which the smallest leg is fewer than 50 contracts, other options exchanges (as well as the Exchange) permit simple price improvement auctions to occur 8 See, e.g., NYSE American LLC (‘‘NYSE American’’) Rule 971.1NYP(c) (as recently amended) (see Securities Exchange Act Release No. 97938 (July 18, 2023), 88 FR 47536 (July 24, 2023) (SR–NYSEAMER–2023–35) (permitting concurrent simple price improvement auctions). PO 00000 Frm 00177 Fmt 4703 Sfmt 4703 67401 simultaneously with complex price improvement auctions for complex strategies involving the same series, with no size restrictions.9 Having simple price improvement auctions in multiple legs of a complex strategy in progress at the same time as a complex price improvement auction for that complex strategy for orders of any size is similar to two complex price improvement auctions in the same complex strategy being in progress at the same time. Additionally, the benefits of allowing concurrent price improvement auctions for simple orders of all sizes and complex strategies with 50 contracts in the smallest leg or more (as described above) would apply to concurrent price improvement auctions for complex strategies with fewer than 50 contracts in the smallest leg. Specifically, allowing concurrent C– AIM Auctions in the same complex strategy if the smallest leg has fewer than 50 contracts would benefit investors because it would afford smaller-sized complex orders increased opportunities to solicit price-improving auction interest. The Exchange further believes this proposed change would provide additional benefits to customers, as smaller-sized orders tend to represent retail interest, and could improve the customer experience on the Exchange by increasing trading opportunities in the C–AIM Auctions. The proposal to allow concurrent AIM and C–AIM Auctions for Agency Orders for less than 50 contracts (or 500 minioption contracts or 5,000 micro-option contracts) in the same series or complex strategy, respectively, would benefit investors because it would afford smaller-sized Agency Orders increased opportunities for price improvement, including because such smaller Agency Orders would no longer be rejected if submitted while an AIM or C–AIM Auction is in progress. The Exchange will continue to protect smaller-sized simple Agency Orders in minimum increment-wide 10 markets by 9 See, e.g., NYSE American Rule 971.1NYP, Commentary .01; BOX Exchange LLC (‘‘BOX’’) Rules 7150, IM–7150–1 and 7245, IM–7245–2; and Nasdaq ISE, LLC (‘‘ISE’’) Options 3, Sections 11(g) and 13, Supplementary Material .04. 10 The Exchange proposes to amend Rule 5.37(b)(1) to require the stop price be at least one minimum increment better than the then-current NBBO if the NBBO width equals the minimum increment rather than $0.01. The purpose of this provision is to require this price improvement if the width of the NBBO is as narrow as possible. However, if the minimum increment for a class is, for example, $0.05, it would not be possible to price improve penny-wide market in the permissible minimum increment of $0.05. The proposed rule change will ensure that smaller-sized orders receive this price improvement when the NBBO is as narrow as possible, as intended. E:\FR\FM\29SEN1.SGM 29SEN1 67402 Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 requiring price improvement of at least one minimum increment for such orders and rejecting such orders in minimum increment-wide markets that do not provide for such price improvement.11 Additionally, the Exchange will continue to protect Priority Customers on the Simple Book by requiring price improvement of at least one minimum increment better than the SBBO if the applicable side of the BBO on any component of the complex Agency Order complex strategy represents a Priority Customer on the Simple Book.12 These protections would apply when the proposed concurrent Auctions are occurring. Thus, the Exchange believes this proposed change should allow the Exchange to better compete for auctionrelated order flow that may lead to an increase in Exchange volume, while continuing to ensure that displayed customer interest on the Book is protected, to the benefit of all market participants. The Exchange believes that its System has sufficient capacity to process a large volume of concurrent AIM and C–AIM Auctions for Agency Orders of any size, including for Agency Orders of fewer than 50 contracts (or 500 mini-option contracts or 5,000 micro-option contracts). Additionally, the Exchange proposes to amend Rule 5.38(c)(1)(B) related to early termination priority in the event of concurrent AIM and C–AIM Auctions. Currently, if the System receives a simple order that causes AIM and C– AIM (or multiple AIM and/or C–AIM) Auctions to end in early termination, the System first processes AIM Auctions (in price-time priority) and then processes C–AIM Auctions (in pricetime priority). The Exchange proposes to update Rule 5.38(c)(1)(B) to provide for the processing of early terminations in time priority in these instances. Under the proposed rule, if the System receives a simple order that causes AIM and C–AIM (or multiple AIM and/or C– AIM) Auctions to end in early termination, the System will continue to first process AIM Auctions (sequentially based on the exact time each AIM Auction commenced) and then process C–AIM Auctions (sequentially based on the exact time each C–AIM Auction commenced), which is consistent with the priority the System processes 11 See Rule 5.37(b)(1). The proposed rule change continues to provide price improvement assurances for those for buy (sell) Agency Orders submitted for AIM Auction processing with less than 50 standard option contracts (or 500 mini-option contracts or 5,000 micro-option contracts) and NBBO width of $0.01, pursuant to Rule 5.37(b)(1)(A), which remains unchanged. 12 See Rule 5.38(b)(1). VerDate Sep<11>2014 21:46 Sep 28, 2023 Jkt 259001 concurrent AIM Auctions and concurrent C–AIM Auctions. 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.13 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 14 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) 15 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes the proposal to permit concurrent AIM and C–AIM Auctions for Agency Orders for less than 50 contracts (or 500 mini-option contracts or 5,000 micro-option contracts) in the same series or complex strategy, respectively, would remove impediments to and perfect the mechanisms of a free and open market and a national market system because it would extend concurrent auction functionality to smaller-sized Agency Orders. The Exchange also believes this proposed change is non-controversial because it does not raise any issues that differ from those previously considered when the Exchange and other options exchanges adopted this functionality for larger-sized agency orders submitted to price improvement auctions, or when another options exchange adopted this functionality (pursuant to an immediately effective, noncontroversial rule filing) for smaller-sized simple agency orders submitted into a price improvement auction.16 The Exchange believes the proposal will benefit investors because it would afford smaller-sized Agency Orders increased opportunity to solicit price-improving auction interest. The Exchange further 13 15 14 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). believes that this proposed rule change would provide additional benefits to customers, as smaller-sized Agency Orders tend to represent retail interest, and could improve the customer experience on the Exchange by increasing trading opportunities in AIM and C–AIM Auctions. Notwithstanding the proposal to allow concurrent AIM auctions for smaller-sized Agency Orders, the Exchange would continue to protect customer interest on the simple Book by requiring price improvement over the BBO to initiate an Auction for smaller-sized Agency Orders and rejecting such orders in increment wide markets when price improvement is not possible. Additionally, the Exchange will continue to protect Priority Customers on the Simple Book by requiring price improvement of at least one minimum increment better than the SBBO if the applicable side of the BBO on any component of the complex Agency Order complex strategy represents a Priority Customer on the Simple Book.17 Further, the Exchange believes the proposed new functionality to allow concurrent AIM and C–AIM auctions for Agency Orders of any size is consistent with the Act, as the proposed rule changes will prevent the rejection of these smaller Agency Orders that occurs when such smaller Agency Orders are submitted while an AIM or C–AIM Auction is in progress, which the Exchange believes will increase execution opportunities for these smaller Agency orders to the benefit of investors. For example, in July 2023, the new functionality would have provided investors with additional price improvement and execution opportunities via approximately 6,000 additional AIM or C–AIM Auctions that were otherwise rejected due to current concurrency limitations. The Exchange also believes this proposed new functionality to allow concurrent AIM and C–AIM auctions for Agency Orders of any size should promote and foster competition and provide more options contracts with the opportunity for price improvement, which should benefit all market participants. In addition, this proposed change may lead to an increase in Exchange volume and should allow the Exchange to better compete against other markets that permit overlapping price improvement auctions, while continuing to ensure that displayed customer interest on the simple Book is protected. The proposed enhancement to allow concurrent auctions for Agency Orders of any size would be a 15 Id. 16 See PO 00000 supra note 8. Frm 00178 Fmt 4703 17 See Sfmt 4703 E:\FR\FM\29SEN1.SGM supra note 12. 29SEN1 Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 competitive change and may make the Exchange a more attractive venue for auction-related order flow. As noted above, the Exchange believes that its trading platform has sufficient capacity to process a large volume of concurrent Auctions for Agency Orders of any size, including for Agency Orders of fewer than 50 contracts (or 500 mini-option contracts or 5,000 micro-option contracts). Further, the Exchange believes its proposal to amend its AIM Rules to require the stop price be at least one minimum increment better than the then-current NBBO if the NBBO width equals the minimum increment for the class rather than $0.01 would remove impediments to and perfect the mechanisms of a free and open market and a national market system. As stated above, the purpose of this provision is to require this price improvement if the width of the NBBO is as narrow as possible. However, if the minimum increment for a class is, for example, $0.05, it would not be possible to price improve penny-wide market in the permissible minimum increment of $0.05. The Exchange believes the proposal, which is consistent with the original intention of current AIM stop price rules (which permit the Exchange to determine different AIM minimum increments for classes), will ensure that smaller-sized orders receive this price improvement when the NBBO is as narrow as possible, to the benefit of the marketplace and investors. Finally, the Exchange believes the proposed rule change related to the processing of AIM and C–AIM Auctions in the event of early termination will promote just and equitable principles of trade, in accordance with the Act. The Exchange believes processing concurrent AIM and C–AIM Auctions that end in early termination in time priority is a fair and equitable process, and consistent with the priority applicable to concurrent AIM Auctions and concurrent C–AIM Auctions when they are terminated early. 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 that is not necessary or appropriate in furtherance of the purposes of the Act, because it will apply uniformly to TPHs. The proposed rule change will result in smaller orders receiving the same VerDate Sep<11>2014 21:46 Sep 28, 2023 Jkt 259001 opportunities for execution and price improvement through AIM and C–AIM that are already afforded to larger orders, which are not subject to the concurrency restriction. As noted above, the proposed rule change to require the stop price in AIM Auctions be at least one minimum increment better than the then-current NBBO if the NBBO width equals the minimum increment for the class rather than $0.01 will ensure that smaller-sized orders receive this price improvement when the NBBO is as narrow as possible, which the Exchange believes will result in orders in all classes receiving the same price improvement opportunities through AIM and C–AIM in a manner consistent with the applicable minimum increment. Further, the Exchange does not believe the proposed rule change related to the processing of AIM and C– AIM Auctions in the event of early termination will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, as it will apply in the same manner to all Agency Orders. Additionally, the Exchange notes that participation in the AIM and C–AIM Auctions is completely voluntary. The Exchange believes all market participants, particular those that submit smaller orders, 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. The Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues who offer similar functionality. The Exchange believes this proposed rule change would promote fair competition among the options exchanges and establish more uniform functionality across the various price improvement auctions offered by other options exchanges. The proposed functionality may lead to an increase in Exchange volume and should allow the Exchange to better compete against other options markets that already offer similar price improvement mechanisms and for this reason the proposal does not create an undue burden on intermarket competition. By contrast, not having the proposed functionality places the Exchange at a competitive disadvantage vis-a`-vis other exchanges that offer similar price improvement mechanisms. PO 00000 Frm 00179 Fmt 4703 Sfmt 4703 67403 As noted above, another options exchange adopted this functionality (pursuant to an immediately effective, noncontroversial rule filing) to allow for concurrent price improvement auctions for smaller-sized simple agency orders,18 and other options exchanges (as well as the Exchange) permit simple price improvement auctions to occur simultaneously with complex price improvement auctions for complex strategies involving the same series, with no size restrictions.19 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 20 and Rule 19b– 4(f)(6) 21 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 18 See supra note 8. supra note 9. 20 15 U.S.C. 78s(b)(3)(A). 21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 19 See E:\FR\FM\29SEN1.SGM 29SEN1 67404 Federal Register / Vol. 88, No. 188 / Friday, September 29, 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– CBOE–2023–053 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. lotter on DSK11XQN23PROD with NOTICES1 All submissions should refer to file number SR–CBOE–2023–053. 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–CBOE–2023–053 and should be submitted on or before October 20, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–21347 Filed 9–28–23; 8:45 am] BILLING CODE 8011–01–P 22 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 21:46 Sep 28, 2023 Jkt 259001 SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–824; OMB Control No. 3235–0500] Submission for OMB Review; Comment Request; Extension: Rule 608 Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 608 (17 CFR 242.608) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Rule 608 specifies procedures for filing or amending national market system plans (‘‘NMS Plans’’). Selfregulatory organizations (‘‘SROs’’) filing a new NMS Plan must submit the text of the NMS Plan to the Commission, along with a statement of purpose, and, if applicable, specified supporting materials that may include: (1) a copy of all governing or constituent documents, (2) a description of the manner in which the NMS Plan, and any facility or procedure contemplated by the NMS Plan, will be implemented, (3) a listing of all significant phases of development and implementation contemplated by the NMS Plan, including a projected completion date for each phase, (4) an analysis of the competitive impact of implementing the NMS Plan, (5) a description of any written agreements or understandings between or among plan participants or sponsors relating to interpretations of the NMS Plan or conditions for becoming a plan participant or sponsor, and (6) a description of the manner in which any facility contemplated by the NMS Plan shall be operated. Participants or sponsors to the NMS Plan must ensure that a current and complete version of the NMS Plan is posted on a designated website or a plan website after being notified by the Commission that the NMS Plan is effective. Each plan participant or sponsor must also provide a link on its own website to the current website to the current version of the NMS Plan. The Commission estimates that the creation and submission of a new NMS Plan and any related materials would PO 00000 Frm 00180 Fmt 4703 Sfmt 4703 result in an average aggregate burden of approximately 850 hours per year (25 SROs × 34 hours = 850 hours). The Commission further estimates an average aggregate burden of approximately 125 hours per year (25 SROs × 5 hours = 125 hours), for each of the SROs to keep a current and complete version of the NMS Plan posted on a designated website or a plan website, and to provide a link to the current version of the NMS Plan on its own website. In addition, the Commission estimates that the creation of a new NMS Plan and any related materials would result in an average aggregate cost of approximately $150,000 per year (25 SROs × $6,000 = $150,000). SROs proposing to amend an existing NMS Plan must submit the text of the amendment to the Commission, along with a statement of purpose, and, if applicable, the supporting materials described above, as well as a statement that the amendment has been approved by the plan participants or sponsors in accordance with the terms of the NMS Plan. Participants or sponsors to the NMS Plan must ensure that any proposed amendments are posted to a designated website or a plan website after filing the amendments with the Commission and that those websites are updated to reflect the current status of the amendment and the NMS Plan. Each plan participant or sponsor must also provide a link on its own website to the current version of the NMS Plan. The Commission estimates that the creation and submission of NMS Plan amendments and any related materials would result in an average aggregate burden of approximately 11,050 hours per year (25 SROs × 442 hours = 11,050 hours). The Commission further estimates an average aggregate burden of approximately 124 hours per year (25 SROs × 4.94 hours = 123.5 hours rounded up to 124) for SROs to post any pending NMS Plan amendments to a designated website or a plan website and to update such websites to reflect the current status of the amendment and the NMS Plan. In addition, the Commission estimates that the creation of an NMS Plan amendment and any related materials would result in an average aggregate cost of approximately $325,000 per year (25 SROs × $13,000 = $325,000). Finally, to the extent that a plan processor is required for any facility contemplated by a NMS Plan, the plan participants or sponsors must file with the Commission a statement identifying the plan processor selected, describing the material terms under which the plan processor is to serve, and indicating the E:\FR\FM\29SEN1.SGM 29SEN1

Agencies

[Federal Register Volume 88, Number 188 (Friday, September 29, 2023)]
[Notices]
[Pages 67400-67404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21347]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98511; File No. SR-CBOE-2023-053]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Automated Price Improvement Auction Rules

September 25, 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 September 20, 2023, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the Exchange. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its automated price improvement auction rules. The text of the 
proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend provisions in Rule 5.37 (Automated 
Price Improvement Mechanism (``AIM'' or ``AIM Auction'')) and Rule 5.38 
(Complex Automated Improvement Mechanism (``C-AIM'' or ``C-AIM 
Auction'')) regarding concurrent AIM and C-AIM Auctions, respectively. 
The Exchange also proposes to update the provisions in those Rules 
regarding the permissible stop price.
    By way of background, Rules 5.37 and 5.38 contain the requirements 
applicable to the execution of orders using AIM and C-AIM, 
respectively. The AIM and C-AIM auctions are electronic auctions 
intended to provide orders that Trading Permit Holders (``TPHs'') 
represent as agent (``Agency Orders'') with opportunities to receive 
price improvement (over the National Best Bid or Offer (``NBBO'') in 
AIM, or the synthetic best bid or offer (``SBBO'') on the Exchange in 
C-AIM). Upon submitting an Agency Order into an AIM or C-AIM auction, 
the initiating Trading Permit Holder (``Initiating TPH'') must also 
submit a contra-side second order (``Initiating Order'') for the

[[Page 67401]]

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 may submit responses to trade against the Agency Order. At 
the end of an auction, depending on the contra-side interest available, 
the Initiating Order may be allocated a certain percentage of the 
Agency Order.\5\
---------------------------------------------------------------------------

    \5\ See generally Rules 5.37(e) and 5.38(e).
---------------------------------------------------------------------------

    An Initiating TPH may initiate an AIM or C-AIM auction provided 
that the Agency Order is in a class and of sufficient size as 
determined by the Exchange.\6\ Upon receipt of an Agency Order, the AIM 
or C-AIM auction process commences. Currently, under Rule 5.37(c)(1), 
for Agency Orders for less than 50 standard option contracts (or 500 
mini-option contracts or 5,000 micro-option contracts), only one AIM 
Auction may be ongoing at any given time in a series, and AIM Auctions 
in the same series may not queue or overlap in any manner. One or more 
AIM Auctions in the same series for Agency Orders of 50 standard option 
contracts (or 500 mini-option contracts or 5,000 micro-option 
contracts) or more may occur at the same time. The Exchange proposes 
amending Rule 5.37(c)(1) to allow one or more AIM Auctions in the same 
series to occur at the same time for Agency Orders for less than 50 
standard option contracts (or 500 mini-option contracts or 5,000 micro-
option contracts). This would effectively allow for one or more AIM 
Auctions in the same series to occur at the same time for orders of all 
sizes. Concurrent AIM Auctions for these smaller-sized orders will 
occur in the same manner as concurrent AIM Auctions for orders of 50 or 
more contracts occur today.\7\
---------------------------------------------------------------------------

    \6\ See Rules 5.37(a) and 5.38(a), respectively.
    \7\ See Rules 5.37(c)(1) (which provides that if there is more 
than one AIM Auction in a series underway at a time, those auctions 
will conclude sequentially based on the exact time each auction 
commenced, including if they are terminated early pursuant to Rule 
5.37(d)); and Rule 5.38(c)(1)(B) and (C) (which provides that if 
there is more than one C-AIM Auction in a complex strategy underway 
at a time, those auctions will conclude sequentially based on the 
exact time each auction commenced, including if they are terminated 
early pursuant to Rule 5.38(d)).
---------------------------------------------------------------------------

    Similarly, under current Rule 5.38(c)(1)(A), with respect to Agency 
Orders for which the smallest leg is less than 50 standard option 
contracts (or 500 mini-option contracts or 5,000 micro-option 
contracts), only one C-AIM Auction may be ongoing at any given time in 
a complex strategy, and C-AIM Auctions in the same complex strategy may 
not queue or overlap in any manner. One or more C-AIM Auctions in the 
same complex strategy for Agency Orders for which the smallest leg is 
50 standard option contracts (or 500 mini-option contracts or 5,000 
micro-option contracts) or more may occur at the same time. The 
Exchange proposes amending Rule 5.38(c)(1)(A) to allow one or more C-
AIM Auctions in a complex strategy to occur at the same time for Agency 
Orders for which the smallest leg is less than 50 standard option 
contracts (or 500 mini-option contracts or 5,000 micro-option 
contracts). This would effectively allow for one or more C-AIM Auctions 
in the same complex strategy to occur at the same time for complex 
orders of all sizes. The Exchange believes this proposed functionality 
will allow more AIM Auctions in the same series and more C-AIM Auctions 
in the same complex strategy to be conducted, thereby increasing 
opportunities for price improvement on the Exchange to the benefit of 
all market participants.
    Currently, if an Agency Order of fewer than 50 contracts (or 500 
mini-option contracts or 5,000 micro-option contracts) is submitted to 
AIM or C-AIM while an AIM or C-AIM Auction is in progress, the Agency 
order is rejected. The proposal to add concurrent AIM and C-AIM 
Auctions for Agency Orders of any size, including for Agency Orders of 
fewer than 50 contracts (or 500 mini-option contracts or 5,000 micro-
option contracts), would also prevent the rejection of these smaller 
Agency Orders that occurs when such smaller Agency Orders are submitted 
while an AIM or C-AIM Auction is in progress. By eliminating this 
rejection scenario, the Exchange would increase execution and price 
improvement opportunities for these smaller Agency orders to the 
benefit of investors.
    The Exchange notes that allowing more than one price improvement 
auction at a time in the same series for paired agency orders of fewer 
than 50 contracts is not new or novel and is current functionality on 
at least one other options exchange.\8\ While the Exchange is unaware 
of another options exchange that offers concurrent price improvement 
auctions for orders in complex strategies for which the smallest leg is 
fewer than 50 contracts, other options exchanges (as well as the 
Exchange) permit simple price improvement auctions to occur 
simultaneously with complex price improvement auctions for complex 
strategies involving the same series, with no size restrictions.\9\ 
Having simple price improvement auctions in multiple legs of a complex 
strategy in progress at the same time as a complex price improvement 
auction for that complex strategy for orders of any size is similar to 
two complex price improvement auctions in the same complex strategy 
being in progress at the same time. Additionally, the benefits of 
allowing concurrent price improvement auctions for simple orders of all 
sizes and complex strategies with 50 contracts in the smallest leg or 
more (as described above) would apply to concurrent price improvement 
auctions for complex strategies with fewer than 50 contracts in the 
smallest leg. Specifically, allowing concurrent C-AIM Auctions in the 
same complex strategy if the smallest leg has fewer than 50 contracts 
would benefit investors because it would afford smaller-sized complex 
orders increased opportunities to solicit price-improving auction 
interest. The Exchange further believes this proposed change would 
provide additional benefits to customers, as smaller-sized orders tend 
to represent retail interest, and could improve the customer experience 
on the Exchange by increasing trading opportunities in the C-AIM 
Auctions.
---------------------------------------------------------------------------

    \8\ See, e.g., NYSE American LLC (``NYSE American'') Rule 
971.1NYP(c) (as recently amended) (see Securities Exchange Act 
Release No. 97938 (July 18, 2023), 88 FR 47536 (July 24, 2023) (SR-
NYSEAMER-2023-35) (permitting concurrent simple price improvement 
auctions).
    \9\ See, e.g., NYSE American Rule 971.1NYP, Commentary .01; BOX 
Exchange LLC (``BOX'') Rules 7150, IM-7150-1 and 7245, IM-7245-2; 
and Nasdaq ISE, LLC (``ISE'') Options 3, Sections 11(g) and 13, 
Supplementary Material .04.
---------------------------------------------------------------------------

    The proposal to allow concurrent AIM and C-AIM Auctions for Agency 
Orders for less than 50 contracts (or 500 mini-option contracts or 
5,000 micro-option contracts) in the same series or complex strategy, 
respectively, would benefit investors because it would afford smaller-
sized Agency Orders increased opportunities for price improvement, 
including because such smaller Agency Orders would no longer be 
rejected if submitted while an AIM or C-AIM Auction is in progress.
    The Exchange will continue to protect smaller-sized simple Agency 
Orders in minimum increment-wide \10\ markets by

[[Page 67402]]

requiring price improvement of at least one minimum increment for such 
orders and rejecting such orders in minimum increment-wide markets that 
do not provide for such price improvement.\11\ Additionally, the 
Exchange will continue to protect Priority Customers on the Simple Book 
by requiring price improvement of at least one minimum increment better 
than the SBBO if the applicable side of the BBO on any component of the 
complex Agency Order complex strategy represents a Priority Customer on 
the Simple Book.\12\ These protections would apply when the proposed 
concurrent Auctions are occurring. Thus, the Exchange believes this 
proposed change should allow the Exchange to better compete for 
auction-related order flow that may lead to an increase in Exchange 
volume, while continuing to ensure that displayed customer interest on 
the Book is protected, to the benefit of all market participants.
---------------------------------------------------------------------------

    \10\ The Exchange proposes to amend Rule 5.37(b)(1) to require 
the stop price be at least one minimum increment better than the 
then-current NBBO if the NBBO width equals the minimum increment 
rather than $0.01. The purpose of this provision is to require this 
price improvement if the width of the NBBO is as narrow as possible. 
However, if the minimum increment for a class is, for example, 
$0.05, it would not be possible to price improve penny-wide market 
in the permissible minimum increment of $0.05. The proposed rule 
change will ensure that smaller-sized orders receive this price 
improvement when the NBBO is as narrow as possible, as intended.
    \11\ See Rule 5.37(b)(1). The proposed rule change continues to 
provide price improvement assurances for those for buy (sell) Agency 
Orders submitted for AIM Auction processing with less than 50 
standard option contracts (or 500 mini-option contracts or 5,000 
micro-option contracts) and NBBO width of $0.01, pursuant to Rule 
5.37(b)(1)(A), which remains unchanged.
    \12\ See Rule 5.38(b)(1).
---------------------------------------------------------------------------

    The Exchange believes that its System has sufficient capacity to 
process a large volume of concurrent AIM and C-AIM Auctions for Agency 
Orders of any size, including for Agency Orders of fewer than 50 
contracts (or 500 mini-option contracts or 5,000 micro-option 
contracts).
    Additionally, the Exchange proposes to amend Rule 5.38(c)(1)(B) 
related to early termination priority in the event of concurrent AIM 
and C-AIM Auctions. Currently, if the System receives a simple order 
that causes AIM and C-AIM (or multiple AIM and/or C-AIM) Auctions to 
end in early termination, the System first processes AIM Auctions (in 
price-time priority) and then processes C-AIM Auctions (in price-time 
priority). The Exchange proposes to update Rule 5.38(c)(1)(B) to 
provide for the processing of early terminations in time priority in 
these instances. Under the proposed rule, if the System receives a 
simple order that causes AIM and C-AIM (or multiple AIM and/or C-AIM) 
Auctions to end in early termination, the System will continue to first 
process AIM Auctions (sequentially based on the exact time each AIM 
Auction commenced) and then process C-AIM Auctions (sequentially based 
on the exact time each C-AIM Auction commenced), which is consistent 
with the priority the System processes concurrent AIM Auctions and 
concurrent C-AIM Auctions.
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.\13\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \14\ 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) \15\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
---------------------------------------------------------------------------

    The Exchange believes the proposal to permit concurrent AIM and C-
AIM Auctions for Agency Orders for less than 50 contracts (or 500 mini-
option contracts or 5,000 micro-option contracts) in the same series or 
complex strategy, respectively, would remove impediments to and perfect 
the mechanisms of a free and open market and a national market system 
because it would extend concurrent auction functionality to smaller-
sized Agency Orders. The Exchange also believes this proposed change is 
non-controversial because it does not raise any issues that differ from 
those previously considered when the Exchange and other options 
exchanges adopted this functionality for larger-sized agency orders 
submitted to price improvement auctions, or when another options 
exchange adopted this functionality (pursuant to an immediately 
effective, noncontroversial rule filing) for smaller-sized simple 
agency orders submitted into a price improvement auction.\16\ The 
Exchange believes the proposal will benefit investors because it would 
afford smaller-sized Agency Orders increased opportunity to solicit 
price-improving auction interest. The Exchange further believes that 
this proposed rule change would provide additional benefits to 
customers, as smaller-sized Agency Orders tend to represent retail 
interest, and could improve the customer experience on the Exchange by 
increasing trading opportunities in AIM and C-AIM Auctions. 
Notwithstanding the proposal to allow concurrent AIM auctions for 
smaller-sized Agency Orders, the Exchange would continue to protect 
customer interest on the simple Book by requiring price improvement 
over the BBO to initiate an Auction for smaller-sized Agency Orders and 
rejecting such orders in increment wide markets when price improvement 
is not possible. Additionally, the Exchange will continue to protect 
Priority Customers on the Simple Book by requiring price improvement of 
at least one minimum increment better than the SBBO if the applicable 
side of the BBO on any component of the complex Agency Order complex 
strategy represents a Priority Customer on the Simple Book.\17\
---------------------------------------------------------------------------

    \16\ See supra note 8.
    \17\ See supra note 12.
---------------------------------------------------------------------------

    Further, the Exchange believes the proposed new functionality to 
allow concurrent AIM and C-AIM auctions for Agency Orders of any size 
is consistent with the Act, as the proposed rule changes will prevent 
the rejection of these smaller Agency Orders that occurs when such 
smaller Agency Orders are submitted while an AIM or C-AIM Auction is in 
progress, which the Exchange believes will increase execution 
opportunities for these smaller Agency orders to the benefit of 
investors. For example, in July 2023, the new functionality would have 
provided investors with additional price improvement and execution 
opportunities via approximately 6,000 additional AIM or C-AIM Auctions 
that were otherwise rejected due to current concurrency limitations.
    The Exchange also believes this proposed new functionality to allow 
concurrent AIM and C-AIM auctions for Agency Orders of any size should 
promote and foster competition and provide more options contracts with 
the opportunity for price improvement, which should benefit all market 
participants. In addition, this proposed change may lead to an increase 
in Exchange volume and should allow the Exchange to better compete 
against other markets that permit overlapping price improvement 
auctions, while continuing to ensure that displayed customer interest 
on the simple Book is protected. The proposed enhancement to allow 
concurrent auctions for Agency Orders of any size would be a

[[Page 67403]]

competitive change and may make the Exchange a more attractive venue 
for auction-related order flow. As noted above, the Exchange believes 
that its trading platform has sufficient capacity to process a large 
volume of concurrent Auctions for Agency Orders of any size, including 
for Agency Orders of fewer than 50 contracts (or 500 mini-option 
contracts or 5,000 micro-option contracts).
    Further, the Exchange believes its proposal to amend its AIM Rules 
to require the stop price be at least one minimum increment better than 
the then-current NBBO if the NBBO width equals the minimum increment 
for the class rather than $0.01 would remove impediments to and perfect 
the mechanisms of a free and open market and a national market system. 
As stated above, the purpose of this provision is to require this price 
improvement if the width of the NBBO is as narrow as possible. However, 
if the minimum increment for a class is, for example, $0.05, it would 
not be possible to price improve penny-wide market in the permissible 
minimum increment of $0.05. The Exchange believes the proposal, which 
is consistent with the original intention of current AIM stop price 
rules (which permit the Exchange to determine different AIM minimum 
increments for classes), will ensure that smaller-sized orders receive 
this price improvement when the NBBO is as narrow as possible, to the 
benefit of the marketplace and investors.
    Finally, the Exchange believes the proposed rule change related to 
the processing of AIM and C-AIM Auctions in the event of early 
termination will promote just and equitable principles of trade, in 
accordance with the Act. The Exchange believes processing concurrent 
AIM and C-AIM Auctions that end in early termination in time priority 
is a fair and equitable process, and consistent with the priority 
applicable to concurrent AIM Auctions and concurrent C-AIM Auctions 
when they are terminated early.

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 that is not necessary or appropriate in furtherance of the 
purposes of the Act, because it will apply uniformly to TPHs. The 
proposed rule change will result in smaller orders receiving the same 
opportunities for execution and price improvement through AIM and C-AIM 
that are already afforded to larger orders, which are not subject to 
the concurrency restriction. As noted above, the proposed rule change 
to require the stop price in AIM Auctions be at least one minimum 
increment better than the then-current NBBO if the NBBO width equals 
the minimum increment for the class rather than $0.01 will ensure that 
smaller-sized orders receive this price improvement when the NBBO is as 
narrow as possible, which the Exchange believes will result in orders 
in all classes receiving the same price improvement opportunities 
through AIM and C-AIM in a manner consistent with the applicable 
minimum increment. Further, the Exchange does not believe the proposed 
rule change related to the processing of AIM and C-AIM Auctions in the 
event of early termination will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, as it will apply in the same manner to all Agency 
Orders.
    Additionally, the Exchange notes that participation in the AIM and 
C-AIM Auctions is completely voluntary. The Exchange believes all 
market participants, particular those that submit smaller orders, 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. The Exchange 
notes that it operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues who 
offer similar functionality. The Exchange believes this proposed rule 
change would promote fair competition among the options exchanges and 
establish more uniform functionality across the various price 
improvement auctions offered by other options exchanges. The proposed 
functionality may lead to an increase in Exchange volume and should 
allow the Exchange to better compete against other options markets that 
already offer similar price improvement mechanisms and for this reason 
the proposal does not create an undue burden on intermarket 
competition. By contrast, not having the proposed functionality places 
the Exchange at a competitive disadvantage vis-[agrave]-vis other 
exchanges that offer similar price improvement mechanisms. As noted 
above, another options exchange adopted this functionality (pursuant to 
an immediately effective, noncontroversial rule filing) to allow for 
concurrent price improvement auctions for smaller-sized simple agency 
orders,\18\ and other options exchanges (as well as the Exchange) 
permit simple price improvement auctions to occur simultaneously with 
complex price improvement auctions for complex strategies involving the 
same series, with no size restrictions.\19\
---------------------------------------------------------------------------

    \18\ See supra note 8.
    \19\ See supra note 9.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) \21\ 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

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:

[[Page 67404]]

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-053 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CBOE-2023-053. 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-CBOE-2023-053 and should be 
submitted on or before October 20, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21347 Filed 9-28-23; 8:45 am]
BILLING CODE 8011-01-P
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