Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.11 To Describe the Manner in Which the Exchange Processes Executions in Securities Priced Below $1.00 Received From Away Trading Centers Priced in Fractional Pennies, 46187-46191 [2024-11577]
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Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
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that wish to connect to the Exchange but
want to avoid or mitigate the effect of
this proposed fee can choose to connect
to the Exchange through a vendor (or
order cabinets without reservations, as
noted above).
In offering the Cabinet Proximity
Option the Exchange incurs certain
costs, including costs related to the data
center, including maintaining an
adequate level of power so that reserved
cabinets can be available and powered
on promptly at the request of customers.
If the Exchange is incorrect in its
determination that the proposed fee
reflects the value of the Cabinet
Proximity Option for cabinets with
power densities greater than 10 kW,
customers will not reserve such
cabinets.
In summary, the proposal represents
an equitable allocation of reasonable
dues, fees and other charges because the
proposed fee is less than NYSE’s fee for
a comparable service, customers have
choices in how they connect to the
Exchange, and reservations under the
Cabinet Proximity Option program are
optional and provided as a convenience
to customers.
The Exchange believes that the
proposed fee change is not unfairly
discriminatory because the Cabinet
Proximity Option fee is assessed
uniformly across all market participants
that voluntarily select the option, which
is available to all customers. All
customers have the choice of whether
and how to connect to the Exchange and
may order cabinets without utilizing
reservations.
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 not
necessary or appropriate in furtherance
of the purposes of the Act.
Nothing in the proposal burdens
inter-market competition because
approval of the proposal does not
impose any burden on the ability of
other exchanges to compete. The
Exchange operates in a highly
competitive market in which market
participants can determine whether or
not to connect to the Exchange based on
the value received compared to the cost
of doing so. Indeed, market participants
have numerous alternative exchanges
that they may participate on and direct
their order flow, as well as off-exchange
venues, where competitive products are
available for trading.
Nothing in the proposal burdens
intra-market competition because the
Cabinet Proximity Option program is
available to any customer under the
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same fees as any other customer, and
any customer that wishes to reserve a
cabinet pursuant to the Cabinet
Proximity Option program can do so on
a non-discriminatory basis.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.17
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: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
Phlx–2024–23 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–Phlx–2024–23. 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–Phlx–2024–23 and should be
submitted on or before June 18, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–11579 Filed 5–24–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100198; File No. SRCboeEDGX–2024–025]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
11.11 To Describe the Manner in Which
the Exchange Processes Executions in
Securities Priced Below $1.00
Received From Away Trading Centers
Priced in Fractional Pennies
May 21, 2024.
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 May 10,
2024, Cboe EDGX Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGX’’) 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 self-regulatory organization. The
Commission is publishing this notice to
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
17 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
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Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
1. Purpose
The Exchange proposes to amend
Rule 11.11 to describe the manner in
which the Exchange processes
executions in securities priced below
$1.00 received from away Trading
Centers 3 priced in fractional pennies.4
Currently, the Exchange does not accept
or rank orders priced in fractional
pennies in securities priced below
$1.00 5 for orders posted to the EDGX
Book,6 but may receive executions
priced in fractional pennies through its
routing broker-dealer affiliate, Cboe
Trading, Inc. (‘‘Cboe Trading’’ or the
‘‘Routing Broker’’). Today, when the
Exchange’s Routing Broker receives an
execution in a security priced below
$1.00 from certain away Trading Centers
priced in fractional pennies, the Routing
Broker truncates the execution price to
four decimal places by eliminating any
values beyond four decimal places prior
to transmitting the execution price back
to the Exchange.7 The Exchange now
proposes that for each Exchange order
in a security priced below $1.00 that the
Routing Broker routes to an away
Trading Center, and for which it
receives an execution in fractional
pennies, that such execution will be
rounded up or down in favor of the
Exchange order—i.e., the Routing
Broker will round down to the nearest
$0.0001 for all buy executions, and
round up to the nearest $0.0001 for all
sell executions.
Pursuant to Rule 2.11, the Exchange
relies on its Routing Broker to provide
outbound routing services from the
Exchange to a routing destination. Rule
2.11 also provides the authority to the
Exchange or the Routing Broker to
cancel orders on the Exchange’s equity
securities platform when a technical or
system issue occurs. In addition, Rule
2.11 also describes the operation of an
error account for Cboe Trading. While
Rule 2.11 speaks to the authority of the
Routing Broker to provide outbound
routing services, Rule 11.11 describes
the manner in which orders are routed
away from the Exchange to an away
Trading Center. The Exchange proposes
to add subparagraph (j) to Rule 11.11 to
describe the order handling behavior of
fractional penny executions on away
Trading Centers.
Specifically, the Exchange proposes
that in order to process executions
which occur in securities priced below
$1.00 in fractional pennies on away
3 See Rule 2.11. A ‘‘Trading Center’’ means a
securities exchange other than the Exchange,
facilities of securities exchanges, automated trading
systems, electronic communications networks, or
other brokers or dealers.
4 For purposes of this filing, the term ‘‘fractional
pennies’’ or ‘‘fractional penny’’ means an execution
out to five decimal places or more (i.e., $0.00001
or finer). The Exchange notes that it accepts and
ranks orders in securities priced below $1.00 out to
four decimal places ($0.0001). While quotations and
executions in $0.0001 increments are also known as
fractional penny quotations (executions), the
Exchange is limiting the use of the term ‘‘fractional
penny’’ or ‘‘fractional pennies’’ within this proposal
to executions out to five or more decimal places to
categorize a specific issue with increments finer
than $0.0001.
5 See Rule 11.6(i). ‘‘Bids, offers, or orders in
securities traded on the Exchange shall not be made
in an increment smaller than: (i) $0.01 if those bids,
offers, or orders are priced equal to or greater than
$1.00 per share; or (ii) $0.0001 if those bids, offers,
or orders are priced less than $1.00 per share; or
(iii) any other increment established by the
Commission for any security which has been
granted an exemption from the minimum price
increments requirement of SEC Rule 612(a) or
612(b) of Regulation NMS.’’
6 See Rule 1.5(d). The term ‘‘EDGX Book’’ shall
mean the System’s electronic file of orders.
7 For example, if the Routing Broker receives an
execution from an away Trading Center priced at
$0.50037, it truncates the price to $0.5003 prior to
transmitting the execution price back to the
Exchange.
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend Rule 11.11 to describe the
manner in which the Exchange
processes executions in securities
priced below $1.00 received from away
Trading Centers priced in fractional
pennies. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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Trading Centers, the Exchange’s Routing
Broker will perform an adjustment to
each fractional penny execution. In
particular, for all buy executions in
securities priced below $1.00 received
from an away Trading Center in
fractional pennies, the Routing Broker
will round down to the nearest $0.0001.
Additionally, for all sell executions in
securities priced below $1.00 received
from an away Trading Center in
fractional pennies, the Routing Broker
will round up to the nearest $0.0001.
The only exception to this rounding
behavior will occur when a buy
execution in securities priced below
$1.00 in fractional pennies received
from an away Trading Center would
result in the Routing Broker rounding
down to a price of $0.0000. In this
instance, and this instance only, the
Routing Broker will instead round up to
the minimum price of $0.0001 in order
to comply with Rule 11.6(i). The
Routing Broker will afford the Exchange
order (and ultimately, the User 8) the
most favorable execution price based on
the fractional penny execution received
by the Routing Broker from the away
market, save for the limited scenario
when the Routing Broker must round a
buy order up to a price of $0.0001 in
order to meet the Exchange’s minimum
price requirement. Once the Routing
Broker has completed its adjustment, it
will transmit the order back to the
Exchange.
The Exchange’s proposal is based on
a similar proposal from NYSE that
described how its routing broker would
process orders received from an away
market that were executed in odd-lots or
in sub-pennies.9 While the Exchange’s
proposal is similar to the NYSE Routing
Broker Filing, there are important
distinctions as described below. First,
the NYSE Routing Broker Filing is a
broad proposal that introduces NYSE’s
routing broker and provides a detailed
description of the routing broker’s
operation, and the Exchange’s proposal
is limited to describing only the manner
in which the Routing Broker processes
executions received from an away
Trading Center that occur in fractional
pennies, as the Exchange’s Routing
Broker has been operating since 2014.10
Next, the Exchange’s proposal differs
from the NYSE Routing Broker Filing in
8 See Rule 1.5(ee). The term ‘‘User’’ shall mean
any Member or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Rule 11.3.
9 See Securities Exchange Act Release No. 55590
(April 5, 2007), 72 FR 18707 (April 13, 2007), SR–
NYSE–2007–29 (‘‘NYSE Routing Broker Filing’’).
10 See Securities Exchange Act Release No. 73940
(December 24, 2014), 80 FR 63 (January 2, 2015),
SR–EDGX–2014–35 (‘‘EDGX Routing Broker
Amendment’’).
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that the Exchange seeks to describe
order handling behavior by its Routing
Broker when executions on an away
Trading Center occur in fractional
pennies, whereas the NYSE Routing
Broker Filing describes order handling
behavior for executions received by its
routing broker occurring in odd-lots or
sub-pennies. While there is a distinction
between the Exchange’s proposal being
focused on fractional pennies for
securities priced below $1.00 and
NYSE’s proposal applying to subpennies in securities priced at or above
$1.00, the order handling behavior by
both NYSE’s routing broker and the
Exchange’s Routing Broker is nearly
identical as both round up (down) to
provide the most favorable execution
price in a permissible pricing increment
based on the execution received from
the away Trading Center. In the NYSE
Routing Broker Filing, its routing broker
rounds up (for sell orders) or down (for
buy orders) to the nearest penny,
providing the Exchange order the most
favorable execution price based on the
sub-penny execution received by the
routing broker from the away market
center. The Exchange’s proposal
indicates that the Routing Broker will
round up (down) to the nearest $0.0001,
providing the Exchange order the most
favorable execution price based on the
fractional penny execution received by
the Routing Broker from the away
Trading Center. Additionally, while the
NYSE Routing Broker Filing describes
the order handling behavior of its
routing broker, this description was not
actually added as rule text to the NYSE
rulebook 11 and the Exchange is seeking
to codify its Routing Broker’s order
handling behavior when executions are
received in fractional pennies.
This service provided by the Routing
Broker with regard to fractional penny
executions is not intended to operate as
a means to generate revenue. While the
Routing Broker does not anticipate
accruing any positions as a result of the
adjustments made to executions in
securities priced below $1.00 received
from away Trading Centers in fractional
pennies, the Routing Broker will
liquidate positions assumed as a result
of the services provided to the
Exchange. To that end, it is the intent
of the Routing Broker to be flat in all
11 See Securities Exchange Act Release No. 64729
(June 23, 2011), 76 FR 38232 (June 29, 2011), SR–
NYSE–2011–24 (‘‘NYSE Inbound Routing Filing’’).
Footnote 11 of the NYSE Inbound Routing Filing
states ‘‘[n]o rule text was added to the NYSE Rules
to describe these functions[.]’’ in reference to a
statement that the routing broker was previously
engaged in certain odd-lot and sub-penny
transactions as part of its routing function for the
exchange.
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18:43 May 24, 2024
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positions at the end of each trading
day.12 The Routing Broker incorporates
an automated system to immediately
assist in the liquidation (acquisition) for
any residual long (short) positions. To
mitigate financial risk 13 to the Routing
Broker, registered trading personnel of
the Routing Broker may be required to
manually assist, as soon as practicable,
in the liquidation (acquisition) of such
positions, when due to the nature of the
security (e.g., high-priced securities that
trade with a wide spread) and its trading
pattern or volatile market conditions
liquidation (acquisition) is not
immediately possible.
The Exchange has included the
following examples to demonstrate the
proposed order handling behavior.
Example 1
Firm A enters an order on the
Exchange to buy 100 shares of ABC at
$0.5008. The Exchange’s best offer is
$0.5007. Trading Center 1 is displaying
a best offer at $0.5006. Trading Center
1 also has the ability to execute trades
in fractional pennies. The System 14
transmits Firm A’s order with order
handling instructions to the Routing
Broker. The Routing Broker then
transmits the order with the order
handling instructions received from the
Exchange to Trading Center 1. The
Routing Broker receives a fill of 100
shares at $0.50058 due to price
improvement received at Trading Center
1. The Routing Broker will sell 100
shares to Firm A at $0.5005 and uses the
fill of 100 shares at $0.50058 to offset
the position. The Routing Broker will
incur [sic] total a [sic] loss of $0.008, or
$0.00008 per share.
Example 2
Firm A enters an order on the
Exchange to sell 100 shares of ABC at
$0.5004. The Exchange’s best bid is
$0.5005. Trading Center 1 is displaying
a best bid at $0.5006. Trading Center 1
also has the ability to execute trades in
fractional pennies. The System
transmits Firm A’s order with order
handling instructions to the Routing
Broker. The Routing Broker then
transmits the order with the order
12 Absent any unusual market conditions or
timing of such trades (for example, the execution
of the order at 15:59:59 (it is intended that the
Routing Broker will be flat in all positions at the
end of each trading day.
13 Any and all losses incurred during the
facilitation of fractional penny executions will be
assumed by the Routing Broker as part of the
routing service provided.
14 See Rule 1.5(cc). The term ‘‘System’’ shall
mean 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.
PO 00000
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46189
handling instructions received from the
Exchange to Trading Center 1. The
Routing Broker receives a fill of 100
shares at $0.50068 due to price
improvement received at Trading Center
1. The Routing Broker will buy 100
shares from Firm A at $0.5007 and uses
the fill of 100 shares at $0.50068 to
offset the position. The Routing Broker
will incur a total loss of $0.002, or
$0.00002 per share.
Example 3
Firm A enters an order on the
Exchange to buy 100 shares of ABC at
$0.0001. The Exchange’s best offer is
$0.0003. Trading Center 1 is displaying
a best offer at $0.0001. Trading Center
1 also has the ability to execute trades
in fractional pennies. The System
transmits Firm A’s order with order
handling instructions to the Routing
Broker. The Routing Broker then
transmits the order with the order
handling instructions received from the
Exchange to Trading Center 1. The
Routing Broker receives a fill of 100
shares at $0.00008 due to price
improvement received at Trading Center
1. The Routing Broker will sell 100
shares to Firm A at $0.0001 and uses the
fill of 100 shares at $0.00008 to offset
the position. The Routing Broker will
have a total gain of $0.002, or $0.00002
per share.15
The Routing Broker will not engage in
any business for the Exchange other
than its outbound and inbound routing
functions as detailed in Rules 2.11 and
2.12 and in the manner described above.
Users are not required to utilize the
Routing Broker when submitting orders
to the Exchange. In the event a User
does not wish for its order to be routed
and potentially subject to the order
handling behavior described above, it
must enter an immediate-or-cancel
(‘‘IOC’’) or any such other order type
available on the Exchange that is not
eligible for routing. All bids and offers
entered on the Exchange that are routed
away via the Routing Broker which
result in an execution shall be binding
on the User that entered such bid or
offer.
The Exchange believes that the above
proposal detailing the order handling
behavior for executions in securities
priced below $1.00 received from an
away Trading Center in fractional
pennies will provide Users with the best
possible outcome in situations where
the Exchange is unable to process an
15 The Exchange notes that Example 3 is unlikely
to happen as the minimum price increment is
$0.0001 but includes this example to demonstrate
potential order handling behavior. See 17 CFR
242.612(b).
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execution in fractional pennies due to
System limitations.
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.16 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 17 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) 18 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposal promotes
just and equitable principles of trade by
providing additional transparency into
how the Exchange’s Routing Broker
processes executions in securities
priced below $1.00 received in
fractional pennies from away Trading
Centers. Additionally, the Exchange
believes that the Routing Broker’s
favorable price adjustment in favor of
the User submitting the order promotes
just and equitable principles of trade as
it is designed to provide Users with the
best possible outcome when their orders
are adjusted due to System limitations
on the Exchange. While the Routing
Broker will be incurring a loss on each
transaction except for in the limited
scenario described in Example 3 above,
the end result serves to protect investors
and the public interest by providing a
price more favorable to Users than the
execution price received on the away
Trading Center. The Exchange believes
that the limited scenario presented in
Example 3 above promotes just and
equitable principles of trade because
rather than providing an execution to
the Exchange (and therefore the User) at
a price of $0.0000, the Routing Broker
will instead round up to a price of
$0.0001, which is the minimum
16 15
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
execution price supported by the
Exchange. While this will result in a
minimal profit for the Routing Broker
and an inferior execution price than
what is provided by the away Trading
Center, the Exchange believes that the
benefit of the Exchange (and User)
ultimately receiving a buy execution at
$0.0001 outweighs any minimal profit
that the Routing Broker may receive and
any minimal loss that the User
experiences as a result of the rounding
adjustment. Further, the proposal does
not result in unfair discrimination as it
applies to all executions received by the
Routing Broker in securities priced
below $1.00 that are priced in fractional
pennies. Should a User not wish for its
order to be subject to the proposed
fractional penny adjustment described
above, it is free to select a different
order type that does not route to an
away Trading Center.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition as
the proposed order handling behavior
by the Routing Broker will apply to all
orders routed away equally, in that any
order received by the Routing Broker
from an away Trading Center in
fractional pennies will be adjusted
down (up) to the benefit of the User
before being sent back to the Exchange.
The Exchange notes that use of the
Routing Broker is not mandatory. If a
User does not wish to have its order
subjected to the proposed order
handling behavior it is free to choose a
different order type that is not eligible
for routing to away Trading Centers. In
addition, the proposed rule change will
not impose any burden on intermarket
competition as it is not being introduced
to address a competitive issue, but
rather to better describe order handling
behavior by the Exchange’s Routing
Broker.
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.
18 Id.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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 prior to 30 days from the date
on which it was filed, or such shorter
time as the Commission may designate,
if consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section
19(b)(3)(A)(iii) of the Act 19 and Rule
19b–4(f)(6) thereunder.20
A proposed rule change filed under
Rule 19b–4(f)(6) 21 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),22 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing.
The Exchange states that waiver of the
operative delay would permit the
Exchange’s Routing Broker to
immediately implement the order
handling behavior described in the
proposal, which would benefit Users
who submit a routable order to the
Exchange and receive an execution on
an away Trading Center in fractional
pennies. The Exchange further states the
proposed rule change does not present
any new or novel issues, as at least one
other exchange indicated that its routing
broker performed similar rounding
behavior for orders received in odd-lot
or sub-penny increments that were
filled on away market centers and were
not compatible with existing exchange
system behavior.23 For these reasons,
and because the proposal does not raise
any new or novel issues, the
Commission believes that waiver of the
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the 30-day operative
19 15
U.S.C. 78s(b)(3)(A)(iii).
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, along with a brief
description and text of 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.
21 17 CFR 240.19b–4(f)(6).
22 17 CFR 240.19b–4(f)(6)(iii).
23 See supra note 9.
20 17
E:\FR\FM\28MYN1.SGM
28MYN1
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
delay and designates the proposal
operative upon filing.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 25 of the Act 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:
khammond on DSKJM1Z7X2PROD with 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–
CboeEDGX–2024–025 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–CboeEDGX–2024–025. 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
24 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
25 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeEDGX–2024–025 and should be
submitted on or before June 18, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–11577 Filed 5–24–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100187; File No. SR–
NYSECHX–2024–18]
Self-Regulatory Organizations; NYSE
Chicago, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Its Rules
Concerning Supervision To Adopt
Rules Based on NYSE American Rules
3110—Equities and 3120—Equities
May 21, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on May 16,
2024, the NYSE Chicago, Inc. (‘‘NYSE
Chicago’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules concerning supervision to adopt
rules based on NYSE American Rules
3110—Equities (Supervision) and
26 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00137
Fmt 4703
Sfmt 4703
46191
3120—Equities (Supervisory Control
System) and make certain conforming
changes. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, 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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
rules concerning supervision to adopt
rules based on NYSE American Rules
3110—Equities (Supervision) and
3120—Equities (Supervisory Control
System) and make certain conforming
changes. More specifically, the
Exchange proposes to (1) adopt new rule
text that is substantially similar to NYSE
American Rule 3110—Equities and
NYSE American Rule 3120—Equities;
(2) delete Article 6, Rule 5 (Registration,
Supervision and Training) except for
certain text that will be retained as new
Rule 11.20 (Adherence to Law); and (3)
make conforming changes to Rule
10.9217 (Violations Appropriate for
Disposition Under Rule 9216(b)).
Background and Proposed Rule Change
Current Supervision Rules
The Exchange’s current supervision
Rule is Article 6, Rule 5.
Subsection (a) of Article 6, Rule 5 sets
forth a basic declaration that
Participants are responsible for
adherence to federal securities laws and
Exchange rules, and must reasonably
supervise their operations and
associated persons to prevent violations
of thereof.
Subsection (b) provides for the
designation of persons with supervisory
authority. Specifically, the rule provides
that each Participant Firm must
designate a principal executive officer,
general partner or managing partner to
hold overall authority and responsibility
E:\FR\FM\28MYN1.SGM
28MYN1
]]>Agencies
[Federal Register Volume 89, Number 103 (Tuesday, May 28, 2024)]
[Notices]
[Pages 46187-46191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11577]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100198; File No. SR-CboeEDGX-2024-025]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 11.11 To Describe the Manner in Which the Exchange Processes
Executions in Securities Priced Below $1.00 Received From Away Trading
Centers Priced in Fractional Pennies
May 21, 2024.
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 May 10, 2024, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'')
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 self-regulatory organization. The Commission
is publishing this notice to
[[Page 46188]]
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend Rule 11.11 to describe the manner in which the Exchange processes
executions in securities priced below $1.00 received from away Trading
Centers priced in fractional pennies. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 11.11 to describe the manner in
which the Exchange processes executions in securities priced below
$1.00 received from away Trading Centers \3\ priced in fractional
pennies.\4\ Currently, the Exchange does not accept or rank orders
priced in fractional pennies in securities priced below $1.00 \5\ for
orders posted to the EDGX Book,\6\ but may receive executions priced in
fractional pennies through its routing broker-dealer affiliate, Cboe
Trading, Inc. (``Cboe Trading'' or the ``Routing Broker''). Today, when
the Exchange's Routing Broker receives an execution in a security
priced below $1.00 from certain away Trading Centers priced in
fractional pennies, the Routing Broker truncates the execution price to
four decimal places by eliminating any values beyond four decimal
places prior to transmitting the execution price back to the
Exchange.\7\ The Exchange now proposes that for each Exchange order in
a security priced below $1.00 that the Routing Broker routes to an away
Trading Center, and for which it receives an execution in fractional
pennies, that such execution will be rounded up or down in favor of the
Exchange order--i.e., the Routing Broker will round down to the nearest
$0.0001 for all buy executions, and round up to the nearest $0.0001 for
all sell executions.
---------------------------------------------------------------------------
\3\ See Rule 2.11. A ``Trading Center'' means a securities
exchange other than the Exchange, facilities of securities
exchanges, automated trading systems, electronic communications
networks, or other brokers or dealers.
\4\ For purposes of this filing, the term ``fractional pennies''
or ``fractional penny'' means an execution out to five decimal
places or more (i.e., $0.00001 or finer). The Exchange notes that it
accepts and ranks orders in securities priced below $1.00 out to
four decimal places ($0.0001). While quotations and executions in
$0.0001 increments are also known as fractional penny quotations
(executions), the Exchange is limiting the use of the term
``fractional penny'' or ``fractional pennies'' within this proposal
to executions out to five or more decimal places to categorize a
specific issue with increments finer than $0.0001.
\5\ See Rule 11.6(i). ``Bids, offers, or orders in securities
traded on the Exchange shall not be made in an increment smaller
than: (i) $0.01 if those bids, offers, or orders are priced equal to
or greater than $1.00 per share; or (ii) $0.0001 if those bids,
offers, or orders are priced less than $1.00 per share; or (iii) any
other increment established by the Commission for any security which
has been granted an exemption from the minimum price increments
requirement of SEC Rule 612(a) or 612(b) of Regulation NMS.''
\6\ See Rule 1.5(d). The term ``EDGX Book'' shall mean the
System's electronic file of orders.
\7\ For example, if the Routing Broker receives an execution
from an away Trading Center priced at $0.50037, it truncates the
price to $0.5003 prior to transmitting the execution price back to
the Exchange.
---------------------------------------------------------------------------
Pursuant to Rule 2.11, the Exchange relies on its Routing Broker to
provide outbound routing services from the Exchange to a routing
destination. Rule 2.11 also provides the authority to the Exchange or
the Routing Broker to cancel orders on the Exchange's equity securities
platform when a technical or system issue occurs. In addition, Rule
2.11 also describes the operation of an error account for Cboe Trading.
While Rule 2.11 speaks to the authority of the Routing Broker to
provide outbound routing services, Rule 11.11 describes the manner in
which orders are routed away from the Exchange to an away Trading
Center. The Exchange proposes to add subparagraph (j) to Rule 11.11 to
describe the order handling behavior of fractional penny executions on
away Trading Centers.
Specifically, the Exchange proposes that in order to process
executions which occur in securities priced below $1.00 in fractional
pennies on away Trading Centers, the Exchange's Routing Broker will
perform an adjustment to each fractional penny execution. In
particular, for all buy executions in securities priced below $1.00
received from an away Trading Center in fractional pennies, the Routing
Broker will round down to the nearest $0.0001. Additionally, for all
sell executions in securities priced below $1.00 received from an away
Trading Center in fractional pennies, the Routing Broker will round up
to the nearest $0.0001. The only exception to this rounding behavior
will occur when a buy execution in securities priced below $1.00 in
fractional pennies received from an away Trading Center would result in
the Routing Broker rounding down to a price of $0.0000. In this
instance, and this instance only, the Routing Broker will instead round
up to the minimum price of $0.0001 in order to comply with Rule
11.6(i). The Routing Broker will afford the Exchange order (and
ultimately, the User \8\) the most favorable execution price based on
the fractional penny execution received by the Routing Broker from the
away market, save for the limited scenario when the Routing Broker must
round a buy order up to a price of $0.0001 in order to meet the
Exchange's minimum price requirement. Once the Routing Broker has
completed its adjustment, it will transmit the order back to the
Exchange.
---------------------------------------------------------------------------
\8\ See Rule 1.5(ee). The term ``User'' shall mean any Member or
Sponsored Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.
---------------------------------------------------------------------------
The Exchange's proposal is based on a similar proposal from NYSE
that described how its routing broker would process orders received
from an away market that were executed in odd-lots or in sub-
pennies.\9\ While the Exchange's proposal is similar to the NYSE
Routing Broker Filing, there are important distinctions as described
below. First, the NYSE Routing Broker Filing is a broad proposal that
introduces NYSE's routing broker and provides a detailed description of
the routing broker's operation, and the Exchange's proposal is limited
to describing only the manner in which the Routing Broker processes
executions received from an away Trading Center that occur in
fractional pennies, as the Exchange's Routing Broker has been operating
since 2014.\10\ Next, the Exchange's proposal differs from the NYSE
Routing Broker Filing in
[[Page 46189]]
that the Exchange seeks to describe order handling behavior by its
Routing Broker when executions on an away Trading Center occur in
fractional pennies, whereas the NYSE Routing Broker Filing describes
order handling behavior for executions received by its routing broker
occurring in odd-lots or sub-pennies. While there is a distinction
between the Exchange's proposal being focused on fractional pennies for
securities priced below $1.00 and NYSE's proposal applying to sub-
pennies in securities priced at or above $1.00, the order handling
behavior by both NYSE's routing broker and the Exchange's Routing
Broker is nearly identical as both round up (down) to provide the most
favorable execution price in a permissible pricing increment based on
the execution received from the away Trading Center. In the NYSE
Routing Broker Filing, its routing broker rounds up (for sell orders)
or down (for buy orders) to the nearest penny, providing the Exchange
order the most favorable execution price based on the sub-penny
execution received by the routing broker from the away market center.
The Exchange's proposal indicates that the Routing Broker will round up
(down) to the nearest $0.0001, providing the Exchange order the most
favorable execution price based on the fractional penny execution
received by the Routing Broker from the away Trading Center.
Additionally, while the NYSE Routing Broker Filing describes the order
handling behavior of its routing broker, this description was not
actually added as rule text to the NYSE rulebook \11\ and the Exchange
is seeking to codify its Routing Broker's order handling behavior when
executions are received in fractional pennies.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 55590 (April 5,
2007), 72 FR 18707 (April 13, 2007), SR-NYSE-2007-29 (``NYSE Routing
Broker Filing'').
\10\ See Securities Exchange Act Release No. 73940 (December 24,
2014), 80 FR 63 (January 2, 2015), SR-EDGX-2014-35 (``EDGX Routing
Broker Amendment'').
\11\ See Securities Exchange Act Release No. 64729 (June 23,
2011), 76 FR 38232 (June 29, 2011), SR-NYSE-2011-24 (``NYSE Inbound
Routing Filing''). Footnote 11 of the NYSE Inbound Routing Filing
states ``[n]o rule text was added to the NYSE Rules to describe
these functions[.]'' in reference to a statement that the routing
broker was previously engaged in certain odd-lot and sub-penny
transactions as part of its routing function for the exchange.
---------------------------------------------------------------------------
This service provided by the Routing Broker with regard to
fractional penny executions is not intended to operate as a means to
generate revenue. While the Routing Broker does not anticipate accruing
any positions as a result of the adjustments made to executions in
securities priced below $1.00 received from away Trading Centers in
fractional pennies, the Routing Broker will liquidate positions assumed
as a result of the services provided to the Exchange. To that end, it
is the intent of the Routing Broker to be flat in all positions at the
end of each trading day.\12\ The Routing Broker incorporates an
automated system to immediately assist in the liquidation (acquisition)
for any residual long (short) positions. To mitigate financial risk
\13\ to the Routing Broker, registered trading personnel of the Routing
Broker may be required to manually assist, as soon as practicable, in
the liquidation (acquisition) of such positions, when due to the nature
of the security (e.g., high-priced securities that trade with a wide
spread) and its trading pattern or volatile market conditions
liquidation (acquisition) is not immediately possible.
---------------------------------------------------------------------------
\12\ Absent any unusual market conditions or timing of such
trades (for example, the execution of the order at 15:59:59 (it is
intended that the Routing Broker will be flat in all positions at
the end of each trading day.
\13\ Any and all losses incurred during the facilitation of
fractional penny executions will be assumed by the Routing Broker as
part of the routing service provided.
---------------------------------------------------------------------------
The Exchange has included the following examples to demonstrate the
proposed order handling behavior.
Example 1
Firm A enters an order on the Exchange to buy 100 shares of ABC at
$0.5008. The Exchange's best offer is $0.5007. Trading Center 1 is
displaying a best offer at $0.5006. Trading Center 1 also has the
ability to execute trades in fractional pennies. The System \14\
transmits Firm A's order with order handling instructions to the
Routing Broker. The Routing Broker then transmits the order with the
order handling instructions received from the Exchange to Trading
Center 1. The Routing Broker receives a fill of 100 shares at $0.50058
due to price improvement received at Trading Center 1. The Routing
Broker will sell 100 shares to Firm A at $0.5005 and uses the fill of
100 shares at $0.50058 to offset the position. The Routing Broker will
incur [sic] total a [sic] loss of $0.008, or $0.00008 per share.
---------------------------------------------------------------------------
\14\ See Rule 1.5(cc). The term ``System'' shall mean 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.
---------------------------------------------------------------------------
Example 2
Firm A enters an order on the Exchange to sell 100 shares of ABC at
$0.5004. The Exchange's best bid is $0.5005. Trading Center 1 is
displaying a best bid at $0.5006. Trading Center 1 also has the ability
to execute trades in fractional pennies. The System transmits Firm A's
order with order handling instructions to the Routing Broker. The
Routing Broker then transmits the order with the order handling
instructions received from the Exchange to Trading Center 1. The
Routing Broker receives a fill of 100 shares at $0.50068 due to price
improvement received at Trading Center 1. The Routing Broker will buy
100 shares from Firm A at $0.5007 and uses the fill of 100 shares at
$0.50068 to offset the position. The Routing Broker will incur a total
loss of $0.002, or $0.00002 per share.
Example 3
Firm A enters an order on the Exchange to buy 100 shares of ABC at
$0.0001. The Exchange's best offer is $0.0003. Trading Center 1 is
displaying a best offer at $0.0001. Trading Center 1 also has the
ability to execute trades in fractional pennies. The System transmits
Firm A's order with order handling instructions to the Routing Broker.
The Routing Broker then transmits the order with the order handling
instructions received from the Exchange to Trading Center 1. The
Routing Broker receives a fill of 100 shares at $0.00008 due to price
improvement received at Trading Center 1. The Routing Broker will sell
100 shares to Firm A at $0.0001 and uses the fill of 100 shares at
$0.00008 to offset the position. The Routing Broker will have a total
gain of $0.002, or $0.00002 per share.\15\
---------------------------------------------------------------------------
\15\ The Exchange notes that Example 3 is unlikely to happen as
the minimum price increment is $0.0001 but includes this example to
demonstrate potential order handling behavior. See 17 CFR
242.612(b).
---------------------------------------------------------------------------
The Routing Broker will not engage in any business for the Exchange
other than its outbound and inbound routing functions as detailed in
Rules 2.11 and 2.12 and in the manner described above. Users are not
required to utilize the Routing Broker when submitting orders to the
Exchange. In the event a User does not wish for its order to be routed
and potentially subject to the order handling behavior described above,
it must enter an immediate-or-cancel (``IOC'') or any such other order
type available on the Exchange that is not eligible for routing. All
bids and offers entered on the Exchange that are routed away via the
Routing Broker which result in an execution shall be binding on the
User that entered such bid or offer.
The Exchange believes that the above proposal detailing the order
handling behavior for executions in securities priced below $1.00
received from an away Trading Center in fractional pennies will provide
Users with the best possible outcome in situations where the Exchange
is unable to process an
[[Page 46190]]
execution in fractional pennies due to System limitations.
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.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
---------------------------------------------------------------------------
In particular, the proposal promotes just and equitable principles
of trade by providing additional transparency into how the Exchange's
Routing Broker processes executions in securities priced below $1.00
received in fractional pennies from away Trading Centers. Additionally,
the Exchange believes that the Routing Broker's favorable price
adjustment in favor of the User submitting the order promotes just and
equitable principles of trade as it is designed to provide Users with
the best possible outcome when their orders are adjusted due to System
limitations on the Exchange. While the Routing Broker will be incurring
a loss on each transaction except for in the limited scenario described
in Example 3 above, the end result serves to protect investors and the
public interest by providing a price more favorable to Users than the
execution price received on the away Trading Center. The Exchange
believes that the limited scenario presented in Example 3 above
promotes just and equitable principles of trade because rather than
providing an execution to the Exchange (and therefore the User) at a
price of $0.0000, the Routing Broker will instead round up to a price
of $0.0001, which is the minimum execution price supported by the
Exchange. While this will result in a minimal profit for the Routing
Broker and an inferior execution price than what is provided by the
away Trading Center, the Exchange believes that the benefit of the
Exchange (and User) ultimately receiving a buy execution at $0.0001
outweighs any minimal profit that the Routing Broker may receive and
any minimal loss that the User experiences as a result of the rounding
adjustment. Further, the proposal does not result in unfair
discrimination as it applies to all executions received by the Routing
Broker in securities priced below $1.00 that are priced in fractional
pennies. Should a User not wish for its order to be subject to the
proposed fractional penny adjustment described above, it is free to
select a different order type that does not route to an away Trading
Center.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition as the proposed order handling behavior by the
Routing Broker will apply to all orders routed away equally, in that
any order received by the Routing Broker from an away Trading Center in
fractional pennies will be adjusted down (up) to the benefit of the
User before being sent back to the Exchange. The Exchange notes that
use of the Routing Broker is not mandatory. If a User does not wish to
have its order subjected to the proposed order handling behavior it is
free to choose a different order type that is not eligible for routing
to away Trading Centers. In addition, the proposed rule change will not
impose any burden on intermarket competition as it is not being
introduced to address a competitive issue, but rather to better
describe order handling behavior by the Exchange's Routing Broker.
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 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \19\ and Rule
19b-4(f)(6) thereunder.\20\
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\19\ 15 U.S.C. 78s(b)(3)(A)(iii).
\20\ 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, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange states that waiver of the operative delay would permit
the Exchange's Routing Broker to immediately implement the order
handling behavior described in the proposal, which would benefit Users
who submit a routable order to the Exchange and receive an execution on
an away Trading Center in fractional pennies. The Exchange further
states the proposed rule change does not present any new or novel
issues, as at least one other exchange indicated that its routing
broker performed similar rounding behavior for orders received in odd-
lot or sub-penny increments that were filled on away market centers and
were not compatible with existing exchange system behavior.\23\ For
these reasons, and because the proposal does not raise any new or novel
issues, the Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative
[[Page 46191]]
delay and designates the proposal operative upon filing.\24\
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\23\ See supra note 9.
\24\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 shall institute proceedings under
Section 19(b)(2)(B) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeEDGX-2024-025 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeEDGX-2024-025. 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 Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeEDGX-2024-025 and should
be submitted on or before June 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11577 Filed 5-24-24; 8:45 am]
BILLING CODE 8011-01-P
