Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 11.28(a) To Add Four Additional Market-on-Close Cut-off Times to Cboe Market Close, 46428-46441 [2024-10945]
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46428
Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
Table of Contents
I. Introduction
II. Docketed Proceeding(s)
lotter on DSK11XQN23PROD with NOTICES1
I. Introduction
The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
removal of a negotiated service
agreement from the Market Dominant or
the Competitive product list, or the
modification of an existing product
currently appearing on the Market
Dominant or the Competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern Market Dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
Competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: CP2023–198; Filing
Title: USPS Notice of Amendment to
Priority Mail Contract 782, Filed Under
Seal; Filing Acceptance Date: May 22,
2024; Filing Authority: 39 CFR
3035.105; Public Representative:
Jennaca D. Upperman; Comments Due:
May 31, 2024.
2. Docket No(s).: MC2024–310 and
CP2024–318; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & USPS Ground Advantage
Contract 71 to Competitive Product List
and Notice of Filing Materials Under
Seal; Filing Acceptance Date: May 22,
2024; Filing Authority: 39 U.S.C. 3642,
39 CFR 3040.130 through 3040.135, and
39 CFR 3035.105; Public Representative:
Kenneth R. Moeller; Comments Due:
May 31, 2024.
3. Docket No(s).: MC2024–311 and
CP2024–319; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & USPS Ground Advantage
Contract 72 to Competitive Product List
and Notice of Filing Materials Under
Seal; Filing Acceptance Date: May 22,
2024; Filing Authority: 39 U.S.C. 3642,
39 CFR 3040.130 through 3040.135, and
39 CFR 3035.105; Public Representative:
Jennaca D. Upperman; Comments Due:
May 31, 2024..
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
[FR Doc. 2024–11754 Filed 5–28–24; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100129; File No. SR–
CboeBZX–2024–032]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change, as Modified
by Amendment No. 1, To Amend Rule
11.28(a) To Add Four Additional
Market-on-Close Cut-off Times to Cboe
Market Close
May 14, 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 April 29,
2024, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. On May 13, 2024, the
Exchange filed Amendment No. 1,
which supersedes the original filing in
its entirety.3 The Commission is
1 15
1 See
Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, the Exchange (1) amended
paragraph (b) of Rule 11.28 and Interpretations and
Policies .02 of Rule 11.28 to conform the CMC
2 17
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publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) proposes to
amend Rule 11.28(a) to add four
additional market-on-close (‘‘MOC’’)
cut-off times (each a ‘‘MOC Cut-Off
Time’’ and collectively ‘‘MOC Cut-Off
Times’’) To Cboe Market Close (‘‘CMC’’).
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
BZX proposes to amend Rule 11.28(a)
to add four additional CMC MOC CutOff times. These MOC Cut-Off times
would be in addition to the existing
MOC Cut-Off time of 3:49 p.m. ET, for
a total of five matching sessions: 3:15
p.m. ET (new), 3:30 p.m. ET (new), 3:49
p.m. ET (current), 3:54 p.m. ET (new),
and 3:58 p.m. ET (new).4 These
proposed MOC Cut-Off Times are based
on Member feedback. Specifically, in
response to CMC’s noticeable increase
in executed volume (discussed below),
there has been heightened interest in
CMC from both existing users, as well
procedures with the proposed additional MOC CutOff times and (2) provided additional justification
and support for the proposal. The full text of
Amendment No. 1 is available on the Commission’s
website at https://www.sec.gov/rules/sro/nationalsecurities-exchanges?aId=&sro_organization=
192731.
4 Hereinafter, all times referenced are in Eastern
Time.
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Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
as potential new users of CMC
(collectively ‘‘Members’’). Collectively,
these Members have requested certain
enhancements to CMC that would
encourage existing users to increase
their utilization of CMC, as well
encourage prospective users to begin
using CMC. Namely, Members have
expressed a desire for: (1) MOC Cut-Off
Times earlier in the trading day, and
prior to the current MOC Cut-Off Time
of 3:49 p.m.; (2) a MOC Cut-Off Time
closer to Nasdaq’s MOC cut-off time of
3:55 p.m.; (3) a MOC Cut-Off Time
Closer to the New York Stock
Exchange’s (‘‘NYSE’’) Closing-D Order
cut-off time of 3:59:50; and (4) a MOC
Cut-Off Time that is subsequent to the
MOC cut-off times of the NYSE’s and
Nasdaq’s MOC cut-off times, and just
prior to the NYSE’s Closing-D Order 5
cut-off time of 3:59:50 p.m.
Both the Exchange and its Members
believe that these enhancements will
help to position CMC as more viable
alternative to the primary exchanges’
closing auctions, NYSE’s Closing D
Order, and off-exchange closing price
services. Additionally, multiple MOC
Cut-Off Times will make CMC more
appealing to a larger segment of market
participants by providing Members with
different trading strategies and technical
and operational capabilities more
flexibility in how they manage their
market-on-close (‘‘MOC’’) and closing
price orders.
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Procedural Background
On May 5, 2017, the Exchange filed a
proposed rule change to adopt CMC, a
match process for MOC orders in nonBZX listed securities and on December
1, 2017, filed Amendment No. 1 6 to that
proposal (the ‘‘Original Proposal’’).7 On
5 See NYSE Rule 7.31 (c)(2)(‘‘Closing-D Order’’);
see also ‘‘The Floor Broker’s Modern Trading Tool’’,
available at: https://www.nyse.com/article/trading/
d-order (‘‘While D-Orders are available for use
throughout the trading day, most executions occur
in the closing auction, where they’re known as
Closing D Orders. At 3:55 p.m., Closing D Order
interest eligible to participate in the closing auction
is added to the order imbalance feed at their
discretionary price range. Closing D Orders can also
be submitted, modified or cancelled up to 3:59:50
p.m. These distinct features of Closing D Orders are
designed to facilitate the Floor Broker’s traditional
agency role on behalf of larger institutional interest,
allowing Floor Brokers to work in conjunction with
their customer to find larger liquidity
opportunities.’’).
6 The only change in Amendment No. 1 was to
rename the proposed closing match process as Cboe
Market Close. Per the Commission, because
Amendment No. 1 was a technical amendment and
did not materially alter the substance of the
proposed rule change or raise unique or novel
regulatory issues, Amendment No. 1 was not
subject to notice and comment.
7 See Securities Exchange Act Release No. 34–
80683 (May 16, 2017), 82 FR 23320 (May 22, 2017)
(SR–Bats–BZX–2017–34) (Notice of Filing of a
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January 17, 2018, the Commission,
acting through authority delegated to
the Division of Trading and Markets,8
approved the Original Proposal
(‘‘Approval Order’’).9 On January 31,
2018, NYSE Group, Inc. (‘‘NYSE’’) and
the Nasdaq Stock Market LLC
(‘‘Nasdaq’’) filed petitions for review of
the Approval Order (‘‘Petitions for
Review’’). Pursuant to Commission Rule
of Practice 431(e),10 the Approval Order
was stayed by the filing with the
Commission of a notice of intention to
petition for review.11 On March 1, 2018,
pursuant to Commission Rule of
Practice 431, the Commission issued a
scheduling order granting the Petitions
of Review of the Approval Order, and
provided until March 22, 2018, for any
party or other person to file a written
statement in support of, or in opposition
to, the Approval Order.12 On April 12,
2018, NYSE and Nasdaq submitted
written statements opposing the
Approval Order and BZX submitted a
statement in support of the Approval
Order.13 On October 4, 2018, BZX filed
Amendment No. 2 14 to the Original
Proposal.
Proposed Rule Change to Introduce Bats Market
Close, a Closing Match Process for Non-BZX Listed
Securities Under New Exchange Rule 11.28).
8 17 CFR 200.30–3(a)(12).
9 See Securities Exchange Act Release No. 34–
82522 (January 17, 2018), 83 FR 3205 (January 23,
2018) (SR–BatsBZX–2017–34) (Notice of Filing of
Amendment No. 1 and Order Granting Approval of
a Proposed Rule Change, as Modified by
Amendment No. 1, To Introduce Cboe Market
Close, a Closing Match Process for Non-BZX Listed
Securities Under New Exchange Rule 11.28).
10 17 CFR 201.431(e).
11 See Letter to Christopher Solgan, Assistant
General Counsel, Cboe Global Markets, Inc. (Jan. 24,
2018) (providing notice of receipt of notices of
intention to petition for review of delegated action
and stay of order), available at: https://www.sec.gov/
rules/sro/batsbzx/2018/sr-batsbzx-2017-34-letterfrom-secretary-to-cboe.pdf.
12 See Securities Exchange Act Release No. 82794,
83 FR 9561 (Mar. 6, 2018). On March 16, 2018, the
Office of the Secretary, acting by delegated
authority, issued an order on behalf of the
Commission granting a motion for an extension of
time to file statements on or before April 12, 2018.
See Securities Exchange Act Release No. 82896, 83
FR 12633 (Mar. 22, 2018).
13 See Statement of NYSE Group, Inc., in
Opposition to the Division’s Order Approving a
Rule to Introduce Cboe Market Close (‘‘NYSE
Statement’’); Statement of the Nasdaq Stock Market
LLC in Opposition to Order Granting Approval of
a Proposed Rule Change, as Modified by
Amendment No. 1, to Introduce Cboe Market Close
(‘‘Nasdaq Statement’’); and Statement of Cboe BZX
Exchange, Inc., in support of Commission Staff’s
Approval Order (‘‘BZX Statement’’), available at:
https://www.sec.gov/comments/sr-batsbzx-2017-34/
batsbzx201734.htm.
14 See Securities Exchange Act Release No. 34–
84670 (November 28, 2018), 83 FR 62646
(December 4, 2018) (SR–BatsBZX–2017–34)
(‘‘Notice of Filing of Amendment No. 2 to Proposed
Rule Change to Introduce Cboe Market Close, a
Closing Match Process for Non-BZX Listed
Securities Under New Exchange Rule 11.28’’).
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46429
The Commission conducted a de novo
review of the CMC proposal and
associated public record, including
Amendment No. 2, the Petitions for
Review, and all comments and
statements submitted by certain
exchanges, issuers, and other market
participants,15 to determine whether the
proposal was consistent with the
requirements of the Act and the rules
and regulations issued thereunder that
are applicable to a national securities
exchange.16 The Commission noted that
under Rule 700(b)(3) of the
Commission’s Rule of Practice, the
‘‘burden to demonstrate that a proposed
rule change is consistent with the
Exchange Act and the rules and
regulations issued thereunder. . .is on
the self-regulatory organization that
proposed the rule change.’’ 17
Importantly, after reviewing the entire
record, the Commission concluded that
BZX met its burden to show that the
proposed rule change was consistent
with the Act, and pursuant to its
January 21, 2020, order, set aside the
Approval Order and approved BZX’s
CMC proposal, as amended (‘‘Final
Approval Order’’).18 Notably, the
Commission stated that the record
‘‘demonstrate[d] that Cboe Market Close
should introduce and promote
competitive forces among national
securities exchanges for the execution of
MOC orders’’ 19 and that ‘‘the record
demonstrate[d] that Cboe Market Close
should not disrupt the closing auction
price discovery process nor should it
materially increase the risk of
manipulation of official closing
prices’’.20
Subsequently, on August 5, 2022, the
Exchange filed a proposed rule change
to amend Rule 11.28(a) to extend CMC’s
MOC Cut-Off Time from 3:35 p.m. to
3:49 p.m. (‘‘CMC Amendment’’).21 On
October 4, 2022, the Commission, acting
through authority delegated to the
Division of Trading and Markets,
designated a longer period within which
to take action on the Exchange’s CMC
15 See ‘‘Statements on File No. SR–BatsBZX–
2017–34’’, available at: https://www.sec.gov/
comments/sr-batsbzx-2017-34/batsbzx201734.htm.
16 See Securities Exchange Act Release No. 34–
88008 (January 21, 2020), 85 FR 4726 (January 27,
2020) (SR–BatsBZX–2017–34) (‘‘Order Setting
Aside Action by Delegated Authority and
Approving a Proposed Rule Change, as Modified by
Amendments No. 1 and 2, To Introduce Cboe
Market Close, a Closing Match Process for Non-BZX
Listed Securities Under New Exchange Rule
11.28’’).
17 Id.
18 Id.
19 Id.
20 Id.
21 See Securities Exchange Act Release No. 34–
95529 (August 17, 2020), 87 FR 52092 (August 24,
2022) (SR–CboeBZX–2022–038).
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Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
Amendment.22 Later, on November 11,
2022, BZX filed Amendment No. 1 to its
CMC Amendment, and the Commission
instituted proceedings to determine
whether to approve or disapprove the
proposed rule change as modified by
Amendment No. 1.23 Finally, on
February, 9, 2023, the Commission,
approved the proposed CMC
Amendment (‘‘CMC Amendment
Approval Order’’).24
In approving the CMC Amendment,
the Commission stated that the proposal
was consistent with Section 6(b)(5) of
the Act,25 which requires, among other
things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, 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, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers;
as well as Section 6(b)(8) of the Act,26
which requires that the rules of a
national securities exchange not impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
For the reasons discussed more fully
below, the Exchange believes that when
applying the Commission’s analysis in
the Final Approval Order and the CMC
Amendment Approval Order to the
current proposal, such review would
similarly conclude that this proposal is
consistent with the Act.
Increased Volume and New Demand for
CMC
On March 10, 2023, the Exchange
moved its MOC Cut-Off Time from 3:35
p.m. to 3:49 p.m. As illustrated in
Figure 1 below, since implementing the
3:49 p.m. MOC Cut-Off Time CMC has
experienced noticeable growth in its
trading volume, rising modestly
beginning in May 2023 and more
remarkably between September 2023
and November 2023, ultimately
reaching a record-high of 155 million
shares traded in December 2023. Based
on CMC’s growing usage, the Exchange
has received various feedback from both
existing CMC users and prospective
CMC users. Collectively, these Members
have requested certain enhancements to
CMC that would encourage existing
users to increase their utilization of
CMC, as well encourage prospective
users to begin using CMC. Namely,
Members have expressed a desire for: (1)
MOC Cut-Off Times earlier in the
trading day, including prior to the
current MOC Cut-Off Time of 3:49 p.m.;
(2) a MOC Cut-Off Time closer to
Nasdaq’s MOC cut-off time of 3:55 p.m.;
(3) a MOC Cut-Off Time Closer to
NYSE’s Closing-D Order cut-off time of
3:59:50; and (4) a MOC Cut-Off Time
that is subsequent to the MOC cut-off
times of the NYSE’s and Nasdaq’s MOC
cut-off times, and just prior to NYSE’s
Closing-D Order cut-off time of 3:59:50
p.m.
As noted, both the Exchange and its
Members believe that these
enhancements will help to position
CMC as more viable alternative to the
primary exchanges’ closing auctions,
NYSE’s Closing-D Order, and offexchange closing price services.
Additionally, multiple MOC Cut-Off
Times will make CMC more appealing
to a larger segment of Members by
providing Members with different
trading strategies and technical and
operational capabilities more flexibility
in how they manage their MOC and
closing price orders.
Figure 1 (Source: Internal Exchange Data)
CMC Monthly Total Volume
180
160
140
120
100
80
60
22 See Securities Exchange Act Release No. 34–
95967 (October 4, 2022), 87 FR 61425 (October 11,
2022) (SR–CboeBZX–2022–038).
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23 See Securities Exchange Act Release No. 34–
96359 (November 18, 2022), 87 FR 72537
(November 25, 2022) (SR–CboeBZX–2022–038).
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24 See Securities Exchange Act Release No. 34–
96861 (February 9, 2023), 88 FR 9940 (February 15,
2023) (SR–CboeBZX–2022–038).
25 15 U.S.C. 78f(b)(5).
26 15 U.S.C. 78f(b)(8).
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Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
Proposed Functionality
Accordingly, BZX proposes to amend
Rule 11.28(a) to add four CMC MOC
Cut-Off times. These MOC Cut-Off times
would be in addition to the existing
MOC Cut-Off time of 3:49 p.m., for a
total of five matching sessions: 3:15 p.m.
(new), 3:30 p.m. (new), 3:49 p.m.
(current), 3:54 p.m. (new), and 3:58 p.m.
(new). MOC orders may be entered for
each matching session up to the relevant
MOC Cut-Off Time, beginning each day
at 6:00 a.m.27 Members will have the
ability to specify on their order
instructions which CMC session(s) they
wish to participate in. For orders that
specify they are willing to match in
multiple matching sessions, any
unfilled quantity from an earlier session
will carry forward to the next session(s).
Any unfilled quantity remaining after a
Member’s specified final matching
session will be canceled back to the
Member. To illustrate the proposed
functionality, consider the following
examples.
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Example 1: Order indicates matching in
a single session
Order 1: Buy 100 @ MKT—CMC
Session: 3:49 p.m., Timestamp:
3:00:00 p.m.
Order 2: Sell 100 @ MKT—CMC
Session: 3:15 p.m., 3:30 p.m., 3:49
p.m., Timestamp: 3:01:00 p.m.
Results:
• Order 1 will not match with Order
2 in the 3:15 p.m. or 3:30 p.m.
session. Order 2’s unfilled quantity
of 100 shares will first carry
forward from the 3:15 session, then
again from the 3:30 session, and
finally to the 3:49 session.
• Order 1 and Order 2 match in the
3:49 p.m. session for 100 shares at
the closing price.
• Order 1 and Order 3 match in the
3:15 p.m. session for 100 shares at
the closing price and Order 1’s 400
remaining shares are carried over to
the next session.
• Order 1 and Order 2 match in the
3:30 p.m. session for 100 shares at
the closing price and Order 1’s 300
remaining shares are carried over to
the next session.
• Order 1 and Order 4 match in the
3:49 p.m. session for 100 shares at
the closing price and Order 1’s 200
remaining shares are canceled back.
Example 3: Order’s unfilled quantity
retains its original timestamp for
priority purposes
Order 1: Buy 500 @MKT—CMC Session:
3:15 p.m., 3:30 p.m., Timestamp:
3:00:00 p.m.
Order 2: Buy 100 @MKT—CMC Session:
3:30 p.m., Timestamp: 3:01:00 p.m.
Order 3: Sell 100 @MKT—CMC Session:
3:15 p.m., Timestamp: 3:02:00 p.m.
Order 4: Sell 100 @MKT—CMC Session:
3:30 p.m., Timestamp: 3:03:00 p.m.
Results:
• Order 1 and Order 3 match in the
3:15 p.m. session for 100 shares at
the closing price and Order 1’s 400
remaining shares are carried over to
the next session.
• Order 1 28 and Order 4 match in the
3:30 p.m. session for 100 shares at
the closing price and Order 1’s 300
remaining shares are canceled back.
• Order 2’s 100 shares are unfilled
and canceled back at 3:30 p.m.
Example 2: Order indicates matching in
multiple sessions
Order 1: Buy 500 @ MKT—CMC
Session: 3:15 p.m., 3:30 p.m., 3:49
p.m., Timestamp: 3:00:00 p.m.
Order 2: Sell 100 @ MKT—CMC
Session: 3:30 p.m., Timestamp:
3:01:00 p.m.
Order 3: Sell 100 @ MKT—CMC
Session: 3:15 p.m., Timestamp:
3:02:00 p.m.
Order 4: Sell 100 @ MKT—CMC
Session: 3:49 p.m., Timestamp:
3:03:00 p.m.
Results:
The Proposed 3:15 p.m. and 3:30 p.m.
MOC Cut-Off Times
Members requesting MOC Cut-Off
Times earlier in the trading day have
expressed that these additional MOC
Cut-Off Times will provide them more
flexibility in managing their MOC and
closing price order flow. For instance,
some Members maintain multiple
internal trading desks, each managing
different types of order flow and trading
strategies. One trading desk may manage
orders that its traders actively trade
throughout the trading day leading up to
the close, making MOC Cut-Off Times
closer to 4:00 p.m. more valuable for
that trading desk. Separately, one of the
Member’s other trading desks may
typically execute orders guaranteeing
the closing price or perhaps manage
orders on behalf of index funds or ETF
providers, that are often benchmarked to
27 For instance, an MOC order specifying that it
wishes to participate in the 3:15 MOC Cut-Off Time
must be entered, cancelled, or replaced prior to 3:15
p.m. Similarly, a MOC order specified to participate
in the 3:30 MOC Cut-Off Time may be entered,
cancelled, or replaced anytime between 6:00 a.m.
and 3:29:59 p.m.
28 Note that Order 1 in this scenario retains its
priority over Order 2. Because Order 1 and Order
2 are both un-priced MOC orders, time priority
takes precedent, with Order 1 maintaining its queue
priority versus Order 2. See Rule 11.12, Priority of
Orders, which provides that orders are ranked
based on price, then time.
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46431
the official closing price. For this
workflow, a Member may be agnostic as
to when it commits MOC orders to
CMC, a primary exchange’s closing
auction, or an off-exchange closing price
service, and may view the ability to
commit such order flow to CMC earlier
in the trading day at 3:15 p.m. or 3:30
p.m. as a valuable tool to help them
execute orders and de-risk their trading
risk earlier in the trading day.
Additionally, Members have
indicated the proposed 3:15 p.m. and
3:30 p.m. MOC Cut-Off Times will also
assist them in managing any
technological and operational risk
associated with managing high volumes
of order flow. Notional trading and
trading volatility are typically at their
highest towards the end of Regular
Trading Hours. During this time,
Members systems may be managing a
significant number of MOC or closing
price orders. Unless the Member is
attempting to beat the closing price by
trading such orders for as long as
possible heading into the close,
committing such orders to CMC earlier
in the trading day will enable them to
reduce the number of MOC and closing
price orders their trading systems must
manage. Notably, the Exchange noted in
its CMC Amendment that today’s
market participants, including CMC’s
existing users, were technologically
equipped 29 to handle CMC’s current
3:49 p.m. MOC Cut-Off Time. While this
remains the case today, the recent
growth in CMC’s executed volume has
attracted potential new users with
trading strategies, and technological and
operational capabilities, that have
presented new use cases for CMC.
29 As a general matter, today’s market
participants, including CMC users, rely on
electronic smart order routers, order management
systems, and trading algorithms, which make
routing and trading decisions on an automated
basis, in times typically often measured in
microseconds. See generally ‘‘Staff Report on
Algorithmic Trading in U.S. Capital Markets’’
(August 5, 2020), available at https://www.sec.gov/
tm/reports-and-publications/special-studies/algo_t_
report_2020 (‘‘Algorithmic Trading Report’’) (‘‘Over
the past decade, the manual handling of
institutional orders is increasingly rare and has
been replaced by sophisticated institutional order
execution algorithms and smart order routing
systems.’’) (‘‘The secondary market for U.S.-listed
equity securities that has developed within this
structure is now primarily automated. The process
of trading has changed dramatically primarily as a
result of developments in technologies for
generating, routing, and executing orders, as well as
by the requirement imposed by law and
regulation.’’) (‘‘Modern equity markets are
connected in part by the data flowing between
market centers. An enormous volume of data is
available to market participants. In recent years,
there has been an exponential growth in the amount
of market data available, the speed with which it
is disseminated, and the computer power used to
analyze and react to price movements.’’).
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Overall, by having the ability to
submit orders to the proposed 3:15 p.m.,
3:30 p.m., and 3:49 p.m. MOC Cut-Off
Times, Members will have a greater
opportunity of being matched earlier in
the trading day before potentially
needing to re-route their unmatched
MOC orders to the primary exchanges or
off-exchange closing price offerings. On
high-volume order days—e.g. Russell
Rebalance Days where trading volume is
high—the utility of being able to de-risk
closing cross order volume earlier in the
trading day is both a rational trading
decision and a prudent way for
Members to manage their operational
and technological risk as such event
days are marked by high volume and
volatility that may utilize a significant
portion of some Members’ systems
capacity.
The Proposed 3:54 p.m. and 3:58 p.m.
MOC Cut-Off Times
Members requesting the later MOC
Cut-Off Time of 3:54 p.m. have
indicated that these MOC Cut-Off Times
will help to better align CMC with
Nasdaq’s MOC cut-off time of 3:55 p.m.,
thereby helping to make CMC a more
viable alternative to Nasdaq’s closing
auction. Members requesting the later
MOC Cut-Off Time of 3:58 p.m. have
indicated that this MOC Cut-Off Time
would provide Members with another
option similar to NYSE’s Closing D-
Order, thereby enabling Members to
achieve the official closing price where
they may have traded beyond the
primary exchanges’ closing auction cutoff times as they attempt to trade as
close to 4:00 p.m. as possible.
Similar to the rationale for extending
CMC’s MOC Cut-Off Time from 3:35
p.m. to 3:49 p.m., Members desire MOC
Cut-Off Times that are closer to the end
of Regular Trading Hours 30 so that they
may retain control of their trading for a
longer period of time. By being able to
trade closer to the end of Regular
Trading Hours, Members have more
opportunities to seek better priced
liquidity for their orders in a variety of
ways and reducing the size of their
outstanding orders they may need to
commit to CMC or the primary auctions,
including but not limited to, finding
contra-side liquidity in the marketplace
and trading directly against such
interest, or guaranteeing a customer
order at a price better than the national
best bid or offer by committing capital
to an order and filling it in a principal
capacity, as well as continuing to trade
algorithmically into the close. By adding
the MOC Cut-Off Times of 3:54 p.m. and
3:58 p.m., CMC will be better positioned
to serve as a viable option for market
participants to consider when deciding
which venues to route their MOC orders
or Closing-D Orders, thus enhancing
intermarket competition.
In support of the above, Figure 2
shows the total average daily volume
across all market centers, from 3:30 p.m.
to 4:00 p.m. in 30-seconds intervals, and
includes labels for the different MOC
cut-off times for CMC, NYSE, and
Nasdaq. As illustrated, at NYSE’s 3:50
p.m. MOC cut-off time, NYSE’s 3:59:50
Closing-D Order cut-off time, Nasdaq’s
3:55 p.m. MOC cut-off time, and 4:00
p.m. market close, there is a noticeable
increase in traded volume in the overall
marketplace, with volume relatively flat
in the overall marketplace prior to those
times. This analysis supports the
Exchange’s assertion that certain market
participants do indeed prefer cut-off
times later in the trading day. Therefore,
the Exchange now seeks to implement
the MOC Cut-Off Times of 3:54 p.m.,
and 3:58 p.m., to better align CMC with
Nasdaq’s 3:55 p.m. MOC cut-off time
and NYSE’s Closing-D Order cut-off
time of 3:59:50. In doing so, the
Exchange believes that CMC will be
better positioned as a viable alternative
to Nasdaq’s closing auction, and as
another option to NYSE’s Closing DOrder, enabling Members to achieve the
official closing price where they may
have traded beyond the primary
exchanges’ closing auction cut-off times
as they attempt to trade as close to 4:00
p.m., thereby ‘‘foster[ing] price
competition and. . .decreas[ing] costs
for market participants.’’ 31
Figure 2 (Source: Internal Exchange Data)
3:30PM to 4:00 PM Average Daily Volume: 2024 YTD
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30 The term ‘‘Regular Trading Hours’’ means the
time between 9:30 a.m. and 4:00 p.m. Eastern Time.
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See Rule 1.2 (w), definition of, ‘‘Regular Trading
Hours.’’
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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.32 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 33 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 witht
he Section 6(b)(5) 34 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the addition of the proposed MOC
Cut-Off Times would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
the proposed times would offer CMC
users increased flexibility in how to
manage their MOC and closing price
order flow and their associated trading,
and their technological and operational
risk, as well help to better position CMC
to serve as a viable alternative to the
primary exchanges’ closing auctions,
and off-exchange closing price
mechanism. For instance, by having the
option to allocate their MOC order flow
across various MOC Cut-Off Times,
Members will have the opportunity to
receive matches earlier in the trading
day, thereby reducing their trading risk,
as well as the volume of orders their
systems may need to handle at once,
thereby reducing operational and
technology risk. Furthermore, the
proposed 3:54 p.m. MOC Cut-Off time
will enable Members to actively trade
orders in Nasdaq-listed securities for a
longer period as they will no longer
have to submit their MOC orders to
CMC at 3:49 p.m.—i.e., six-minutes
prior to Nasdaq’s cut-off time. As
discussed above, if a Member’s MOC
orders are not matched in CMC they
32 15
U.S.C. 78f(b).
note 25.
33 Supra
34 Id.
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will still have ample time to reroute any
unmatched to CMC MOC orders to
Nasdaq’s closing auction, thereby
making CMC a more comparable
alternative to Nasdaq’s closing auction.
Additionally, the Exchange has
received feedback from Members that
while moving the single MOC Cut-Off
Time from 3:35 p.m. to 3:49 p.m. (sixminutes prior to Nasdaq’s cut-off time,
and nearly eleven-minutes prior to
NYSE’s Closing-D Order cut-off time)
has been helpful in managing their MOC
and closing price order flow, Members
desire later cut-off times that more
closely align with the current Nasdaq
cut-off time of 3:55 p.m., and a cut-off
time closer to 4:00 p.m. As noted, the
proposed 3:54 p.m. MOC Cut-Off Time
will help make CMC a more practical
alternative to the Nasdaq closing
auction. Furthermore, the proposed
MOC Cut-Off Time of 3:58 p.m. (i.e.,
closer to 4:00 p.m.) would be of great
value to Members because it would
enable them to trade closer to 4:00
p.m.—i.e., past the primary exchanges’
cut-off times—giving them control of
their orders for a longer period of time
and providing them with an option
similar to NYSE’s Closing-D Order. The
Exchange notes that the market
participants that would primarily use
the later MOC Cut-Off Times are
technologically equipped 35 to handle
the proposed 3:54 p.m. and 3:58 p.m.
MOC Cut-Off Times. Specifically,
CMC’s current users utilize third-party
providers or broker-dealers 36 that
provide them with electronic trading
technology enabling them to quickly
react to market conditions and
messages, such as the Cboe Auction
35 Supra
note 28.
a general matter, third-party technology
providers and broker-dealers with electronic trading
offerings provide automated trading and routing
products and services to market participants that
may not possess their own proprietary technology,
or simply choose to leverage third party solutions
they deem superior to their own internal
technology. By way of example, portfolio managers
responsible for reweighting their managed funds
may not possess internal automated routing and
algorithmic trading capabilities, and instead utilize
third-party solutions enabling them to trade on an
automated basis. As such, the proposed MOC CutOff Times of 3:54 p.m. and 3:58 p.m. are not likely
to negatively impact market participants who may
not possess the internal capabilities to reroute
unmatched CMC MOC orders to the primary
exchanges’ closing auctions. The Exchange further
notes that the utilization of third parties and brokerdealers for technological trading solutions was even
noted by the Commission in its Algorithmic
Trading Report. Supra note 28 (‘‘Institutions that do
not create their own algorithms generally use
algorithms provided to them by institutional
brokers.’’) (‘‘Brokers are tasked by their customers
with finding liquidity in a complex, fragmented
market, achieving best execution, and minimizing
information leakage and other implicit costs. To try
to meet these goals, brokers use, and offer to their
customers, a wide range of execution algorithms.’’).
36 As
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Feed.37 Moreover, many market
participants, including non-users of
CMC, utilize electronic smart order
routers, order management systems, and
trading algorithms, which make routing
and trading decisions on an automated
basis in times often measured in
microseconds. Therefore, the Exchange
believes that both current users of CMC,
as well as those that may utilize CMC
following approval of this proposal, will
be technologically equipped to
efficiently respond to CMC’s publication
of matched shares and, should they so
choose, reroute any unmatched MOC
orders to Nasdaq’s closing auction,
utilize NYSE’s Closing-D Order,38 or
reroute to an off-exchange closing price
offering.
The Exchange also notes that as CMC
volume has increased, prospective new
users 39 with different trading strategies
and different technological and
operational capabilities have expressed
interest in utilizing CMC. This segment
of Members has expressed a desire for
earlier MOC Cut-Off Times, which they
note will assist them in more efficiently
managing their workflows and trading
risk. For instance, some of these
Members would prefer to commit
certain of their closing price orders—
e.g., guaranteed close orders—to a
closing auction mechanism earlier in
the trading day. By submitting such
orders to CMC and potentially receiving
a match, a Member can reduce its
trading risk. Additionally, by having the
ability to allocate MOC orders across
37 Per Rule 11.22(i), The Cboe Auction Feed is an
uncompressed data product that provides
information regarding the current status of price
and size information related to auctions conducted
by the Exchange as well as the total size of all buy
and sell orders matched via Cboe Market Close
described in Rule 11.28
38 By way of background, CMC calculates the
matched shares at the MOC Cut-Off Time (currently
3:49 p.m.) Importantly, the matching process
happens quickly, and while the duration may vary,
the total matching process typically takes a fraction
of second (e.g., ∼948 microseconds), with the
maximum being around 1-second. With these
timeframes in mind, a user should in most
instances, currently knows the paired CMC quantity
no later than 3:49:01 p.m., leaving the user at least
fifty-nine-seconds (59) to reroute any unpaired CMC
MOC orders to the primary exchanges’ closing
auctions. Similarly, applying these timeframes to
the proposed MOC Cut-Off Times, a user should in
most instances know the pair paired CMC
quantities no later than 3:15.01, 3:30.01, 3:54.01,
and 3:58.01. As noted by the Exchange throughout
this filing, the speed of today’s trading technology
is typically measured in microseconds, making
fifty-nine-seconds (59) a significant amount of time
for a user to make an automated trading decision.
For reference, a microsecond is 1-millionth of a
second.
39 Prospective new users of CMC include both
Members expressing interest in utilizing CMC for
the first time, as well as new end-clients of
Members that currently utilize CMC, and have
inquired as to CMC’s functionality, and the
proposed enhancements.
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various MOC Cut-Off Times, Members
can more capably manage their order
volume and reduce the number of
messages that their systems must
manage and process heading into
market close, where trading volume and
volatility are typically highest. As such,
Members will be better able to manage
any operational or technology risk 40
associated with a high order volume day
such as index rebalance days (e.g.,
Russell or MSCI index rebalance days)
or unexpected high volatility trading
days, as well as better manage the
number of MOC orders a Member may
need to send to an exchange or offexchange venue at any one time.41
As noted in its CMC Amendment, the
Exchange continues to believe that the
extension of cut-off times by the
primary exchanges since CMC’s
approval in 2020 as well as the growth
of off-exchange venues 42 with cut-off
40 The Exchange notes that there are market
participants that may not currently possess internal
high-speed routing and trading technology.
However, such market participants may, and likely
already do, utilize routing and trading services
offered by third-party providers or broker-dealers to
handle and execute their orders electronically.
Additionally, CMC is entirely voluntary and
Members that do not possess internal high-speed
trading and routing technology, or utilize thirdparty broker-dealers, are not required to use CMC.
Accordingly, the Exchange believes that the
proposed MOC Cut-Off Time is not likely to result
in disparate treatment amongst CMC users and
other market participants.
41 In this regard, the Exchange notes that some
Members have expressed that while they have
ample time to redirect any unmatched CMC orders
to the primary exchanges, internal or external
message rate checks (e.g., SEC Rule 15c3–5 risk
checks or market center checks) may prohibit them
from doing so if the Member is submitting a large
volume of unmatched MOC orders at one time. In
this regard, the proposed additional MOC Cut-Off
Times may assist Members in allocating MOC
orders across multiple CMC sessions, and should
they be matched, reduce the volume of unmatched
MOC orders the Member may have to submit to
another market center.
42 For example, JP Morgan Securities’ ATS, JPB–
X, offers Close Price Match. This functionality
utilizes a conditional order process to match orders
and crosses them at the security’s official closing
prices, as determined by the closing auction at the
primary exchange for a security. The Close Price
Match time for an NMS stock is currently 30seconds before the MOC cut-off time for that stock’s
primary exchange. Additionally, Instinet, LLC’s
ATS, CBX provides for three MOC Crossing
Sessions, which consist of: a cross for securities
where the primary listing exchange is the Nasdaq
(‘‘Nasdaq Cross’’), a cross for securities where the
primary listing exchange is the NYSE Arca (‘‘Arca
Cross’’), and a cross for securities where the
primary listing exchange is the NYSE (‘‘NYSE
Cross’’) (collectively, ‘‘MOC Crosses’’). Each MOC
Cross occurs two minutes prior to the relevant
exchange’s cut-off time; i.e., the Nasdaq Cross
currently occurs at or near 3:53 p.m., the NYSE
Cross at or near 3:48 p.m., and the Arca Cross at
or near 3:57 p.m. See Form ATS–N, JPB–X,
available at: https://www.sec.gov/Archives/edgar/
data/782124/000001961722000459/xslATS-N_X01/
primary_doc.xml; see also Form ATS–N, Instinet,
LLC’s ATS, CBX, available at: https://www.sec.gov/
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times in such close proximity to the end
of Regular Trading Hours is indicative
of Members’ desires for such offerings.
Logically, such a change in market
structure would not have occurred if
market participants did not already
possess the operational and
technological capabilities to effectively
manage the multitude of cut-off times
offered by the exchanges and offexchange venues.
The Exchange also believes that the
proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
adding the MOC Cut-Off Times of 3:54
p.m. and 3:58 p.m. would more closely
align the CMC with the cut-off time in
place for the Nasdaq closing auction, as
well as provide market participants with
a tool similar to NYSE’s Closing D-Order
that enables them to trade closer to 4:00
p.m.43 By adding the 3:54 p.m. and 3:58
p.m. MOC Cut-Off Times, CMC has the
ability to become a more comparable
alternative to Nasdaq’s closing auction
and another option similar to NYSE’s
Closing D Orders, thereby ‘‘foster[ing]
price competition and . . . decreas[ing]
costs for market participants.’’ 44
The primary exchanges’ cut-off times
are beneficial to market participants
because of their proximity to the closing
auctions, which occur at 4:00 p.m.
Trading later into the day provides
market participants with more time to
seek better-priced liquidity for their
orders in a variety of ways and provides
additional time to determine the size of
their outstanding orders that they may
decide to commit to CMC, the primary
auctions, or services offered by offexchange venues such as ATSs. In this
regard, by having the option to trade
past the primary exchanges’ cut-off
times and still potentially receive the
official closing price by participating in
CMC at 3:58 p.m., Members will have
had additional time to actively trade
orders and attempt to access better
priced liquidity for their orders or their
client orders.
Importantly, even with the addition of
the proposed MOC Cut-Off Times, CMC
will remove any perceived impact on
Nasdaq’s or NYSE’s closing auction by
publishing the number of matched order
shares, by security, in advance of
Archives/edgar/data/310607/000031060722000009/
xslATS-N_X01/primary_doc.xml . . should.
43 As noted above, NYSE’s Closing-D Order cutoff time is 3:50 p.m., and Nasdaq’s cut-off time is
3:55 p.m. Additionally, the Exchange notes that
NYSE Arca’s cut-off time for MOC orders is 3:59
p.m. See ‘‘Trading Information—Closing Auctions’’,
available at: https://www.nyse.com/markets/nysearca/trading-info.
44 Supra note 15.
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Nasdaq’s cut-off time and NYSE’s
Closing-D Order cut-off time. The total
matched shares would still be
disseminated by the Exchange free of
charge via the Cboe Auction Feed, albeit
at each of the newly proposed MOC CutOff Times. Because of the speeds and
widespread use of market technology
the market makers on the primary
exchanges could, should they choose to
do so, incorporate the Cboe Auction
Feed information (including
information about total matched shares
in CMC) into their closing processes.45
Additionally, as discussed above,
because of the market technology
utilized by market participants in
today’s markets, those who choose to
participate in CMC will still have ample
time 46 to reroute any MOC orders not
matched via CMC to reach Nasdaq’s
closing auction or NYSE’s Closing-D
Order offering, to be included in the
primary exchanges’ closing auctions.
Notably, market participants that do not
possess internal high-speed trading and
routing capabilities often rely on thirdparty providers or broker-dealers 47 to
handle and execute their orders
electronically. Moreover, if market
participants do not possess internal
high-speed routing and trading
technology, and do not utilize thirdparty solutions, the addition of the
proposed MOC Cut-Off Times of 3:15
p.m. and 3:30 p.m. would allow such
participants to try and receive CMC
matches earlier in the day at 3:15 p.m.
45 In connection with its CMC Amendment filing,
the Exchange spoke with four (4) designated market
makers for the primary exchanges and confirmed
that while they do not currently monitor the Cboe
Auction Feed, they are technically equipped to do
so.
46 Supra note 28.
47 As a general matter, third-party technology
providers and broker-dealers with electronic trading
offerings provide automated trading and routing
products and services to market participants that
may not possess their own proprietary technology,
or simply choose to leverage third party solutions
they deem superior to their own internal
technology. By way of example, portfolio managers
responsible for reweighting their managed funds
may not possess internal automated routing and
algorithmic trading capabilities, and instead utilize
third-party solutions enabling them to trade on an
automated basis. As such, the proposed MOC CutOff Times of 3:54 p.m. and 3:58 p.m. are not likely
to negatively impact market participants who may
not possess the internal capabilities to reroute
unmatched CMC MOC orders to the primary
exchanges’ closing auctions. The Exchange further
notes that the utilization of third parties and brokerdealers for technological trading solutions was even
noted by the Commission in its Algorithmic
Trading Report. Supra note 28 (‘‘Institutions that do
not create their own algorithms generally use
algorithms provided to them by institutional
brokers.’’) (‘‘Brokers are tasked by their customers
with finding liquidity in a complex, fragmented
market, achieving best execution, and minimizing
information leakage and other implicit costs. To try
to meet these goals, brokers use, and offer to their
customers, a wide range of execution algorithms.’’)
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or 3:30 p.m., rather than limiting
themselves to the later MOC Cut-Off
Times of 3:49 p.m., 3:54 p.m., and 3:58
p.m., and having less time to re-route
their unmatched MOC orders to the
primary exchanges or off-exchange
closing price mechanisms. Accordingly,
the Exchange believes that the proposed
MOC Cut-Off Times are not likely to
result in disparate treatment amongst
CMC users.
The proposed 3:58 p.m. MOC Cut-Off
Time would also help to further align
CMC’s MOC Cut-Off Times with that of
off-exchange venues that offer cut-off
times that correspond with those
currently offered by the primary
exchanges, and as little as 30 seconds
prior to market close.48 As such, the
Exchange believes that the proposed
rule change is supported by both ample
precedent as well as current market
structure, and should not present any
new or novel issues that market
participants must consider when
managing their trading and determining
which exchange or off-exchange venue
to route their MOC orders.
Price Discovery 49
As was the case with its CMC
Amendment, the Exchange believes that
the proposed rule change is consistent
with the Section 6(b)(5) requirements.50
As previously noted by the Exchange,51
CMC accepts and matches only
unpriced MOC orders. By matching only
48 Supra
note 41.
part of this proposed amendment, the
Exchange is addressing several questions
considered by the Commission in connection with
the Exchange’s Original Proposal, including price
discovery and fragmentation, market complexity
and operational risk, and manipulation.
Importantly, in considering these questions, the
Commission found that based on CMC’s design and
the record before the Commission, that the proposal
was consistent with Section 6(b)(5) of the Act.
Supra note 15.
50 The Exchange notes that the Commission, in its
Final Approval Order, carefully analyzed and
considered CMC and its potential effects, if any, on
the primary listing exchanges’ closing auctions,
including their price discovery functions.
Importantly, the Commission found that, based on
CMC’s design, CMC should not disrupt the price
discovery process in the closing auctions of the
primary listing exchanges. Supra note 15.
51 See Letter from Joanne Moffic-Silver, Executive
Vice President, General Counsel, and Corporate
Secretary, Bats Global Markets, Inc. (August 2,
2017), available at: https://www.sec.gov/comments/
sr-batsbzx-2017-34/batsbzx201734-2162452157801.pdf; see also Letter from Joanne MofficSilver (October 11, 2017), available at: https://
www.sec.gov/comments/sr-batsbzx-2017-34/
batsbzx201734-2634580-161229.pdf.
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unpriced MOC orders, and not priced
Limit-On-Close (‘‘LOC’’) orders and
executing those matched MOC orders
that naturally pair off with each other
and effectively cancel each other out,
CMC is designed to avoid impacting
price discovery. The proposed rule
change—i.e., the addition of additional
MOC Cut-Off Times—does not change
CMC’s underlying functionality. As
previously noted by the Exchange,52
matched MOC orders are merely
recipients of price formation and do not
directly contribute to the price
formation process. Indeed, in its Final
Approval Order for CMC, even the
Commission noted that unpriced,
paired-off MOC orders do not directly
contribute to setting the official closing
price of securities on the primary listing
exchanges but, rather, are inherently the
recipients of price formation
information.53
Moreover, the Exchange believes that
even if the addition of MOC Cut-Off
Times reduces the number of MOC
orders routed to a security’s primary
listing market, CMC is still designed to
remove any perceived adverse impact
on the primary listing markets’ close
because the total matched shares for
each CMC session would still be
disseminated by the Exchange free of
charge via the Cboe Auction Feed prior
to the primary exchanges’ cut-off times.
Additionally, even with the addition of
the new MOC Cut-Off Times, because of
the technological capabilities of today’s
market participants discussed more
fully above, the market makers on the
primary exchanges would still have the
ability to incorporate the Cboe Auction
Feed information, including information
about total matched shares in CMC, into
their closing processes.
Furthermore, current users of CMC
are either technologically equipped to
manage the proposed CMC MOC-Cut Off
Times or rely on third-party solutions
that provide them with the
technological capability to appropriately
manage the proposed MOC Cut-Off
Times and timely re-route unmatched
CMC orders participate in the primary
exchanges’ closing auctions. Similarly,
given the widespread use of routing and
trading technology in today’s markets, it
is likely that potential new CMC users
already possess the technological
capabilities to manage the proposed
52 Id.
53 Supra
PO 00000
note 15.
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46435
MOC Cut-Off Times, and if they do not,
similarly rely on third-party providers
with high-speed technology offerings.
Alternatively, CMC users lacking highspeed trading and routing technology
can simply utilize the earlier MOC CutOff Times of 3:15 p.m. and 3:30 p.m.,
providing themselves more flexibility to
reroute unmatched CMC orders to the
primary exchanges.
Fragmentation 54
Another matter addressed by the
Commission in its review of the Original
Proposal was fragmentation, and
whether CMC would fragment the
markets beyond what currently occurs
through off-exchange close price
matching venues offered by brokerdealers.55 While comparisons to offexchange MOC activity may not be a
perfect measure of the potential
resulting effect of CMC market
fragmentation,56 the proposed MOC
Cut-Off Times are designed to enable
CMC to better compete with offexchange venues and for closing volume
that is already executed away from the
primary listing venues.
As illustrated in the first two charts
below, a growing proportion of trading
volume at the close occurs on offexchange venues, where the TRF close
volume, as a percent of Exchange close
volume, has risen steadily since Q1
2019.57 In the third chart the Exchange
also studied the top ten most actively
traded securities during the same time
period and found that a significant
portion of the total closing volume is
executed off-exchange, following the
dissemination of the official closing
price.
54 Supra
note 49.
note 15.
56 Id (‘‘. . . [C]omparisons to off-exchange
activity are not a perfect measure of the potential
resulting effect of the [CMC] proposal because the
structures of the many off-exchange mechanisms
differ from the structure of Cboe Market Close.’’).
57 The Exchange conducted an analysis of offexchange/Trade Reporting Facility (‘‘TRF’’) closing
volume that occurs after market close, 4:00 p.m.
Eastern Time, where the price is equal to the
closing price and for which such trades are reported
with a Prior Reference Price (‘‘PRP’’) trade reporting
modifier. The TRF is a trade reporting facility
where FINRA members may report trades in
Nasdaq-listed and other exchange-listed securities,
that were executed otherwise than on an exchange.
The first two charts represent TRF executed volume
at the close with the ‘‘PRP’’ flag that equals the
closing auction price, divided by total on exchange
auction volume.
55 Supra
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Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
Figure 2 (Source: Internal Exchange Data)
TRF Close Volume %: of Exchange Close Volume by listing Exchange
-m
-•NYSE
-NYSEArca
NYSE American .
NASE>AQ
Figure 3 (Source: Internal Exchange Data)
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TRF Close % of Exchange Close
Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
46437
Symbol
Total ADV
Primary Listing
Exchange
1
TSLA
129,423,964
Nasdaq
12%
2
SQQQ
129,161,658
Nasdaq
21%
3
BBBY
122,763,238
Nasdaq
5%
4
SPY
80,346,142
NYSE Arca
13%
5
soxs
73,944,691
NYSE Arca
16%
6
NKLA
67,493,708
Nasdaq
8%
7
AMD
64,632,893
Nasdaq
15%
8
PLTR
60,699,921
NYSE
15%
9
AAPL
59,750,017
Nasdaq
17%
10
PRTY
57,838,421
NYSE
7%
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Given the significant volume of offexchange MOC activity already
occurring, the Exchange believes that
there is still ample opportunity for the
proposed MOC Cut-Off Times to attract
existing MOC volume that is already
being executed away from CMC and the
primary listing venues. As discussed
above, market participants have
expressed the value of being able to
trade closer to 4:00 p.m. In this regard,
the proposed MOC Cut-Off Times of
3:55 p.m. and 3:58 p.m. satisfy the
needs of today’s market participants,
and enable CMC to better compete with
off-exchange venues, thereby
‘‘foster[ing] price competition and . . .
decreas[ing] costs for market
participants.58 Members may prefer to
execute their MOC orders via CMC
rather than off-exchange venues for
reasons such as the increased
58 Supra
note 15.
Letter from Joanne Moffic-Silver, Executive
Vice President, General Counsel, and Corporate
Secretary, Bats Global Markets, Inc., a Cboe
Company (Oct. 11, 2017) (‘‘Furthermore, [CMC]
59 See
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TRF Close % inc. PRP
transparency and reliability that exists
when investors execute their orders on
public, well-regulated exchanges.
Moreover, by attracting such order flow,
CMC can help to increase the amount of
volume at the close executed on systems
subject to the resiliency requirements of
Regulation SCI.59
Moreover, the Exchange’s
observations in Figure 5 below show
that the closing auction volume on both
NYSE and Nasdaq has increased despite
the launch of CMC on March 6, 2020,
and the subsequent implementation of
the 3:49 p.m. MOC Cut-Off Time in
2023. Therefore, while the proposed
amendment may lead to additional
orders being routed to CMC rather than
the primary exchanges’ closing auctions,
it cannot be said with certainty that
such a change will cause additional
fragmentation in the marketplace as it is
possible that existing MOC order flow
that already executes on off-exchange
venues may in fact migrate to CMC. In
other words, MOC orders that are
already being executed and matched
away from the primary exchanges will
continue to match and execute on away
venues, but rather would match and
execute pursuant to CMC rather than on
an unregulated, non-transparent venue.
In fact, the Exchange believes the
proposed additional MOC Cut-Off
Times are not likely to materially
increase market fragmentation and
therefore have a negative impact on the
market because data shows that even
with the implementation of CMC, there
is still a significant amount of volume
executed on the primary exchanges’
suggesting that market participants
continue to utilize the primary closing
auctions.
would operate on the Exchange’s reliable SCI
systems . . . significant MOC liquidity is
conducted today by off-exchange venues. These
venues are not SCI systems and, therefore, not
subject to Regulation SCI’s enhanced resiliency
requirements. [CMC] could attract MOC orders from
these off-exchange venues to the Exchange and its
reliable SCI system, furthering the Commission’s
presumed desire for liquidity at the close to be
conducted on SCI systems.’’)
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Figure 4 (Source: Internal Exchange Data)
46438
Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
Figure 5 (Source: Internal Exchange Data)
Avera1e Daily Closing Auction Volume by Primary
Since CMC Launch
I
t
8ZX.1M
700
J:I
82)(. 1M
600
AMEX,3M
''\~
\
\\
500
AMElt4M
■ BZX
\,
IIAMEX
400
C
f
i%\IIARCA
300
IINYS£
200
■ NASDAQ
100
Pre-CMC
Post.CMC
llel'ol" Cli(d11n1Jilfl' i, llll!l
All« CM«:: M11<~ll ', 20ltl • Ali<'i
The Exchange believes that the
proposed rule change is simple and
straightforward, and as such will not
significantly increase market complexity
or operational risk. The Exchange
already received approval to change its
MOC Cut-Off Time from 3:35 p.m. to
3:49 p.m., which resulted in no increase
in market complexity and operational
risk. The Exchange now seeks only to
offer additional MOC Cut-Off Times,
none of which will increase market
complexity or operational risk. Indeed,
the 3:15 p.m. and 3:30 p.m. MOC CutOff Times are designed to help aid
Members in managing their MOC order
flow, and actually mitigate their
operational and technological risk. The
proposed 3:54 p.m. and 3:58 p.m. MOC
Cut-Off Times—like the approved 3:49
p.m. MOC Cut-Off Time—are intended
only to help better align CMC with the
cut-off times utilized by NYSE and
Nasdaq for their Closing-D Orders and
closing auction, respectively. While
Members will now have the option to
designate orders for participation in
multiple MOC Cut-Off Times, and any
unmatched quantities for such orders
will carry forward to the next CMC
session, the Exchange believes that
Members are well equipped to manage
any new workflow associated with these
proposed enhancements. Indeed, the
Exchange conferred with Members to
discuss the proposed workflow prior to
submitting this proposal, and Members
indicated that such changes did not
present new or novel issues for them to
consider. In addition, as previously
noted,61 both current CMC users and
market participants in general, possess
high-speed routing and order handling
technology, that will enable them to
efficiently manage the proposed changes
to CMC. Members continuing to only
participate in a single CMC session will
not have to consider new operational
requirements of monitoring and
consuming a new data feed or consider
the utilization of a new order type or
implementation of new Exchange code,
other than perhaps needing to monitor
the Cboe Auction Feed for the
publication of CMC information at a
different MOC Cut-Off Time. While
Members electing to participate in
multiple CMC sessions will need to
monitor the Cboe Auction Feed for CMC
information at multiple MOC Cut-Off
Times, Members have indicated that the
operational and technological
requirements to do so are not complex,
and do not present any new or novel
issues. In addition, as previously
noted,62 market participants today
utilize high-speed technology that
enables to receive and process market
data in sub-second latencies. As such,
given that the proposed MOC Cut-Off
Times are multiple minutes apart, the
proposed MOC Cut-Off Times should
61 Supra.
60 Supra
note 49.
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62 Id.
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not present any new or novel issues for
Members.
Additionally, just as the Exchange did
prior to proposing the 3:49 p.m. MOC
Cut-Off Time, the Exchange discussed
this current proposal with CMC users
and learned that CMC’s current users
are technologically equipped 63 to
manage the proposed 3:54 p.m. and 3:58
p.m. MOC Cut-Off Times, and that they
can respond to CMC’s publication of
matched shares and quickly reroute any
unmatched MOC orders to the
respective primary closing auction.
Furthermore, the Exchange again notes
that both off-exchange venues and other
exchanges already offer MOC cut-off
times that are closer in time to the end
of Regular Trading Hours. Specifically,
in 2018 Nasdaq received approval to
move the cut-off times for the entry of
MOC and Limit-On-Close (‘‘LOC’’)
orders from 3:50 to 3:55 p.m.64
Similarly, in 2018 NYSE received
approval from the SEC to extend cut-off
times for order entry and cancellation
63 Id.
64 See Securities Exchange Act Release No. 34–
84454 (October 19, 2018), 83 FR 53923 (October 25,
2018) (SR–Nasdaq–2018–068) (Order approving a
rule change by Nasdaq) (The Commission approved
a rule change by Nasdaq to move the cut-off times
for the entry of MOC and LOC orders from 3:50 p.m.
to 3:55 p.m.); see also Securities Exchange Act
Release No. 34–85021 (January 31, 2019) (SR–
NYSE–2018–58) (Order approving a rule change by
NYSE) (The Commission approved a rule change by
the NYSE to amend Rule 123C to extend the cutoff times for order entry and cancellation for
participation in the closing auction, from 3:45 p.m.
to 3:50 p.m.).
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Market Complexity and Operational
Risk 60
Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
for participation in its closing auction,
from 3:45 p.m. to 3:50 p.m.65 NYSE also
offers discretionary-orders, which
unlike MOC/LOC orders subject to
NYSE’s 3:50 p.m. cut-off, may be
entered for participation in the closing
auction until 3:59:50.66 Additionally,
market participants may enter MOC
orders for participation in NYSE Arca’s
closing auction up to 3:59 p.m.67
Finally, various off-exchange venues
offer closing match processes with cutoff times aligned with those of the
primary exchanges, and even as close to
30-seconds before market close, 4:00
p.m.68
Moreover, the proposed 3:15 p.m. and
3:30 p.m. MOC Cut-Off Times will also
enable new and existing CMC users that
may not have high-speed trading and
routing infrastructure, to still utilize
CMC and not rely on high-speed
technology to reroute unmatched CMC
orders from the 3:49 p.m., 3:54 p.m., or
3:58 p.m. MOC Cut-Off Times. The
Exchange also notes that CMC is a
voluntary offering, and Members may
freely decide whether to participate.
Accordingly, the Exchange believes
that market participants are well
accustomed to managing the various
cut-off times in today’s marketplace,
and in incorporating these timelines
into their trading decisions. The number
of exchanges and off-exchange venues
with extended cut-off times indicates
that market participants find value in
their ability to retain control of their
trading heading into the end of Regular
Trading Hours, and the primary
exchanges and off-exchange venues
have responded to such demand.
Certainly, market participants would
not desire cut-off times closer to the end
of Regular Trading Hours if they could
not technologically and operationally
manage their trading accordingly.
Therefore, the additional, later CMC
MOC Cut-Off Times should not present
market participants with any novel
operational or technological
complexities.
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Manipulation 69
In its CMC Amendment the Exchange
noted that the value of the 3:49 p.m.
MOC Cut-Off Time was not the
proximity of CMC’s matched share
message to the cut-off times of the
primary exchanges, but rather the ability
of users to trade their orders for a longer
period of time before deciding whether
65 Id.
66 Supra
note 4.
‘‘Closing Auction Timeline’’, available at:
https://www.nyse.com/markets/nyse-arca/tradinginfo.
68 Supra note 41.
69 Supra note 49.
67 See
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to commit their MOC orders to CMC.
The Exchange further stated that it did
not expect that the proposed extension
of the MOC Cut-Off Time to 3:49 p.m.
would result in an increase in
manipulative activity due to
information asymmetries, or that it
raised any unique manipulation
concerns relative to how CMC existed
with a MOC Cut-Off Time of 3:35 p.m.
Importantly, the Exchange believes that
this rationale also applies to the current
proposal, and that the SEC should
dismiss any manipulation concerns
regarding this proposal, just as it did
with the Original Proposal and CMC
Amendment.
Here, the Exchange notes that the
mere existence of multiple MOC Cut-Off
Times does not make any information
CMC participants may be able to glean
from their paired-off MOC orders any
more valuable. Rather, the value of any
information learned by CMC
participants is still limited in nature.
For instance, any information that CMC
participants may learn from receiving
match MOC order messages is indeed
limited in nature because the CMC
participant would still only know the
unexecuted size of its own order.70 Even
if a Member participated in all five CMC
sessions—3:15 p.m., 3:30 p.m., 3:49
p.m., 3:54 p.m., and 3:58 p.m.—and
received messages regarding matched
MOC orders, the proposed MOC Cut-Off
Times are many minutes apart, during
which time new MOC orders may be
entered, rendering useless any
information a Member may have
gleaned regarding an imbalance in the
prior session. Moreover, even if a
Member chose to participate in CMC
only to gather information about the
direction of an imbalance and use such
information to manipulate the closing
price, the Member’s orders were still
eligible for execution subjecting the
Member to economic risk.
While this proposal would result in
the total shares for buy and sell orders
in CMC being disseminated several
times during the last hour of trading,
and with three MOC Cut-Off Times in
close proximity to the primary
exchanges’ cut-off times, these changes
70 The Exchange notes that in its Final Approval
Order, even the Commission noted that, ‘‘In
particular, a market participant would only be able
to determine the direction of the imbalance and
would have difficulty determining the magnitude of
any imbalance, as it would only know the
unexecuted size of its own order. In addition, the
information would only be with regard to the pool
of liquidity on BZX and would provide no insight
into imbalances on the primary listing exchange,
competing auctions, ATSs, or other off-exchange
matching services which, as described above, can
represent a significant portion of trading volume at
the close.’’ Supra note 15.
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46439
do not suddenly make such information
more valuable or useful in terms of
enhancing opportunities for gaming and
manipulating the official closing price.
The 3:49 p.m. and 3:54 p.m. MOC CutOff Times are one-minute prior to
NYSE’s and Nasdaq’s MOC cut-off
times, and the 3:58 p.m. MOC Cut-Off
Time is one-minute prior to NYSE’s
Closing-D Order cut-off time. As noted
throughout, today’s markets are marked
by technological solutions which
typically operate in durations of
microseconds. In this context, the
separation between the CMC MOC CutOff Times and that of NYSE’s and
Nasdaq’s is a substantial duration of
time, during which much can change in
the marketplace, thus limiting the value
of information, if any, that can be
gleaned from CMC’s dissemination of
matched shares at these times.
Moreover, the 3:15 p.m. MOC Cut-Off
Time is thirty-five-minutes prior to
NYSE’s MOC cut-off time, forty-fourminutes and fifty-seconds prior to
NYSE’s Closing-D Order cut-off time,
and forty-minutes prior to Nasdaq’s
MOC cut-off time. Similarly, the 3:30
p.m. MOC Cut-Off Time is twentyminutes prior to the NYSE’s MOC cutoff time, twenty-nine-minutes and fiftyseconds prior to NYSE’s Closing-D
Order cut-off time, and twenty-fiveminutes prior to the Nasdaq MOC cutoff time. These proposed MOC Cut-Off
Times are even further from the primary
exchanges’ cut-off times than the
current CMC MOC Cut-Off Time, during
which the marketplace and CMC will
experience significant change, even
further limiting the value of
information, if any, that a Member may
glean from the dissemination of
matched shares.
Furthermore, as with the current MOC
Cut-Off Time, the proposed MOC Cutoff Times do not present any
information asymmetries that do not
already exist in today’s markets, as the
very nature of trading creates short term
asymmetries of information to those
who are parties to a trade.71 Indeed, as
noted by the Commission, any party to
a trade gains valuable insight regarding
the depth of the market when an order
is executed or partially executed.72
Additionally, NYSE imbalance
information is already disseminated to
71 The Exchange also notes that in its Final
Approval Order, even the Commission noted that,
‘‘Further, the Commission believes information
asymmetries as those described by commenters
exist today and are inherent in trading, including
with respect to closing auctions. For example, any
party to a trade gains valuable insight regarding the
depth of the market when an order is executed or
partially executed.’’ Id.
72 Id.
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NYSE floor brokers, who are permitted
to share with their customers specific
data from the imbalance feed.73 Even in
this case, though, the Commission
stated that the value of such information
is limited because the imbalance
information does not represent overall
supply and demand for a security, is
subject to change, and is only one
relevant piece of information.74
Similarly, because any information
gleaned by a CMC participant is limited
only to the unexecuted size of their
order, and relative to the depth of only
the BZX pool of liquidity, the Exchange
believes that the proposed extension of
the MOC Cut-Off Time does not create
an increased risk of manipulative
trading activity.
Moreover, there are currently controls
and processes in place to monitor for
manipulative trading activity, such as
the supervisory responsibilities and
capabilities of exchanges and the
expansive cross market surveillance
conducted by FINRA. Following
approval of this proposal, the Exchange,
FINRA and others will continue to
surveil for potential manipulative
activity and when appropriate, bring
enforcement actions against market
participants engaged in manipulative
trading activity.
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
proposed amendment applies equally to
all Members, and is intended to offer
additional MOC Cut-Off Times, enabling
a broader segment of Members to utilize
CMC at times that better accommodate
different trading strategies, and
Members’ technological and operational
capabilities. Similar to how current
CMC users are technologically equipped
to participate in CMC at 3:49 p.m. and
timely reroute any unmatched CMC
MOC orders to the NYSE or Nasdaq
closing auction, today’s CMC users will
be able to utilize the 3:54 p.m. MOC
Cut-Off Time and still have time to reroute any unmatched MOC orders to the
Nasdaq closing auction. Similarly,
Members are also technologically
equipped to utilize the 3:58 p.m. MOC
Cut-Off Times and still have time to reroute their orders as NYSE Closing-D
Orders.. Members that may lack internal
high-speed routing and trading
technology may utilize third-party
providers (discussed above) should they
desire to make use of the 3:54 p.m. and
3:58 p.m. MOC Cut-Off Times.
Alternatively, the proposed MOC CutOff Times of 3:15 p.m. and 3:30 p.m.
will allow CMC users that may lack
high-speed trading and routing
infrastructure to utilize CMC without
having to quickly re-route unmatched
CMC orders to the primary exchanges
just prior to their cut-off times, as well
as attract new users who may desire a
mechanism that allows them to match
their MOC orders earlier in the trading
day. Moreover, CMC is a voluntary
closing match process, and Members are
not required to participate in CMC.
The Exchange also does not believe
that 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. As noted above, the
proposed rule change more closely
aligns the CMC MOC Cut-Off Times to
the cut-off times of other exchanges,
while still providing CMC participants
with an opportunity to reroute any of
their unpaired MOC orders to the
primary exchanges. In this regard, the
proposed rule change may make CMC a
more viable alternative to the primary
auctions and ‘‘should foster price
competition and thereby decrease costs
for market participants.’’ 75
Additionally, the proposed MOC CutOff Times of 3:15 p.m. and 3:30 p.m.
will help make CMC a more attractive
alternative to market participants that
may not feel comfortable attempting to
match in CMC at 3:49 p.m. and still
have time to re-route unmatched CMC
orders to NYSE and Nasdaq, as well as
market participants that simply wish to
reduce their MOC trading obligations
earlier in the trading day by attempting
to match in CMC. Collectively, the
proposed MOC Cut-Off Times will
enable the Exchange to compete with
the primary exchanges more effectively,
as well as with off-exchange venues that
have cut-off times much closer in time
to the market close and comprise a
growing percentage of closing volume.
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
Within 45 days of the date of
publication of this notice in the Federal
73 Id.
74 Id.
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Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
A. By Order Approve or Disapprove
Such Proposed Rule Change, as
Modified by Amendment No. 1, or
B. Institute proceedings to determine
whether the proposed rule change, as
modified by Amendment No. 1, should
be 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, as modified by Amendment No.
1, 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–
CboeBZX–2024–032 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–CboeBZX–2024–032. 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;
E:\FR\FM\29MYN1.SGM
29MYN1
Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Notices
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–CboeBZX–2024–032 and should be
submitted on or before June 20, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.76
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–10945 Filed 5–28–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100217; File No. SR–
NYSEARCA–2023–70]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 to a Proposed Rule
Change To List and Trade Shares of
the Grayscale Ethereum Trust
May 22, 2024.
On October 10, 2023, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares of the
Grayscale Ethereum Trust under NYSE
Arca Rule 8.201–E (Commodity-Based
Trust Shares). The proposed rule change
was published for comment in the
Federal Register on October 27, 2023.3
On December 5, 2023, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On January 25,
2024, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Act 6 to determine whether to
approve or disapprove the proposed
rule change.7 On March 15, 2024, the
76 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 98780
(Oct. 23, 2023), 88 FR 73892. Comments on the
proposed rule change are available at: https://
www.sec.gov/comments/sr-nysearca-2023-70/
srnysearca202370.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 99082,
88 FR 85962 (Dec. 11, 2023).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 99428,
89 FR 6155 (Jan. 31, 2024).
lotter on DSK11XQN23PROD with NOTICES1
1 15
VerDate Sep<11>2014
18:05 May 28, 2024
Jkt 262001
Exchange filed Amendment No. 1,
which replaced and superseded the
proposed rule change in its entirety. On
April 2, 2024, the Commission
published notice of Amendment No. 1
to the proposed rule change.8 On April
23, 2024, the Commission designated a
longer period for Commission action on
the proposed rule change, as modified
by Amendment No. 1.9 On May 21,
2024, the Exchange filed Amendment
No. 2 to the proposed rule change as
described in Items I and II below, which
Items have been prepared by the
Exchange. Amendment No. 2 replaced
and superseded the proposed rule
change, as modified by Amendment No.
1, in its entirety. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 2, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the following under
NYSE Arca Rule 8.201–E: Grayscale
Ethereum Trust (ETH) (the ‘‘Trust’’).10
This Amendment No. 2 to SR–
NYSEARCA–2023–70 replaces
Amendment No. 1 to SR–NYSEARCA–
2023–70 and supersedes such filing in
its entirety. 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.
8 See Securities Exchange Act Release No. 99887,
89 FR 24534 (Apr. 8, 2024).
9 See Securities Exchange Act Release No.
100014, 89 FR 33414 (Apr. 29, 2024).
10 The Trust was previously named Ethereum
Investment Trust, whose name was changed
pursuant to a Certificate of Amendment to the
Certificate of Trust of Ethereum Investment Trust
filed with the Delaware Secretary of State on
January 11, 2019.
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
46441
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under NYSE Arca Rule 8.201–E, the
Exchange may propose to list and/or
trade pursuant to unlisted trading
privileges ‘‘Commodity-Based Trust
Shares.’’ 11 The Exchange proposes to
list and trade shares (‘‘Shares’’) 12 of the
Trust pursuant to NYSE Arca Rule
8.201–E.13
11 Commodity-Based Trust Shares are securities
issued by a trust that represent investors’ discrete
identifiable and undivided beneficial ownership
interest in the commodities deposited into the
Trust.
12 The Shares are expected to be listed under the
ticker symbol ‘‘ETHE.’’
13 On April 17, 2020, the Trust confidentially
filed its draft registration statement on Form 10
under the ’34 Act) (File No. 377–03131) (the ‘‘Draft
Registration Statement on Form 10’’). On June 16,
2020, the Trust confidentially filed Amendment No.
1 to the Draft Registration Statement on Form 10.
The Jumpstart Our Business Startups Act (the
‘‘JOBS Act’’), enacted on April 5, 2012, added
Section 6(e) to the Securities Act of 1933 (the
‘‘Securities Act’’ or ‘‘’33 Act’’). Section 6(e) of the
Securities Act provides that an ‘‘emerging growth
company’’ may confidentially submit to the
Commission a draft registration statement for
confidential, non-public review by the Commission
staff prior to public filing, provided that the initial
confidential submission and all amendments
thereto shall be publicly filed not later than 21 days
before the date on which the issuer conducts a road
show, as such term is defined in Securities Act Rule
433(h)(4). An emerging growth company is defined
in Section 2(a)(19) of the Securities Act as an issuer
with less than $1,000,000,000 total annual gross
revenues during its most recently completed fiscal
year. The Trust meets the definition of an emerging
growth company and consequently submitted its
Draft Registration Statement on Form 10 to the
Commission on a confidential basis. On August 6,
2020, the Trust filed its registration statement on
Form 10 under the Securities Act (File No. 000–
56193) (the ‘‘Registration Statement on Form 10’’).
On October 2, 2020, the Trust filed Amendment No.
1 to the Registration Statement on Form 10. On
October 5, 2020, the Registration Statement on
Form 10 was automatically deemed effective. On
March 5, 2021, February 25, 2022, March 1, 2023,
and February 23, 2024, the Trust filed its annual
report on Form 10–K under the Securities Act (File
No. 000–56193) (the ‘‘Annual Reports’’). On
November 6, 2020, May 7, 2021, August 6, 2021,
November 5, 2021, May 6, 2022, August 5, 2022,
November 4, 2022, May 5, 2023, August 4, 2023,
and November 3, 2023, the Trust filed its quarterly
reports on Form 10–Q under the Securities Act (File
No. 000–56193) (the ‘‘Quarterly Reports’’). The
descriptions of the Trust, the Shares, and Ether
contained herein are based, in part, on the Annual
Reports and Quarterly Reports. On January 17,
2019, the Trust submitted to the Commission an
amended Form D as a business trust. Shares of the
Trust have been quoted on OTC Market’s OTCQX
Best Marketplace under the symbol ‘‘ETHE’’ since
June 20, 2019. On May 23, 2019 and March 20,
2020, the Trust published annual reports for ETHE
for the periods ended December 31, 2018 and
December 31, 2019, respectively. On May 23, 2019,
August 8, 2019, November 11, 2019, May 8, 2020,
and August 6, 2020, the Trust published quarterly
reports for ETHE for the periods ended March 31,
2019, June 30, 2019, September 30, 2019, March 31,
E:\FR\FM\29MYN1.SGM
Continued
29MYN1
]]>Agencies
[Federal Register Volume 89, Number 104 (Wednesday, May 29, 2024)]
[Notices]
[Pages 46428-46441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10945]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100129; File No. SR-CboeBZX-2024-032]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend Rule 11.28(a) To Add Four Additional Market-on-Close Cut-off
Times to Cboe Market Close
May 14, 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 April 29, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. On May 13,
2024, the Exchange filed Amendment No. 1, which supersedes the original
filing in its entirety.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 1, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange (1) amended paragraph (b)
of Rule 11.28 and Interpretations and Policies .02 of Rule 11.28 to
conform the CMC procedures with the proposed additional MOC Cut-Off
times and (2) provided additional justification and support for the
proposal. The full text of Amendment No. 1 is available on the
Commission's website at https://www.sec.gov/rules/sro/national-securities-exchanges?aId=&sro_organization=192731.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
amend Rule 11.28(a) to add four additional market-on-close (``MOC'')
cut-off times (each a ``MOC Cut-Off Time'' and collectively ``MOC Cut-
Off Times'') To Cboe Market Close (``CMC'').
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
BZX proposes to amend Rule 11.28(a) to add four additional CMC MOC
Cut-Off times. These MOC Cut-Off times would be in addition to the
existing MOC Cut-Off time of 3:49 p.m. ET, for a total of five matching
sessions: 3:15 p.m. ET (new), 3:30 p.m. ET (new), 3:49 p.m. ET
(current), 3:54 p.m. ET (new), and 3:58 p.m. ET (new).\4\ These
proposed MOC Cut-Off Times are based on Member feedback. Specifically,
in response to CMC's noticeable increase in executed volume (discussed
below), there has been heightened interest in CMC from both existing
users, as well
[[Page 46429]]
as potential new users of CMC (collectively ``Members''). Collectively,
these Members have requested certain enhancements to CMC that would
encourage existing users to increase their utilization of CMC, as well
encourage prospective users to begin using CMC. Namely, Members have
expressed a desire for: (1) MOC Cut-Off Times earlier in the trading
day, and prior to the current MOC Cut-Off Time of 3:49 p.m.; (2) a MOC
Cut-Off Time closer to Nasdaq's MOC cut-off time of 3:55 p.m.; (3) a
MOC Cut-Off Time Closer to the New York Stock Exchange's (``NYSE'')
Closing-D Order cut-off time of 3:59:50; and (4) a MOC Cut-Off Time
that is subsequent to the MOC cut-off times of the NYSE's and Nasdaq's
MOC cut-off times, and just prior to the NYSE's Closing-D Order \5\
cut-off time of 3:59:50 p.m.
---------------------------------------------------------------------------
\4\ Hereinafter, all times referenced are in Eastern Time.
\5\ See NYSE Rule 7.31 (c)(2)(``Closing-D Order''); see also
``The Floor Broker's Modern Trading Tool'', available at: https://www.nyse.com/article/trading/d-order (``While D-Orders are available
for use throughout the trading day, most executions occur in the
closing auction, where they're known as Closing D Orders. At 3:55
p.m., Closing D Order interest eligible to participate in the
closing auction is added to the order imbalance feed at their
discretionary price range. Closing D Orders can also be submitted,
modified or cancelled up to 3:59:50 p.m. These distinct features of
Closing D Orders are designed to facilitate the Floor Broker's
traditional agency role on behalf of larger institutional interest,
allowing Floor Brokers to work in conjunction with their customer to
find larger liquidity opportunities.'').
---------------------------------------------------------------------------
Both the Exchange and its Members believe that these enhancements
will help to position CMC as more viable alternative to the primary
exchanges' closing auctions, NYSE's Closing D Order, and off-exchange
closing price services. Additionally, multiple MOC Cut-Off Times will
make CMC more appealing to a larger segment of market participants by
providing Members with different trading strategies and technical and
operational capabilities more flexibility in how they manage their
market-on-close (``MOC'') and closing price orders.
Procedural Background
On May 5, 2017, the Exchange filed a proposed rule change to adopt
CMC, a match process for MOC orders in non-BZX listed securities and on
December 1, 2017, filed Amendment No. 1 \6\ to that proposal (the
``Original Proposal'').\7\ On January 17, 2018, the Commission, acting
through authority delegated to the Division of Trading and Markets,\8\
approved the Original Proposal (``Approval Order'').\9\ On January 31,
2018, NYSE Group, Inc. (``NYSE'') and the Nasdaq Stock Market LLC
(``Nasdaq'') filed petitions for review of the Approval Order
(``Petitions for Review''). Pursuant to Commission Rule of Practice
431(e),\10\ the Approval Order was stayed by the filing with the
Commission of a notice of intention to petition for review.\11\ On
March 1, 2018, pursuant to Commission Rule of Practice 431, the
Commission issued a scheduling order granting the Petitions of Review
of the Approval Order, and provided until March 22, 2018, for any party
or other person to file a written statement in support of, or in
opposition to, the Approval Order.\12\ On April 12, 2018, NYSE and
Nasdaq submitted written statements opposing the Approval Order and BZX
submitted a statement in support of the Approval Order.\13\ On October
4, 2018, BZX filed Amendment No. 2 \14\ to the Original Proposal.
---------------------------------------------------------------------------
\6\ The only change in Amendment No. 1 was to rename the
proposed closing match process as Cboe Market Close. Per the
Commission, because Amendment No. 1 was a technical amendment and
did not materially alter the substance of the proposed rule change
or raise unique or novel regulatory issues, Amendment No. 1 was not
subject to notice and comment.
\7\ See Securities Exchange Act Release No. 34-80683 (May 16,
2017), 82 FR 23320 (May 22, 2017) (SR-Bats-BZX-2017-34) (Notice of
Filing of a Proposed Rule Change to Introduce Bats Market Close, a
Closing Match Process for Non-BZX Listed Securities Under New
Exchange Rule 11.28).
\8\ 17 CFR 200.30-3(a)(12).
\9\ See Securities Exchange Act Release No. 34-82522 (January
17, 2018), 83 FR 3205 (January 23, 2018) (SR-BatsBZX-2017-34)
(Notice of Filing of Amendment No. 1 and Order Granting Approval of
a Proposed Rule Change, as Modified by Amendment No. 1, To Introduce
Cboe Market Close, a Closing Match Process for Non-BZX Listed
Securities Under New Exchange Rule 11.28).
\10\ 17 CFR 201.431(e).
\11\ See Letter to Christopher Solgan, Assistant General
Counsel, Cboe Global Markets, Inc. (Jan. 24, 2018) (providing notice
of receipt of notices of intention to petition for review of
delegated action and stay of order), available at: https://www.sec.gov/rules/sro/batsbzx/2018/sr-batsbzx-2017-34-letter-from-secretary-to-cboe.pdf.
\12\ See Securities Exchange Act Release No. 82794, 83 FR 9561
(Mar. 6, 2018). On March 16, 2018, the Office of the Secretary,
acting by delegated authority, issued an order on behalf of the
Commission granting a motion for an extension of time to file
statements on or before April 12, 2018. See Securities Exchange Act
Release No. 82896, 83 FR 12633 (Mar. 22, 2018).
\13\ See Statement of NYSE Group, Inc., in Opposition to the
Division's Order Approving a Rule to Introduce Cboe Market Close
(``NYSE Statement''); Statement of the Nasdaq Stock Market LLC in
Opposition to Order Granting Approval of a Proposed Rule Change, as
Modified by Amendment No. 1, to Introduce Cboe Market Close
(``Nasdaq Statement''); and Statement of Cboe BZX Exchange, Inc., in
support of Commission Staff's Approval Order (``BZX Statement''),
available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734.htm.
\14\ See Securities Exchange Act Release No. 34-84670 (November
28, 2018), 83 FR 62646 (December 4, 2018) (SR-BatsBZX-2017-34)
(``Notice of Filing of Amendment No. 2 to Proposed Rule Change to
Introduce Cboe Market Close, a Closing Match Process for Non-BZX
Listed Securities Under New Exchange Rule 11.28'').
---------------------------------------------------------------------------
The Commission conducted a de novo review of the CMC proposal and
associated public record, including Amendment No. 2, the Petitions for
Review, and all comments and statements submitted by certain exchanges,
issuers, and other market participants,\15\ to determine whether the
proposal was consistent with the requirements of the Act and the rules
and regulations issued thereunder that are applicable to a national
securities exchange.\16\ The Commission noted that under Rule 700(b)(3)
of the Commission's Rule of Practice, the ``burden to demonstrate that
a proposed rule change is consistent with the Exchange Act and the
rules and regulations issued thereunder. . .is on the self-regulatory
organization that proposed the rule change.'' \17\
---------------------------------------------------------------------------
\15\ See ``Statements on File No. SR-BatsBZX-2017-34'',
available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734.htm.
\16\ See Securities Exchange Act Release No. 34-88008 (January
21, 2020), 85 FR 4726 (January 27, 2020) (SR-BatsBZX-2017-34)
(``Order Setting Aside Action by Delegated Authority and Approving a
Proposed Rule Change, as Modified by Amendments No. 1 and 2, To
Introduce Cboe Market Close, a Closing Match Process for Non-BZX
Listed Securities Under New Exchange Rule 11.28'').
\17\ Id.
---------------------------------------------------------------------------
Importantly, after reviewing the entire record, the Commission
concluded that BZX met its burden to show that the proposed rule change
was consistent with the Act, and pursuant to its January 21, 2020,
order, set aside the Approval Order and approved BZX's CMC proposal, as
amended (``Final Approval Order'').\18\ Notably, the Commission stated
that the record ``demonstrate[d] that Cboe Market Close should
introduce and promote competitive forces among national securities
exchanges for the execution of MOC orders'' \19\ and that ``the record
demonstrate[d] that Cboe Market Close should not disrupt the closing
auction price discovery process nor should it materially increase the
risk of manipulation of official closing prices''.\20\
---------------------------------------------------------------------------
\18\ Id.
\19\ Id.
\20\ Id.
---------------------------------------------------------------------------
Subsequently, on August 5, 2022, the Exchange filed a proposed rule
change to amend Rule 11.28(a) to extend CMC's MOC Cut-Off Time from
3:35 p.m. to 3:49 p.m. (``CMC Amendment'').\21\ On October 4, 2022, the
Commission, acting through authority delegated to the Division of
Trading and Markets, designated a longer period within which to take
action on the Exchange's CMC
[[Page 46430]]
Amendment.\22\ Later, on November 11, 2022, BZX filed Amendment No. 1
to its CMC Amendment, and the Commission instituted proceedings to
determine whether to approve or disapprove the proposed rule change as
modified by Amendment No. 1.\23\ Finally, on February, 9, 2023, the
Commission, approved the proposed CMC Amendment (``CMC Amendment
Approval Order'').\24\
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release No. 34-95529 (August
17, 2020), 87 FR 52092 (August 24, 2022) (SR-CboeBZX-2022-038).
\22\ See Securities Exchange Act Release No. 34-95967 (October
4, 2022), 87 FR 61425 (October 11, 2022) (SR-CboeBZX-2022-038).
\23\ See Securities Exchange Act Release No. 34-96359 (November
18, 2022), 87 FR 72537 (November 25, 2022) (SR-CboeBZX-2022-038).
\24\ See Securities Exchange Act Release No. 34-96861 (February
9, 2023), 88 FR 9940 (February 15, 2023) (SR-CboeBZX-2022-038).
---------------------------------------------------------------------------
In approving the CMC Amendment, the Commission stated that the
proposal was consistent with Section 6(b)(5) of the Act,\25\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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, and not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers; as well as Section
6(b)(8) of the Act,\26\ which requires that the rules of a national
securities exchange not impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b)(5).
\26\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
For the reasons discussed more fully below, the Exchange believes
that when applying the Commission's analysis in the Final Approval
Order and the CMC Amendment Approval Order to the current proposal,
such review would similarly conclude that this proposal is consistent
with the Act.
Increased Volume and New Demand for CMC
On March 10, 2023, the Exchange moved its MOC Cut-Off Time from
3:35 p.m. to 3:49 p.m. As illustrated in Figure 1 below, since
implementing the 3:49 p.m. MOC Cut-Off Time CMC has experienced
noticeable growth in its trading volume, rising modestly beginning in
May 2023 and more remarkably between September 2023 and November 2023,
ultimately reaching a record-high of 155 million shares traded in
December 2023. Based on CMC's growing usage, the Exchange has received
various feedback from both existing CMC users and prospective CMC
users. Collectively, these Members have requested certain enhancements
to CMC that would encourage existing users to increase their
utilization of CMC, as well encourage prospective users to begin using
CMC. Namely, Members have expressed a desire for: (1) MOC Cut-Off Times
earlier in the trading day, including prior to the current MOC Cut-Off
Time of 3:49 p.m.; (2) a MOC Cut-Off Time closer to Nasdaq's MOC cut-
off time of 3:55 p.m.; (3) a MOC Cut-Off Time Closer to NYSE's Closing-
D Order cut-off time of 3:59:50; and (4) a MOC Cut-Off Time that is
subsequent to the MOC cut-off times of the NYSE's and Nasdaq's MOC cut-
off times, and just prior to NYSE's Closing-D Order cut-off time of
3:59:50 p.m.
As noted, both the Exchange and its Members believe that these
enhancements will help to position CMC as more viable alternative to
the primary exchanges' closing auctions, NYSE's Closing-D Order, and
off-exchange closing price services. Additionally, multiple MOC Cut-Off
Times will make CMC more appealing to a larger segment of Members by
providing Members with different trading strategies and technical and
operational capabilities more flexibility in how they manage their MOC
and closing price orders.
[GRAPHIC] [TIFF OMITTED] TN29MY24.037
[[Page 46431]]
Proposed Functionality
Accordingly, BZX proposes to amend Rule 11.28(a) to add four CMC
MOC Cut-Off times. These MOC Cut-Off times would be in addition to the
existing MOC Cut-Off time of 3:49 p.m., for a total of five matching
sessions: 3:15 p.m. (new), 3:30 p.m. (new), 3:49 p.m. (current), 3:54
p.m. (new), and 3:58 p.m. (new). MOC orders may be entered for each
matching session up to the relevant MOC Cut-Off Time, beginning each
day at 6:00 a.m.\27\ Members will have the ability to specify on their
order instructions which CMC session(s) they wish to participate in.
For orders that specify they are willing to match in multiple matching
sessions, any unfilled quantity from an earlier session will carry
forward to the next session(s). Any unfilled quantity remaining after a
Member's specified final matching session will be canceled back to the
Member. To illustrate the proposed functionality, consider the
following examples.
---------------------------------------------------------------------------
\27\ For instance, an MOC order specifying that it wishes to
participate in the 3:15 MOC Cut-Off Time must be entered, cancelled,
or replaced prior to 3:15 p.m. Similarly, a MOC order specified to
participate in the 3:30 MOC Cut-Off Time may be entered, cancelled,
or replaced anytime between 6:00 a.m. and 3:29:59 p.m.
---------------------------------------------------------------------------
Example 1: Order indicates matching in a single session
Order 1: Buy 100 @ MKT--CMC Session: 3:49 p.m., Timestamp: 3:00:00 p.m.
Order 2: Sell 100 @ MKT--CMC Session: 3:15 p.m., 3:30 p.m., 3:49 p.m.,
Timestamp: 3:01:00 p.m.
Results:
Order 1 will not match with Order 2 in the 3:15 p.m. or
3:30 p.m. session. Order 2's unfilled quantity of 100 shares will first
carry forward from the 3:15 session, then again from the 3:30 session,
and finally to the 3:49 session.
Order 1 and Order 2 match in the 3:49 p.m. session for 100
shares at the closing price.
Example 2: Order indicates matching in multiple sessions
Order 1: Buy 500 @ MKT--CMC Session: 3:15 p.m., 3:30 p.m., 3:49 p.m.,
Timestamp: 3:00:00 p.m.
Order 2: Sell 100 @ MKT--CMC Session: 3:30 p.m., Timestamp: 3:01:00
p.m.
Order 3: Sell 100 @ MKT--CMC Session: 3:15 p.m., Timestamp: 3:02:00
p.m.
Order 4: Sell 100 @ MKT--CMC Session: 3:49 p.m., Timestamp: 3:03:00
p.m.
Results:
Order 1 and Order 3 match in the 3:15 p.m. session for 100
shares at the closing price and Order 1's 400 remaining shares are
carried over to the next session.
Order 1 and Order 2 match in the 3:30 p.m. session for 100
shares at the closing price and Order 1's 300 remaining shares are
carried over to the next session.
Order 1 and Order 4 match in the 3:49 p.m. session for 100
shares at the closing price and Order 1's 200 remaining shares are
canceled back.
Example 3: Order's unfilled quantity retains its original timestamp for
priority purposes
Order 1: Buy 500 @MKT--CMC Session: 3:15 p.m., 3:30 p.m., Timestamp:
3:00:00 p.m.
Order 2: Buy 100 @MKT--CMC Session: 3:30 p.m., Timestamp: 3:01:00 p.m.
Order 3: Sell 100 @MKT--CMC Session: 3:15 p.m., Timestamp: 3:02:00 p.m.
Order 4: Sell 100 @MKT--CMC Session: 3:30 p.m., Timestamp: 3:03:00 p.m.
Results:
Order 1 and Order 3 match in the 3:15 p.m. session for 100
shares at the closing price and Order 1's 400 remaining shares are
carried over to the next session.
Order 1 \28\ and Order 4 match in the 3:30 p.m. session
for 100 shares at the closing price and Order 1's 300 remaining shares
are canceled back.
---------------------------------------------------------------------------
\28\ Note that Order 1 in this scenario retains its priority
over Order 2. Because Order 1 and Order 2 are both un-priced MOC
orders, time priority takes precedent, with Order 1 maintaining its
queue priority versus Order 2. See Rule 11.12, Priority of Orders,
which provides that orders are ranked based on price, then time.
---------------------------------------------------------------------------
Order 2's 100 shares are unfilled and canceled back at
3:30 p.m.
The Proposed 3:15 p.m. and 3:30 p.m. MOC Cut-Off Times
Members requesting MOC Cut-Off Times earlier in the trading day
have expressed that these additional MOC Cut-Off Times will provide
them more flexibility in managing their MOC and closing price order
flow. For instance, some Members maintain multiple internal trading
desks, each managing different types of order flow and trading
strategies. One trading desk may manage orders that its traders
actively trade throughout the trading day leading up to the close,
making MOC Cut-Off Times closer to 4:00 p.m. more valuable for that
trading desk. Separately, one of the Member's other trading desks may
typically execute orders guaranteeing the closing price or perhaps
manage orders on behalf of index funds or ETF providers, that are often
benchmarked to the official closing price. For this workflow, a Member
may be agnostic as to when it commits MOC orders to CMC, a primary
exchange's closing auction, or an off-exchange closing price service,
and may view the ability to commit such order flow to CMC earlier in
the trading day at 3:15 p.m. or 3:30 p.m. as a valuable tool to help
them execute orders and de-risk their trading risk earlier in the
trading day.
Additionally, Members have indicated the proposed 3:15 p.m. and
3:30 p.m. MOC Cut-Off Times will also assist them in managing any
technological and operational risk associated with managing high
volumes of order flow. Notional trading and trading volatility are
typically at their highest towards the end of Regular Trading Hours.
During this time, Members systems may be managing a significant number
of MOC or closing price orders. Unless the Member is attempting to beat
the closing price by trading such orders for as long as possible
heading into the close, committing such orders to CMC earlier in the
trading day will enable them to reduce the number of MOC and closing
price orders their trading systems must manage. Notably, the Exchange
noted in its CMC Amendment that today's market participants, including
CMC's existing users, were technologically equipped \29\ to handle
CMC's current 3:49 p.m. MOC Cut-Off Time. While this remains the case
today, the recent growth in CMC's executed volume has attracted
potential new users with trading strategies, and technological and
operational capabilities, that have presented new use cases for CMC.
---------------------------------------------------------------------------
\29\ As a general matter, today's market participants, including
CMC users, rely on electronic smart order routers, order management
systems, and trading algorithms, which make routing and trading
decisions on an automated basis, in times typically often measured
in microseconds. See generally ``Staff Report on Algorithmic Trading
in U.S. Capital Markets'' (August 5, 2020), available at https://www.sec.gov/tm/reports-and-publications/special-studies/algo_t_report_2020 (``Algorithmic Trading Report'') (``Over the past
decade, the manual handling of institutional orders is increasingly
rare and has been replaced by sophisticated institutional order
execution algorithms and smart order routing systems.'') (``The
secondary market for U.S.-listed equity securities that has
developed within this structure is now primarily automated. The
process of trading has changed dramatically primarily as a result of
developments in technologies for generating, routing, and executing
orders, as well as by the requirement imposed by law and
regulation.'') (``Modern equity markets are connected in part by the
data flowing between market centers. An enormous volume of data is
available to market participants. In recent years, there has been an
exponential growth in the amount of market data available, the speed
with which it is disseminated, and the computer power used to
analyze and react to price movements.'').
---------------------------------------------------------------------------
[[Page 46432]]
Overall, by having the ability to submit orders to the proposed
3:15 p.m., 3:30 p.m., and 3:49 p.m. MOC Cut-Off Times, Members will
have a greater opportunity of being matched earlier in the trading day
before potentially needing to re-route their unmatched MOC orders to
the primary exchanges or off-exchange closing price offerings. On high-
volume order days--e.g. Russell Rebalance Days where trading volume is
high--the utility of being able to de-risk closing cross order volume
earlier in the trading day is both a rational trading decision and a
prudent way for Members to manage their operational and technological
risk as such event days are marked by high volume and volatility that
may utilize a significant portion of some Members' systems capacity.
The Proposed 3:54 p.m. and 3:58 p.m. MOC Cut-Off Times
Members requesting the later MOC Cut-Off Time of 3:54 p.m. have
indicated that these MOC Cut-Off Times will help to better align CMC
with Nasdaq's MOC cut-off time of 3:55 p.m., thereby helping to make
CMC a more viable alternative to Nasdaq's closing auction. Members
requesting the later MOC Cut-Off Time of 3:58 p.m. have indicated that
this MOC Cut-Off Time would provide Members with another option similar
to NYSE's Closing D-Order, thereby enabling Members to achieve the
official closing price where they may have traded beyond the primary
exchanges' closing auction cut-off times as they attempt to trade as
close to 4:00 p.m. as possible.
Similar to the rationale for extending CMC's MOC Cut-Off Time from
3:35 p.m. to 3:49 p.m., Members desire MOC Cut-Off Times that are
closer to the end of Regular Trading Hours \30\ so that they may retain
control of their trading for a longer period of time. By being able to
trade closer to the end of Regular Trading Hours, Members have more
opportunities to seek better priced liquidity for their orders in a
variety of ways and reducing the size of their outstanding orders they
may need to commit to CMC or the primary auctions, including but not
limited to, finding contra-side liquidity in the marketplace and
trading directly against such interest, or guaranteeing a customer
order at a price better than the national best bid or offer by
committing capital to an order and filling it in a principal capacity,
as well as continuing to trade algorithmically into the close. By
adding the MOC Cut-Off Times of 3:54 p.m. and 3:58 p.m., CMC will be
better positioned to serve as a viable option for market participants
to consider when deciding which venues to route their MOC orders or
Closing-D Orders, thus enhancing intermarket competition.
---------------------------------------------------------------------------
\30\ The term ``Regular Trading Hours'' means the time between
9:30 a.m. and 4:00 p.m. Eastern Time. See Rule 1.2 (w), definition
of, ``Regular Trading Hours.''
---------------------------------------------------------------------------
In support of the above, Figure 2 shows the total average daily
volume across all market centers, from 3:30 p.m. to 4:00 p.m. in 30-
seconds intervals, and includes labels for the different MOC cut-off
times for CMC, NYSE, and Nasdaq. As illustrated, at NYSE's 3:50 p.m.
MOC cut-off time, NYSE's 3:59:50 Closing-D Order cut-off time, Nasdaq's
3:55 p.m. MOC cut-off time, and 4:00 p.m. market close, there is a
noticeable increase in traded volume in the overall marketplace, with
volume relatively flat in the overall marketplace prior to those times.
This analysis supports the Exchange's assertion that certain market
participants do indeed prefer cut-off times later in the trading day.
Therefore, the Exchange now seeks to implement the MOC Cut-Off Times of
3:54 p.m., and 3:58 p.m., to better align CMC with Nasdaq's 3:55 p.m.
MOC cut-off time and NYSE's Closing-D Order cut-off time of 3:59:50. In
doing so, the Exchange believes that CMC will be better positioned as a
viable alternative to Nasdaq's closing auction, and as another option
to NYSE's Closing D-Order, enabling Members to achieve the official
closing price where they may have traded beyond the primary exchanges'
closing auction cut-off times as they attempt to trade as close to 4:00
p.m., thereby ``foster[ing] price competition and. . .decreas[ing]
costs for market participants.'' \31\
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\31\ Supra note 15.
[GRAPHIC] [TIFF OMITTED] TN29MY24.048
[[Page 46433]]
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.\32\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \33\ 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 witht he
Section 6(b)(5) \34\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78f(b).
\33\ Supra note 25.
\34\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the addition of the
proposed MOC Cut-Off Times would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed times would offer CMC users increased flexibility
in how to manage their MOC and closing price order flow and their
associated trading, and their technological and operational risk, as
well help to better position CMC to serve as a viable alternative to
the primary exchanges' closing auctions, and off-exchange closing price
mechanism. For instance, by having the option to allocate their MOC
order flow across various MOC Cut-Off Times, Members will have the
opportunity to receive matches earlier in the trading day, thereby
reducing their trading risk, as well as the volume of orders their
systems may need to handle at once, thereby reducing operational and
technology risk. Furthermore, the proposed 3:54 p.m. MOC Cut-Off time
will enable Members to actively trade orders in Nasdaq-listed
securities for a longer period as they will no longer have to submit
their MOC orders to CMC at 3:49 p.m.--i.e., six-minutes prior to
Nasdaq's cut-off time. As discussed above, if a Member's MOC orders are
not matched in CMC they will still have ample time to reroute any
unmatched to CMC MOC orders to Nasdaq's closing auction, thereby making
CMC a more comparable alternative to Nasdaq's closing auction.
Additionally, the Exchange has received feedback from Members that
while moving the single MOC Cut-Off Time from 3:35 p.m. to 3:49 p.m.
(six-minutes prior to Nasdaq's cut-off time, and nearly eleven-minutes
prior to NYSE's Closing-D Order cut-off time) has been helpful in
managing their MOC and closing price order flow, Members desire later
cut-off times that more closely align with the current Nasdaq cut-off
time of 3:55 p.m., and a cut-off time closer to 4:00 p.m. As noted, the
proposed 3:54 p.m. MOC Cut-Off Time will help make CMC a more practical
alternative to the Nasdaq closing auction. Furthermore, the proposed
MOC Cut-Off Time of 3:58 p.m. (i.e., closer to 4:00 p.m.) would be of
great value to Members because it would enable them to trade closer to
4:00 p.m.--i.e., past the primary exchanges' cut-off times--giving them
control of their orders for a longer period of time and providing them
with an option similar to NYSE's Closing-D Order. The Exchange notes
that the market participants that would primarily use the later MOC
Cut-Off Times are technologically equipped \35\ to handle the proposed
3:54 p.m. and 3:58 p.m. MOC Cut-Off Times. Specifically, CMC's current
users utilize third-party providers or broker-dealers \36\ that provide
them with electronic trading technology enabling them to quickly react
to market conditions and messages, such as the Cboe Auction Feed.\37\
Moreover, many market participants, including non-users of CMC, utilize
electronic smart order routers, order management systems, and trading
algorithms, which make routing and trading decisions on an automated
basis in times often measured in microseconds. Therefore, the Exchange
believes that both current users of CMC, as well as those that may
utilize CMC following approval of this proposal, will be
technologically equipped to efficiently respond to CMC's publication of
matched shares and, should they so choose, reroute any unmatched MOC
orders to Nasdaq's closing auction, utilize NYSE's Closing-D Order,\38\
or reroute to an off-exchange closing price offering.
---------------------------------------------------------------------------
\35\ Supra note 28.
\36\ As a general matter, third-party technology providers and
broker-dealers with electronic trading offerings provide automated
trading and routing products and services to market participants
that may not possess their own proprietary technology, or simply
choose to leverage third party solutions they deem superior to their
own internal technology. By way of example, portfolio managers
responsible for reweighting their managed funds may not possess
internal automated routing and algorithmic trading capabilities, and
instead utilize third-party solutions enabling them to trade on an
automated basis. As such, the proposed MOC Cut-Off Times of 3:54
p.m. and 3:58 p.m. are not likely to negatively impact market
participants who may not possess the internal capabilities to
reroute unmatched CMC MOC orders to the primary exchanges' closing
auctions. The Exchange further notes that the utilization of third
parties and broker-dealers for technological trading solutions was
even noted by the Commission in its Algorithmic Trading Report.
Supra note 28 (``Institutions that do not create their own
algorithms generally use algorithms provided to them by
institutional brokers.'') (``Brokers are tasked by their customers
with finding liquidity in a complex, fragmented market, achieving
best execution, and minimizing information leakage and other
implicit costs. To try to meet these goals, brokers use, and offer
to their customers, a wide range of execution algorithms.'').
\37\ Per Rule 11.22(i), The Cboe Auction Feed is an uncompressed
data product that provides information regarding the current status
of price and size information related to auctions conducted by the
Exchange as well as the total size of all buy and sell orders
matched via Cboe Market Close described in Rule 11.28
\38\ By way of background, CMC calculates the matched shares at
the MOC Cut-Off Time (currently 3:49 p.m.) Importantly, the matching
process happens quickly, and while the duration may vary, the total
matching process typically takes a fraction of second (e.g., ~948
microseconds), with the maximum being around 1-second. With these
timeframes in mind, a user should in most instances, currently knows
the paired CMC quantity no later than 3:49:01 p.m., leaving the user
at least fifty-nine-seconds (59) to reroute any unpaired CMC MOC
orders to the primary exchanges' closing auctions. Similarly,
applying these timeframes to the proposed MOC Cut-Off Times, a user
should in most instances know the pair paired CMC quantities no
later than 3:15.01, 3:30.01, 3:54.01, and 3:58.01. As noted by the
Exchange throughout this filing, the speed of today's trading
technology is typically measured in microseconds, making fifty-nine-
seconds (59) a significant amount of time for a user to make an
automated trading decision. For reference, a microsecond is 1-
millionth of a second.
---------------------------------------------------------------------------
The Exchange also notes that as CMC volume has increased,
prospective new users \39\ with different trading strategies and
different technological and operational capabilities have expressed
interest in utilizing CMC. This segment of Members has expressed a
desire for earlier MOC Cut-Off Times, which they note will assist them
in more efficiently managing their workflows and trading risk. For
instance, some of these Members would prefer to commit certain of their
closing price orders--e.g., guaranteed close orders--to a closing
auction mechanism earlier in the trading day. By submitting such orders
to CMC and potentially receiving a match, a Member can reduce its
trading risk. Additionally, by having the ability to allocate MOC
orders across
[[Page 46434]]
various MOC Cut-Off Times, Members can more capably manage their order
volume and reduce the number of messages that their systems must manage
and process heading into market close, where trading volume and
volatility are typically highest. As such, Members will be better able
to manage any operational or technology risk \40\ associated with a
high order volume day such as index rebalance days (e.g., Russell or
MSCI index rebalance days) or unexpected high volatility trading days,
as well as better manage the number of MOC orders a Member may need to
send to an exchange or off-exchange venue at any one time.\41\
---------------------------------------------------------------------------
\39\ Prospective new users of CMC include both Members
expressing interest in utilizing CMC for the first time, as well as
new end-clients of Members that currently utilize CMC, and have
inquired as to CMC's functionality, and the proposed enhancements.
\40\ The Exchange notes that there are market participants that
may not currently possess internal high-speed routing and trading
technology. However, such market participants may, and likely
already do, utilize routing and trading services offered by third-
party providers or broker-dealers to handle and execute their orders
electronically. Additionally, CMC is entirely voluntary and Members
that do not possess internal high-speed trading and routing
technology, or utilize third-party broker-dealers, are not required
to use CMC. Accordingly, the Exchange believes that the proposed MOC
Cut-Off Time is not likely to result in disparate treatment amongst
CMC users and other market participants.
\41\ In this regard, the Exchange notes that some Members have
expressed that while they have ample time to redirect any unmatched
CMC orders to the primary exchanges, internal or external message
rate checks (e.g., SEC Rule 15c3-5 risk checks or market center
checks) may prohibit them from doing so if the Member is submitting
a large volume of unmatched MOC orders at one time. In this regard,
the proposed additional MOC Cut-Off Times may assist Members in
allocating MOC orders across multiple CMC sessions, and should they
be matched, reduce the volume of unmatched MOC orders the Member may
have to submit to another market center.
---------------------------------------------------------------------------
As noted in its CMC Amendment, the Exchange continues to believe
that the extension of cut-off times by the primary exchanges since
CMC's approval in 2020 as well as the growth of off-exchange venues
\42\ with cut-off times in such close proximity to the end of Regular
Trading Hours is indicative of Members' desires for such offerings.
Logically, such a change in market structure would not have occurred if
market participants did not already possess the operational and
technological capabilities to effectively manage the multitude of cut-
off times offered by the exchanges and off-exchange venues.
---------------------------------------------------------------------------
\42\ For example, JP Morgan Securities' ATS, JPB-X, offers Close
Price Match. This functionality utilizes a conditional order process
to match orders and crosses them at the security's official closing
prices, as determined by the closing auction at the primary exchange
for a security. The Close Price Match time for an NMS stock is
currently 30-seconds before the MOC cut-off time for that stock's
primary exchange. Additionally, Instinet, LLC's ATS, CBX provides
for three MOC Crossing Sessions, which consist of: a cross for
securities where the primary listing exchange is the Nasdaq
(``Nasdaq Cross''), a cross for securities where the primary listing
exchange is the NYSE Arca (``Arca Cross''), and a cross for
securities where the primary listing exchange is the NYSE (``NYSE
Cross'') (collectively, ``MOC Crosses''). Each MOC Cross occurs two
minutes prior to the relevant exchange's cut-off time; i.e., the
Nasdaq Cross currently occurs at or near 3:53 p.m., the NYSE Cross
at or near 3:48 p.m., and the Arca Cross at or near 3:57 p.m. See
Form ATS-N, JPB-X, available at: https://www.sec.gov/Archives/edgar/data/782124/000001961722000459/xslATS-N_X01/primary_doc.xml; see
also Form ATS-N, Instinet, LLC's ATS, CBX, available at: https://www.sec.gov/Archives/edgar/data/310607/000031060722000009/xslATS-N_X01/primary_doc.xml . . should.
---------------------------------------------------------------------------
The Exchange also believes that the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market and a national market system because adding the MOC Cut-Off
Times of 3:54 p.m. and 3:58 p.m. would more closely align the CMC with
the cut-off time in place for the Nasdaq closing auction, as well as
provide market participants with a tool similar to NYSE's Closing D-
Order that enables them to trade closer to 4:00 p.m.\43\ By adding the
3:54 p.m. and 3:58 p.m. MOC Cut-Off Times, CMC has the ability to
become a more comparable alternative to Nasdaq's closing auction and
another option similar to NYSE's Closing D Orders, thereby
``foster[ing] price competition and . . . decreas[ing] costs for market
participants.'' \44\
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\43\ As noted above, NYSE's Closing-D Order cut-off time is 3:50
p.m., and Nasdaq's cut-off time is 3:55 p.m. Additionally, the
Exchange notes that NYSE Arca's cut-off time for MOC orders is 3:59
p.m. See ``Trading Information--Closing Auctions'', available at:
https://www.nyse.com/markets/nyse-arca/trading-info.
\44\ Supra note 15.
---------------------------------------------------------------------------
The primary exchanges' cut-off times are beneficial to market
participants because of their proximity to the closing auctions, which
occur at 4:00 p.m. Trading later into the day provides market
participants with more time to seek better-priced liquidity for their
orders in a variety of ways and provides additional time to determine
the size of their outstanding orders that they may decide to commit to
CMC, the primary auctions, or services offered by off-exchange venues
such as ATSs. In this regard, by having the option to trade past the
primary exchanges' cut-off times and still potentially receive the
official closing price by participating in CMC at 3:58 p.m., Members
will have had additional time to actively trade orders and attempt to
access better priced liquidity for their orders or their client orders.
Importantly, even with the addition of the proposed MOC Cut-Off
Times, CMC will remove any perceived impact on Nasdaq's or NYSE's
closing auction by publishing the number of matched order shares, by
security, in advance of Nasdaq's cut-off time and NYSE's Closing-D
Order cut-off time. The total matched shares would still be
disseminated by the Exchange free of charge via the Cboe Auction Feed,
albeit at each of the newly proposed MOC Cut-Off Times. Because of the
speeds and widespread use of market technology the market makers on the
primary exchanges could, should they choose to do so, incorporate the
Cboe Auction Feed information (including information about total
matched shares in CMC) into their closing processes.\45\ Additionally,
as discussed above, because of the market technology utilized by market
participants in today's markets, those who choose to participate in CMC
will still have ample time \46\ to reroute any MOC orders not matched
via CMC to reach Nasdaq's closing auction or NYSE's Closing-D Order
offering, to be included in the primary exchanges' closing auctions.
Notably, market participants that do not possess internal high-speed
trading and routing capabilities often rely on third-party providers or
broker-dealers \47\ to handle and execute their orders electronically.
Moreover, if market participants do not possess internal high-speed
routing and trading technology, and do not utilize third-party
solutions, the addition of the proposed MOC Cut-Off Times of 3:15 p.m.
and 3:30 p.m. would allow such participants to try and receive CMC
matches earlier in the day at 3:15 p.m.
[[Page 46435]]
or 3:30 p.m., rather than limiting themselves to the later MOC Cut-Off
Times of 3:49 p.m., 3:54 p.m., and 3:58 p.m., and having less time to
re-route their unmatched MOC orders to the primary exchanges or off-
exchange closing price mechanisms. Accordingly, the Exchange believes
that the proposed MOC Cut-Off Times are not likely to result in
disparate treatment amongst CMC users.
---------------------------------------------------------------------------
\45\ In connection with its CMC Amendment filing, the Exchange
spoke with four (4) designated market makers for the primary
exchanges and confirmed that while they do not currently monitor the
Cboe Auction Feed, they are technically equipped to do so.
\46\ Supra note 28.
\47\ As a general matter, third-party technology providers and
broker-dealers with electronic trading offerings provide automated
trading and routing products and services to market participants
that may not possess their own proprietary technology, or simply
choose to leverage third party solutions they deem superior to their
own internal technology. By way of example, portfolio managers
responsible for reweighting their managed funds may not possess
internal automated routing and algorithmic trading capabilities, and
instead utilize third-party solutions enabling them to trade on an
automated basis. As such, the proposed MOC Cut-Off Times of 3:54
p.m. and 3:58 p.m. are not likely to negatively impact market
participants who may not possess the internal capabilities to
reroute unmatched CMC MOC orders to the primary exchanges' closing
auctions. The Exchange further notes that the utilization of third
parties and broker-dealers for technological trading solutions was
even noted by the Commission in its Algorithmic Trading Report.
Supra note 28 (``Institutions that do not create their own
algorithms generally use algorithms provided to them by
institutional brokers.'') (``Brokers are tasked by their customers
with finding liquidity in a complex, fragmented market, achieving
best execution, and minimizing information leakage and other
implicit costs. To try to meet these goals, brokers use, and offer
to their customers, a wide range of execution algorithms.'')
---------------------------------------------------------------------------
The proposed 3:58 p.m. MOC Cut-Off Time would also help to further
align CMC's MOC Cut-Off Times with that of off-exchange venues that
offer cut-off times that correspond with those currently offered by the
primary exchanges, and as little as 30 seconds prior to market
close.\48\ As such, the Exchange believes that the proposed rule change
is supported by both ample precedent as well as current market
structure, and should not present any new or novel issues that market
participants must consider when managing their trading and determining
which exchange or off-exchange venue to route their MOC orders.
---------------------------------------------------------------------------
\48\ Supra note 41.
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Price Discovery \49\
---------------------------------------------------------------------------
\49\ As part of this proposed amendment, the Exchange is
addressing several questions considered by the Commission in
connection with the Exchange's Original Proposal, including price
discovery and fragmentation, market complexity and operational risk,
and manipulation. Importantly, in considering these questions, the
Commission found that based on CMC's design and the record before
the Commission, that the proposal was consistent with Section
6(b)(5) of the Act. Supra note 15.
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As was the case with its CMC Amendment, the Exchange believes that
the proposed rule change is consistent with the Section 6(b)(5)
requirements.\50\ As previously noted by the Exchange,\51\ CMC accepts
and matches only unpriced MOC orders. By matching only unpriced MOC
orders, and not priced Limit-On-Close (``LOC'') orders and executing
those matched MOC orders that naturally pair off with each other and
effectively cancel each other out, CMC is designed to avoid impacting
price discovery. The proposed rule change--i.e., the addition of
additional MOC Cut-Off Times--does not change CMC's underlying
functionality. As previously noted by the Exchange,\52\ matched MOC
orders are merely recipients of price formation and do not directly
contribute to the price formation process. Indeed, in its Final
Approval Order for CMC, even the Commission noted that unpriced,
paired-off MOC orders do not directly contribute to setting the
official closing price of securities on the primary listing exchanges
but, rather, are inherently the recipients of price formation
information.\53\
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\50\ The Exchange notes that the Commission, in its Final
Approval Order, carefully analyzed and considered CMC and its
potential effects, if any, on the primary listing exchanges' closing
auctions, including their price discovery functions. Importantly,
the Commission found that, based on CMC's design, CMC should not
disrupt the price discovery process in the closing auctions of the
primary listing exchanges. Supra note 15.
\51\ See Letter from Joanne Moffic-Silver, Executive Vice
President, General Counsel, and Corporate Secretary, Bats Global
Markets, Inc. (August 2, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734-2162452-157801.pdf; see
also Letter from Joanne Moffic-Silver (October 11, 2017), available
at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734-2634580-161229.pdf.
\52\ Id.
\53\ Supra note 15.
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Moreover, the Exchange believes that even if the addition of MOC
Cut-Off Times reduces the number of MOC orders routed to a security's
primary listing market, CMC is still designed to remove any perceived
adverse impact on the primary listing markets' close because the total
matched shares for each CMC session would still be disseminated by the
Exchange free of charge via the Cboe Auction Feed prior to the primary
exchanges' cut-off times. Additionally, even with the addition of the
new MOC Cut-Off Times, because of the technological capabilities of
today's market participants discussed more fully above, the market
makers on the primary exchanges would still have the ability to
incorporate the Cboe Auction Feed information, including information
about total matched shares in CMC, into their closing processes.
Furthermore, current users of CMC are either technologically
equipped to manage the proposed CMC MOC-Cut Off Times or rely on third-
party solutions that provide them with the technological capability to
appropriately manage the proposed MOC Cut-Off Times and timely re-route
unmatched CMC orders participate in the primary exchanges' closing
auctions. Similarly, given the widespread use of routing and trading
technology in today's markets, it is likely that potential new CMC
users already possess the technological capabilities to manage the
proposed MOC Cut-Off Times, and if they do not, similarly rely on
third-party providers with high-speed technology offerings.
Alternatively, CMC users lacking high-speed trading and routing
technology can simply utilize the earlier MOC Cut-Off Times of 3:15
p.m. and 3:30 p.m., providing themselves more flexibility to reroute
unmatched CMC orders to the primary exchanges.
Fragmentation \54\
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\54\ Supra note 49.
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Another matter addressed by the Commission in its review of the
Original Proposal was fragmentation, and whether CMC would fragment the
markets beyond what currently occurs through off-exchange close price
matching venues offered by broker-dealers.\55\ While comparisons to
off-exchange MOC activity may not be a perfect measure of the potential
resulting effect of CMC market fragmentation,\56\ the proposed MOC Cut-
Off Times are designed to enable CMC to better compete with off-
exchange venues and for closing volume that is already executed away
from the primary listing venues.
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\55\ Supra note 15.
\56\ Id (``. . . [C]omparisons to off-exchange activity are not
a perfect measure of the potential resulting effect of the [CMC]
proposal because the structures of the many off-exchange mechanisms
differ from the structure of Cboe Market Close.'').
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As illustrated in the first two charts below, a growing proportion
of trading volume at the close occurs on off-exchange venues, where the
TRF close volume, as a percent of Exchange close volume, has risen
steadily since Q1 2019.\57\ In the third chart the Exchange also
studied the top ten most actively traded securities during the same
time period and found that a significant portion of the total closing
volume is executed off-exchange, following the dissemination of the
official closing price.
---------------------------------------------------------------------------
\57\ The Exchange conducted an analysis of off-exchange/Trade
Reporting Facility (``TRF'') closing volume that occurs after market
close, 4:00 p.m. Eastern Time, where the price is equal to the
closing price and for which such trades are reported with a Prior
Reference Price (``PRP'') trade reporting modifier. The TRF is a
trade reporting facility where FINRA members may report trades in
Nasdaq-listed and other exchange-listed securities, that were
executed otherwise than on an exchange. The first two charts
represent TRF executed volume at the close with the ``PRP'' flag
that equals the closing auction price, divided by total on exchange
auction volume.
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[[Page 46436]]
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[[Page 46437]]
[GRAPHIC] [TIFF OMITTED] TN29MY24.040
Given the significant volume of off-exchange MOC activity already
occurring, the Exchange believes that there is still ample opportunity
for the proposed MOC Cut-Off Times to attract existing MOC volume that
is already being executed away from CMC and the primary listing venues.
As discussed above, market participants have expressed the value of
being able to trade closer to 4:00 p.m. In this regard, the proposed
MOC Cut-Off Times of 3:55 p.m. and 3:58 p.m. satisfy the needs of
today's market participants, and enable CMC to better compete with off-
exchange venues, thereby ``foster[ing] price competition and . . .
decreas[ing] costs for market participants.\58\ Members may prefer to
execute their MOC orders via CMC rather than off-exchange venues for
reasons such as the increased transparency and reliability that exists
when investors execute their orders on public, well-regulated
exchanges. Moreover, by attracting such order flow, CMC can help to
increase the amount of volume at the close executed on systems subject
to the resiliency requirements of Regulation SCI.\59\
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\58\ Supra note 15.
\59\ See Letter from Joanne Moffic-Silver, Executive Vice
President, General Counsel, and Corporate Secretary, Bats Global
Markets, Inc., a Cboe Company (Oct. 11, 2017) (``Furthermore, [CMC]
would operate on the Exchange's reliable SCI systems . . .
significant MOC liquidity is conducted today by off-exchange venues.
These venues are not SCI systems and, therefore, not subject to
Regulation SCI's enhanced resiliency requirements. [CMC] could
attract MOC orders from these off-exchange venues to the Exchange
and its reliable SCI system, furthering the Commission's presumed
desire for liquidity at the close to be conducted on SCI systems.'')
---------------------------------------------------------------------------
Moreover, the Exchange's observations in Figure 5 below show that
the closing auction volume on both NYSE and Nasdaq has increased
despite the launch of CMC on March 6, 2020, and the subsequent
implementation of the 3:49 p.m. MOC Cut-Off Time in 2023. Therefore,
while the proposed amendment may lead to additional orders being routed
to CMC rather than the primary exchanges' closing auctions, it cannot
be said with certainty that such a change will cause additional
fragmentation in the marketplace as it is possible that existing MOC
order flow that already executes on off-exchange venues may in fact
migrate to CMC. In other words, MOC orders that are already being
executed and matched away from the primary exchanges will continue to
match and execute on away venues, but rather would match and execute
pursuant to CMC rather than on an unregulated, non-transparent venue.
In fact, the Exchange believes the proposed additional MOC Cut-Off
Times are not likely to materially increase market fragmentation and
therefore have a negative impact on the market because data shows that
even with the implementation of CMC, there is still a significant
amount of volume executed on the primary exchanges' suggesting that
market participants continue to utilize the primary closing auctions.
[[Page 46438]]
[GRAPHIC] [TIFF OMITTED] TN29MY24.041
Market Complexity and Operational Risk \60\
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\60\ Supra note 49.
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The Exchange believes that the proposed rule change is simple and
straightforward, and as such will not significantly increase market
complexity or operational risk. The Exchange already received approval
to change its MOC Cut-Off Time from 3:35 p.m. to 3:49 p.m., which
resulted in no increase in market complexity and operational risk. The
Exchange now seeks only to offer additional MOC Cut-Off Times, none of
which will increase market complexity or operational risk. Indeed, the
3:15 p.m. and 3:30 p.m. MOC Cut-Off Times are designed to help aid
Members in managing their MOC order flow, and actually mitigate their
operational and technological risk. The proposed 3:54 p.m. and 3:58
p.m. MOC Cut-Off Times--like the approved 3:49 p.m. MOC Cut-Off Time--
are intended only to help better align CMC with the cut-off times
utilized by NYSE and Nasdaq for their Closing-D Orders and closing
auction, respectively. While Members will now have the option to
designate orders for participation in multiple MOC Cut-Off Times, and
any unmatched quantities for such orders will carry forward to the next
CMC session, the Exchange believes that Members are well equipped to
manage any new workflow associated with these proposed enhancements.
Indeed, the Exchange conferred with Members to discuss the proposed
workflow prior to submitting this proposal, and Members indicated that
such changes did not present new or novel issues for them to consider.
In addition, as previously noted,\61\ both current CMC users and market
participants in general, possess high-speed routing and order handling
technology, that will enable them to efficiently manage the proposed
changes to CMC. Members continuing to only participate in a single CMC
session will not have to consider new operational requirements of
monitoring and consuming a new data feed or consider the utilization of
a new order type or implementation of new Exchange code, other than
perhaps needing to monitor the Cboe Auction Feed for the publication of
CMC information at a different MOC Cut-Off Time. While Members electing
to participate in multiple CMC sessions will need to monitor the Cboe
Auction Feed for CMC information at multiple MOC Cut-Off Times, Members
have indicated that the operational and technological requirements to
do so are not complex, and do not present any new or novel issues. In
addition, as previously noted,\62\ market participants today utilize
high-speed technology that enables to receive and process market data
in sub-second latencies. As such, given that the proposed MOC Cut-Off
Times are multiple minutes apart, the proposed MOC Cut-Off Times should
not present any new or novel issues for Members.
---------------------------------------------------------------------------
\61\ Supra. note 28.
\62\ Id.
---------------------------------------------------------------------------
Additionally, just as the Exchange did prior to proposing the 3:49
p.m. MOC Cut-Off Time, the Exchange discussed this current proposal
with CMC users and learned that CMC's current users are technologically
equipped \63\ to manage the proposed 3:54 p.m. and 3:58 p.m. MOC Cut-
Off Times, and that they can respond to CMC's publication of matched
shares and quickly reroute any unmatched MOC orders to the respective
primary closing auction. Furthermore, the Exchange again notes that
both off-exchange venues and other exchanges already offer MOC cut-off
times that are closer in time to the end of Regular Trading Hours.
Specifically, in 2018 Nasdaq received approval to move the cut-off
times for the entry of MOC and Limit-On-Close (``LOC'') orders from
3:50 to 3:55 p.m.\64\ Similarly, in 2018 NYSE received approval from
the SEC to extend cut-off times for order entry and cancellation
[[Page 46439]]
for participation in its closing auction, from 3:45 p.m. to 3:50
p.m.\65\ NYSE also offers discretionary-orders, which unlike MOC/LOC
orders subject to NYSE's 3:50 p.m. cut-off, may be entered for
participation in the closing auction until 3:59:50.\66\ Additionally,
market participants may enter MOC orders for participation in NYSE
Arca's closing auction up to 3:59 p.m.\67\ Finally, various off-
exchange venues offer closing match processes with cut-off times
aligned with those of the primary exchanges, and even as close to 30-
seconds before market close, 4:00 p.m.\68\
---------------------------------------------------------------------------
\63\ Id.
\64\ See Securities Exchange Act Release No. 34-84454 (October
19, 2018), 83 FR 53923 (October 25, 2018) (SR-Nasdaq-2018-068)
(Order approving a rule change by Nasdaq) (The Commission approved a
rule change by Nasdaq to move the cut-off times for the entry of MOC
and LOC orders from 3:50 p.m. to 3:55 p.m.); see also Securities
Exchange Act Release No. 34-85021 (January 31, 2019) (SR-NYSE-2018-
58) (Order approving a rule change by NYSE) (The Commission approved
a rule change by the NYSE to amend Rule 123C to extend the cut-off
times for order entry and cancellation for participation in the
closing auction, from 3:45 p.m. to 3:50 p.m.).
\65\ Id.
\66\ Supra note 4.
\67\ See ``Closing Auction Timeline'', available at: https://www.nyse.com/markets/nyse-arca/trading-info.
\68\ Supra note 41.
---------------------------------------------------------------------------
Moreover, the proposed 3:15 p.m. and 3:30 p.m. MOC Cut-Off Times
will also enable new and existing CMC users that may not have high-
speed trading and routing infrastructure, to still utilize CMC and not
rely on high-speed technology to reroute unmatched CMC orders from the
3:49 p.m., 3:54 p.m., or 3:58 p.m. MOC Cut-Off Times. The Exchange also
notes that CMC is a voluntary offering, and Members may freely decide
whether to participate.
Accordingly, the Exchange believes that market participants are
well accustomed to managing the various cut-off times in today's
marketplace, and in incorporating these timelines into their trading
decisions. The number of exchanges and off-exchange venues with
extended cut-off times indicates that market participants find value in
their ability to retain control of their trading heading into the end
of Regular Trading Hours, and the primary exchanges and off-exchange
venues have responded to such demand. Certainly, market participants
would not desire cut-off times closer to the end of Regular Trading
Hours if they could not technologically and operationally manage their
trading accordingly. Therefore, the additional, later CMC MOC Cut-Off
Times should not present market participants with any novel operational
or technological complexities.
Manipulation \69\
---------------------------------------------------------------------------
\69\ Supra note 49.
---------------------------------------------------------------------------
In its CMC Amendment the Exchange noted that the value of the 3:49
p.m. MOC Cut-Off Time was not the proximity of CMC's matched share
message to the cut-off times of the primary exchanges, but rather the
ability of users to trade their orders for a longer period of time
before deciding whether to commit their MOC orders to CMC. The Exchange
further stated that it did not expect that the proposed extension of
the MOC Cut-Off Time to 3:49 p.m. would result in an increase in
manipulative activity due to information asymmetries, or that it raised
any unique manipulation concerns relative to how CMC existed with a MOC
Cut-Off Time of 3:35 p.m. Importantly, the Exchange believes that this
rationale also applies to the current proposal, and that the SEC should
dismiss any manipulation concerns regarding this proposal, just as it
did with the Original Proposal and CMC Amendment.
Here, the Exchange notes that the mere existence of multiple MOC
Cut-Off Times does not make any information CMC participants may be
able to glean from their paired-off MOC orders any more valuable.
Rather, the value of any information learned by CMC participants is
still limited in nature. For instance, any information that CMC
participants may learn from receiving match MOC order messages is
indeed limited in nature because the CMC participant would still only
know the unexecuted size of its own order.\70\ Even if a Member
participated in all five CMC sessions--3:15 p.m., 3:30 p.m., 3:49 p.m.,
3:54 p.m., and 3:58 p.m.--and received messages regarding matched MOC
orders, the proposed MOC Cut-Off Times are many minutes apart, during
which time new MOC orders may be entered, rendering useless any
information a Member may have gleaned regarding an imbalance in the
prior session. Moreover, even if a Member chose to participate in CMC
only to gather information about the direction of an imbalance and use
such information to manipulate the closing price, the Member's orders
were still eligible for execution subjecting the Member to economic
risk.
---------------------------------------------------------------------------
\70\ The Exchange notes that in its Final Approval Order, even
the Commission noted that, ``In particular, a market participant
would only be able to determine the direction of the imbalance and
would have difficulty determining the magnitude of any imbalance, as
it would only know the unexecuted size of its own order. In
addition, the information would only be with regard to the pool of
liquidity on BZX and would provide no insight into imbalances on the
primary listing exchange, competing auctions, ATSs, or other off-
exchange matching services which, as described above, can represent
a significant portion of trading volume at the close.'' Supra note
15.
---------------------------------------------------------------------------
While this proposal would result in the total shares for buy and
sell orders in CMC being disseminated several times during the last
hour of trading, and with three MOC Cut-Off Times in close proximity to
the primary exchanges' cut-off times, these changes do not suddenly
make such information more valuable or useful in terms of enhancing
opportunities for gaming and manipulating the official closing price.
The 3:49 p.m. and 3:54 p.m. MOC Cut-Off Times are one-minute prior to
NYSE's and Nasdaq's MOC cut-off times, and the 3:58 p.m. MOC Cut-Off
Time is one-minute prior to NYSE's Closing-D Order cut-off time. As
noted throughout, today's markets are marked by technological solutions
which typically operate in durations of microseconds. In this context,
the separation between the CMC MOC Cut-Off Times and that of NYSE's and
Nasdaq's is a substantial duration of time, during which much can
change in the marketplace, thus limiting the value of information, if
any, that can be gleaned from CMC's dissemination of matched shares at
these times.
Moreover, the 3:15 p.m. MOC Cut-Off Time is thirty-five-minutes
prior to NYSE's MOC cut-off time, forty-four-minutes and fifty-seconds
prior to NYSE's Closing-D Order cut-off time, and forty-minutes prior
to Nasdaq's MOC cut-off time. Similarly, the 3:30 p.m. MOC Cut-Off Time
is twenty-minutes prior to the NYSE's MOC cut-off time, twenty-nine-
minutes and fifty-seconds prior to NYSE's Closing-D Order cut-off time,
and twenty-five-minutes prior to the Nasdaq MOC cut-off time. These
proposed MOC Cut-Off Times are even further from the primary exchanges'
cut-off times than the current CMC MOC Cut-Off Time, during which the
marketplace and CMC will experience significant change, even further
limiting the value of information, if any, that a Member may glean from
the dissemination of matched shares.
Furthermore, as with the current MOC Cut-Off Time, the proposed MOC
Cut-off Times do not present any information asymmetries that do not
already exist in today's markets, as the very nature of trading creates
short term asymmetries of information to those who are parties to a
trade.\71\ Indeed, as noted by the Commission, any party to a trade
gains valuable insight regarding the depth of the market when an order
is executed or partially executed.\72\ Additionally, NYSE imbalance
information is already disseminated to
[[Page 46440]]
NYSE floor brokers, who are permitted to share with their customers
specific data from the imbalance feed.\73\ Even in this case, though,
the Commission stated that the value of such information is limited
because the imbalance information does not represent overall supply and
demand for a security, is subject to change, and is only one relevant
piece of information.\74\ Similarly, because any information gleaned by
a CMC participant is limited only to the unexecuted size of their
order, and relative to the depth of only the BZX pool of liquidity, the
Exchange believes that the proposed extension of the MOC Cut-Off Time
does not create an increased risk of manipulative trading activity.
---------------------------------------------------------------------------
\71\ The Exchange also notes that in its Final Approval Order,
even the Commission noted that, ``Further, the Commission believes
information asymmetries as those described by commenters exist today
and are inherent in trading, including with respect to closing
auctions. For example, any party to a trade gains valuable insight
regarding the depth of the market when an order is executed or
partially executed.'' Id.
\72\ Id.
\73\ Id.
\74\ Id.
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Moreover, there are currently controls and processes in place to
monitor for manipulative trading activity, such as the supervisory
responsibilities and capabilities of exchanges and the expansive cross
market surveillance conducted by FINRA. Following approval of this
proposal, the Exchange, FINRA and others will continue to surveil for
potential manipulative activity and when appropriate, bring enforcement
actions against market participants engaged in manipulative trading
activity.
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 proposed amendment
applies equally to all Members, and is intended to offer additional MOC
Cut-Off Times, enabling a broader segment of Members to utilize CMC at
times that better accommodate different trading strategies, and
Members' technological and operational capabilities. Similar to how
current CMC users are technologically equipped to participate in CMC at
3:49 p.m. and timely reroute any unmatched CMC MOC orders to the NYSE
or Nasdaq closing auction, today's CMC users will be able to utilize
the 3:54 p.m. MOC Cut-Off Time and still have time to re-route any
unmatched MOC orders to the Nasdaq closing auction. Similarly, Members
are also technologically equipped to utilize the 3:58 p.m. MOC Cut-Off
Times and still have time to re-route their orders as NYSE Closing-D
Orders.. Members that may lack internal high-speed routing and trading
technology may utilize third-party providers (discussed above) should
they desire to make use of the 3:54 p.m. and 3:58 p.m. MOC Cut-Off
Times.
Alternatively, the proposed MOC Cut-Off Times of 3:15 p.m. and 3:30
p.m. will allow CMC users that may lack high-speed trading and routing
infrastructure to utilize CMC without having to quickly re-route
unmatched CMC orders to the primary exchanges just prior to their cut-
off times, as well as attract new users who may desire a mechanism that
allows them to match their MOC orders earlier in the trading day.
Moreover, CMC is a voluntary closing match process, and Members are not
required to participate in CMC.
The Exchange also does not believe that 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. As noted
above, the proposed rule change more closely aligns the CMC MOC Cut-Off
Times to the cut-off times of other exchanges, while still providing
CMC participants with an opportunity to reroute any of their unpaired
MOC orders to the primary exchanges. In this regard, the proposed rule
change may make CMC a more viable alternative to the primary auctions
and ``should foster price competition and thereby decrease costs for
market participants.'' \75\ Additionally, the proposed MOC Cut-Off
Times of 3:15 p.m. and 3:30 p.m. will help make CMC a more attractive
alternative to market participants that may not feel comfortable
attempting to match in CMC at 3:49 p.m. and still have time to re-route
unmatched CMC orders to NYSE and Nasdaq, as well as market participants
that simply wish to reduce their MOC trading obligations earlier in the
trading day by attempting to match in CMC. Collectively, the proposed
MOC Cut-Off Times will enable the Exchange to compete with the primary
exchanges more effectively, as well as with off-exchange venues that
have cut-off times much closer in time to the market close and comprise
a growing percentage of closing volume.
---------------------------------------------------------------------------
\75\ Supra note 15.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. By Order Approve or Disapprove Such Proposed Rule Change, as
Modified by Amendment No. 1, or
B. Institute proceedings to determine whether the proposed rule
change, as modified by Amendment No. 1, should be 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, as modified by Amendment No. 1, 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-CboeBZX-2024-032 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-CboeBZX-2024-032. 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;
[[Page 46441]]
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-CboeBZX-2024-032 and
should be submitted on or before June 20, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\76\
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\76\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10945 Filed 5-28-24; 8:45 am]
BILLING CODE 8011-01-P
