Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt New Functionality Relating to the Processing of Auction Responses, 86856-86861 [2024-25320]
Download as PDF
<![CDATA[
86856
Federal Register / Vol. 89, No. 211 / Thursday, October 31, 2024 / Notices
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on October 23,
2024, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail &
USPS Ground Advantage® Contract 518
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2025–140, K2025–138.
SUPPLEMENTARY INFORMATION:
Sean C. Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2024–25282 Filed 10–30–24; 8:45 am]
BILLING CODE 7710–12–P
POSTAL SERVICE
Product Change—Priority Mail
Express, Priority Mail, and USPS
Ground Advantage® Negotiated
Service Agreement
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
Date of required notice: October
31, 2024.
DATES:
FOR FURTHER INFORMATION CONTACT:
Sean C. Robinson, 202–268–8405.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on October 22,
2024, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail &
USPS Ground Advantage® Contract 509
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2025–126, K2025–124.
SUPPLEMENTARY INFORMATION:
Sean C. Robinson,
Attorney, Corporate and Postal Business Law.
Postal ServiceTM.
Notice.
AGENCY:
[FR Doc. 2024–25262 Filed 10–30–24; 8:45 am]
ACTION:
BILLING CODE 7710–12–P
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: October
31, 2024.
FOR FURTHER INFORMATION CONTACT:
Sean C. Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on October 24,
2024, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail &
USPS Ground Advantage® Contract 532
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2025–155, K2025–153.
SUMMARY:
Sean C. Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2024–25304 Filed 10–30–24; 8:45 am]
BILLING CODE 7710–12–P
lotter on DSK11XQN23PROD with NOTICES1
POSTAL SERVICE
Product Change—Priority Mail
Express, Priority Mail, and USPS
Ground Advantage® Negotiated
Service Agreement
Postal Service TM.
Notice.
AGENCY:
ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
SUMMARY:
VerDate Sep<11>2014
18:18 Oct 30, 2024
Jkt 265001
POSTAL SERVICE
Product Change—Priority Mail
Express, Priority Mail, and USPS
Ground Advantage® Negotiated
Service Agreement
AGENCY:
ACTION:
POSTAL SERVICE
Product Change—Priority Mail
Express, Priority Mail, and USPS
Ground Advantage® Negotiated
Service Agreement
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: October
31, 2024.
FOR FURTHER INFORMATION CONTACT:
Sean C. Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on October 24,
2024, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail &
USPS Ground Advantage® Contract 536
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2025–159, K2025–157.
SUMMARY:
Sean C. Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2024–25308 Filed 10–30–24; 8:45 am]
Postal ServiceTM.
BILLING CODE 7710–12–P
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
SUMMARY:
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101434; File No. SR–
CboeEDGX–2024–067]
FOR FURTHER INFORMATION CONTACT:
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Adopt New
Functionality Relating to the
Processing of Auction Responses
Sean C. Robinson, 202–268–8405.
October 25, 2024.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on October 24,
2024, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail &
USPS Ground Advantage® Contract 534
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2025–157, K2025–155.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
16, 2024, Cboe EDGX Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘‘‘EDGX’’’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
Date of required notice: October
31, 2024.
DATES:
SUPPLEMENTARY INFORMATION:
Sean C. Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2024–25306 Filed 10–30–24; 8:45 am]
BILLING CODE 7710–12–P
PO 00000
Frm 00073
Fmt 4703
1 15
2 17
Sfmt 4703
E:\FR\FM\31OCN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
31OCN1
Federal Register / Vol. 89, No. 211 / Thursday, October 31, 2024 / Notices
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
adopt new functionality relating to the
processing of auction responses. The
text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
lotter on DSK11XQN23PROD with NOTICES1
1. Purpose
The Exchange currently offers a
variety of auction mechanisms which
provide price improvement
opportunities for eligible orders.
Particularly, the Exchange offers the
following auction mechanisms:
Complex Order Auction (‘‘COA’’),5 Step
Up Mechanism (‘‘SUM’’),6 Automated
Improvement Mechanism (‘‘AIM’’),7
Complex AIM (‘‘C–AIM’’),8 Solicitation
Auction Mechanism (‘‘SAM’’),9 and
Complex SAM (‘‘C–SAM’’).10 The
Exchange notes that eligible orders
(‘‘auctioned order’’) are electronically
exposed for an Exchange-determined
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 See Rule 21.20(d).
6 See Rule 21.18.
7 See Rule 21.19.
8 See Rule 21.22.
9 See Rule 21.21.
10 See Rule 21.23.
4 17
VerDate Sep<11>2014
18:18 Oct 30, 2024
Jkt 265001
period (collectively referred to herein as
‘‘auction response period’’) in
accordance with the applicable
Exchange Rule, during which time
Users may submit responses
(collectively referred to herein as
‘‘auction responses’’ or ‘‘auction
response messages’’) to an auction
message. An auction response may only
execute in the applicable auction and is
cancelled if it does not execute during
an auction. If an auction response is
unable to be processed by the System
during the auction response period, that
auction response is unable to receive
any execution opportunity or provide
liquidity (and possible price
improvement) on the Exchange.11
By way of further background,
Members may submit auction responses
via logical port connectivity.12 Each
logical port corresponds to a single
running order handler application.13
Each order handler application
processes the messages it receives from
the connected Member. This processing
includes determining whether the
message contains the required
information to enter the System and
where to send that message within the
System (i.e., to which matching engine).
Messages are sent from an order handler
application to a matching engine via
User Datagram Protocol (‘‘UDP’’). The
Exchange has multiple matching
engines, each of which controls the
book for one or more classes of options
listed for trading on the Exchange. The
Exchange may run multiple matching
engine applications on a single server.
Once at a matching engine, the message
is received at a server Network Interface
Card (‘‘NIC’’), which timestamps each
message upon arrival and places it in a
queue. Currently, each matching engine
processes all messages it receives from
a single queue from the NIC and
prioritizes the processing of all message
traffic, including auction responses, in
11 The Exchange notes that its review of auction
responses during August 2024 indicated that
approximately 4.25% of auction responses had no
opportunity to execute in their respective auctions,
notwithstanding being submitted within the auction
response period.
12 A User connects to the Exchange using a logical
port available through an API, such as the industrystandard FIX or BOE protocol. Logical ports
represent a technical port established by the
Exchange within the Exchange’s trading system for
the delivery and/or receipt of trading messages,
including orders, cancels, and auction responses.
13 The Exchange has numerous order handlers
and uses an algorithm to determine at random
which ports connect to which order handlers. This
algorithm attempts to spread out a single Member’s
ports across order handlers as well as balance the
number of ports that connect to a single order
handler.
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
86857
the order in which the NIC received
each message (i.e., in time priority).
Auction response messages
historically have waited in the same
queue as all other order and quote
message traffic. As such, if an auction
response is submitted at a time where
there is a deep queue of other message
traffic such as mass cancellation
messages or other orders and quotes, it
is possible that the auction response
may not be ‘‘processed’’ by the System
in sufficient time (i.e., prior to the end
of the auction response period).14
Particularly, the queued auction
response may not be able to participate
in the applicable auction mechanism
because the System had unprocessed
(queued) messages at the time of the
auction execution despite the fact that
the User submitted the auction response
prior to the end of the auction response
period. Auctioned orders may therefore
be missing out on potential price
improvement that may have otherwise
resulted if queued timely auction
response(s) were able to participate in
the auction.
The Exchange proposes to adopt new
functionality under Rule 21.14, new
subparagraph (e), which would apply
across all of its auction mechanisms to
increase the likelihood that timely
submitted auction responses may
participate in the applicable auction,
even during periods of high message
traffic.15 Under the proposed
functionality, at the time an auction
response period ends, the System will
continue to process its inbound queue
for any messages that were received by
the System before the end of the auction
period (including auction messages) for
up to an Exchange-determined period of
time, not to exceed 100 milliseconds
(which the Exchange may determine on
a class-by-class basis which would
apply to all auction mechanisms and
which would be announced with
reasonable advanced notice via
Exchange Notice). That is, any auction
responses that were in the queue before
the conclusion of the auction (as
identified by the NIC timestamp on the
message) would be processed as long as
14 For example, it currently takes the Exchange’s
system an approximate average of 12 microseconds
to process a single order/quote or auction response
message and, on average, approximately 79
microseconds to process a mass cancel message. As
such, under the current system, an auction response
that is entered after a mass cancel message is more
likely to be detrimentally delayed as compared to
a mass cancel message that is entered after an
auction response (i.e., a 79 microsecond ‘‘wait
time’’ versus a 12 microsecond ‘‘wait time’’).
15 Particularly, the proposed functionality would
apply to the following Exchange auction
mechanisms: COA, SUM, AIM, C–AIM, SAM, and
C–SAM.
E:\FR\FM\31OCN1.SGM
31OCN1
lotter on DSK11XQN23PROD with NOTICES1
86858
Federal Register / Vol. 89, No. 211 / Thursday, October 31, 2024 / Notices
the Exchange-determined time on a
class-by-class basis (not to exceed 100
milliseconds) is not exceeded. Only
auction messages received prior to the
execution of the applicable auction are
eligible to be processed for that auction.
The applicable auction will execute
once all messages, including auction
responses, received before the end time
of the auction response period have
been processed or the Exchangedetermined maximum time limit of up
to 100 milliseconds has elapsed,
whichever occurs first. This
continuation of processing the queue for
an additional amount of time for
messages that were received before the
end of the auction allows for auction
responses that would otherwise have
been canceled due to the conclusion of
the auction response period to still have
an opportunity to participate in the
auction. This provides such responses
with increased opportunities to
participate in the auction, even during
periods of high message traffic, thereby
potentially providing customers with
additional opportunities for price
improvement, while still providing a
processing cut off time to ensure auction
executions aren’t unduly delayed.
By way of an example, if an auction
with an auction response period set to
100 milliseconds were to start at 9:00:00
a.m., only auction responses that were
able to be processed by the System by
the conclusion of the auction at 9:00:100
would participate in the auction.
Accordingly, if, for example, an auction
response that was submitted at 9:00:090
(within the auction time response
period), is still in the message queue at
9:00:100, that response under the
current System functionality would be
canceled and not eligible to participate
in the auction. Under the proposal, at
9:00:100, because the System continues
to process all messages timestamped
before 9:00:100, that same auction
response submitted at 9:00:090 would
not automatically be canceled but rather
included in the auction as long as it was
able to be processed within an
additional 50 milliseconds, which is the
additional processing time set by the
Exchange and announced to market
participants with reasonable advance
notice via Exchange Notice for that class
in this example. Once that auction
response is up for processing (because
the System processes messages
sequentially in time order sequence),
the response will be able to participate
in the auction so long as it’s processed
by 9:00:150, notwithstanding such
processing would occur after the 100millisecond auction response period has
concluded. Any auction responses for
VerDate Sep<11>2014
18:18 Oct 30, 2024
Jkt 265001
the pending auction that are still
pending after the execution of the
auction would be canceled.16 The
Exchange notes that using the same
example, if an auction response was
submitted at 9:00:120, it would not be
eligible for processing because the
timestamp would identify it as being
submitted outside the auction response
period which was otherwise set to
conclude at 9:00:100.
The Exchange believes the proposed
rule change will result in increased
execution opportunities for liquidity
providers that submit auction responses
and enhance the potential for price
improvement for orders submitted to
each mechanism to the benefit of
investors and public interest. Indeed,
the Exchange believes the proposed
functionality will increase the
possibility that timely submitted
auction responses are processed by the
Exchange and have an opportunity for
execution in the applicable auction
mechanism, even if there is a deep
pending message queue. The Exchange
believes the proposed maximum
amount of additional time for
processing (i.e., 100 milliseconds) is
both an adequate amount of time to
provide pending auction responses with
such execution opportunity, but also an
amount minimal enough that impact to
other message traffic, if any, would be
de minimis. The Exchange also notes
that it previously discussed the
proposed maximum amount with
market participants who indicated that
100 milliseconds was acceptable to
them. The Exchange anticipates that in
the vast majority of cases, the additional
time needed after the conclusion of
auction response period, if any, to
process all pending auction responses
will be shorter than the maximum 100
milliseconds. To the extent the
Exchange determines a lesser amount of
time would be sufficient, the Exchange
could implement an additional amount
of time for processing auction responses
that is less than 100 milliseconds,
which time would be announced with
reasonable advance notice to market
participants via Exchange Notice.
Additionally, all message traffic
(including auction responses) will
continue to be processed in timepriority.
The Exchange also believes the
proposal will continue to allow the
Exchange to set each auction response
period to an amount of time that
16 If, for example, the System processed all
messages received before 9:00:100 by 9:00:110, then
the auction would execute at 9:00:110 (i.e., the
System does not need to wait until 9:00:150 to
execute an auction if all messages submitted prior
to the end time of the auction have been processed).
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
provides Members submitting responses
with sufficient time to respond to,
compete for, and provide price
improvement for orders, but also
continues to provide auctioned orders
with quick executions that may reduce
market and execution risk. Further, the
Exchange believes some market
participants choose to submit auction
responses towards the end of an auction
response period to better ensure the
response is at a price that the market
participant is willing to trade given the
market at the time the auction response
period concludes. As such, merely
extending the auction response period
in each auction would not itself prevent
auction responses from continuing to
miss the auction notwithstanding being
timely submitted.
Moreover, the Exchange notes that it
recently adopted the same functionality
on its affiliated exchange, Cboe
Exchange, Inc (‘‘Cboe Options’’).17
Implementation
The Exchange will announce via
Exchange Notice the implementation
date of implement the proposed rule
change, which shall be no later than 60
days after the operative date of this rule
filing.
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.18 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 19 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 20 requirement that
17 See Securities Exchange Act Release No. 97738
(June 15, 2023) 88 FR 40878 (June 22, 2023) (SR–
CBOE–2022–051) (Order Granting Accelerated
Approval of Proposed Rule Change as Modified by
Amendment Nos. 1 and 2 Relating to the Processing
of Auction Responses).
18 15 U.S.C. 78f(b).
19 15 U.S.C. 78f(b)(5).
20 Id.
E:\FR\FM\31OCN1.SGM
31OCN1
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 89, No. 211 / Thursday, October 31, 2024 / Notices
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
modifying its System to allow it to
potentially process more, if not all,
timely submitted auction responses may
provide further opportunities for
auctioned orders to receive price
improvement, which removes
impediments to a free and open market
and ultimately protects and benefits
investors. In particular, the proposed
rule change will continue to provide
investors with timely processing of their
options quote and order messages, while
providing investors who submit auction
orders with additional auction liquidity.
Indeed, the proposed rule change may
allow more investors additional
opportunities to receive price
improvement through an auction
mechanism. Additionally, because the
proposed functionality may provide
liquidity providers that submit auction
responses with additional execution
opportunities in auctions, the Exchange
believes they may be further encouraged
to submit more auction responses,
which may contribute to a deeper, more
liquid auction process that provides
investors with additional price
improvement opportunities.
The Exchange believes the proposed
rule change will result in increased
execution opportunities for liquidity
providers that submit auction responses
and enhance the potential for price
improvement for orders submitted to
each mechanism to the benefit of
investors and public interest. As
described above, the Exchange believes
the proposed functionality will increase
the possibility that timely submitted
auction responses are processed by the
Exchange and have an opportunity for
execution in the applicable auction
mechanism, even if there is a deep
pending message queue. The Exchange
believes the proposed maximum
amount of additional time for
processing (i.e., 100 milliseconds) is
both an adequate amount of time to
provide pending auction responses with
such execution opportunity, but also an
amount minimal enough that impact to
other message traffic, if any, would be
de minimis. The Exchange also
discussed the proposed maximum
amount of time with market participants
who indicated that 100 milliseconds
was acceptable to them. As represented
above, the Exchange anticipates that in
the vast majority of cases, the additional
time needed after the conclusion of
auction response period, if any, to
process all pending auction responses
will be shorter than the maximum 100
milliseconds. To the extent the
VerDate Sep<11>2014
18:18 Oct 30, 2024
Jkt 265001
Exchange determines a lesser amount of
time would be sufficient, the Exchange
could implement an additional amount
of time for processing auction responses
that is less than 100 milliseconds,
which time would be announced with
reasonable advance notice to market
participants via Exchange Notice.
Additionally, all message traffic
(including auction responses) will
continue to be processed in timepriority.
While the Exchange may increase the
length of auction response periods to
accommodate more auction responses,
the Exchange believes the proposed
functionality better addresses the issue
of missed auction responses.
Particularly, the Exchange believes the
proposed rule change will accommodate
more auction responses while also
mitigating market risk that may
accompany a longer auction period by
setting the length of an auction response
period to a timeframe that allows an
adequate amount of time for Members to
respond to an auction message and
provides the auctioned order with fast
executions. Additionally, the Exchange
believes Members may wait until the
end of an auction response period
regardless of how long the Exchange
sets it to in order to ensure they are
comfortable with the price the response
may execute at the conclusion of such
auction. As such, extending the auction
response period in each auction would
not itself prevent auction responses
from continuing to miss the auction
notwithstanding being timely
submitted.
The Exchange believes adopting the
proposed functionality for auction
responses would also better provide
customers with additional opportunities
for price improvements with little to no
impact to non-auction response message
traffic. Currently, auction responses
account for an incredibly small fraction
of message traffic submitted to the
Exchange. Indeed, based on the
Exchange’s analysis in August 2024,
auction response messages accounted
for a mere 0.01% of all message traffic
submitted to the Exchange. The
Exchange believe the processing of such
a small amount of message traffic, even
after the conclusion of an auction
response period, would therefore have
de minimis, if any, impact on the
processing of non-auction response
messages waiting in the queue. The
Exchange also notes that all messages
are currently processed one at a time by
the System. Therefore, the System still
needs to ‘‘process’’ all pending auction
responses, regardless of whether that
processing involves canceling the
pending auction response because it
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
86859
wasn’t processed in time to participate
in the auction or actually processing the
response to participate in the auction.
Either way, the non-auction response
messages will still have to wait for
processing of any pending responses
ahead of it. Conversely, the current
system may cause investors to miss out
on opportunities to receive price
improvement through the Exchange’s
auction mechanisms as the System is
configured to cancel pending auction
responses that ‘‘miss’’ the auction
execution, even if such responses were
timely submitted but not processed due
to the System being otherwise occupied
processing messages in queue ahead of
it. The Exchange therefore believes its
proposal will make it more likely that
the System processes timely submitted
auction responses and includes them in
applicable auctions, thus providing
them with more opportunities to
execute against auctioned orders, even
during periods of high message traffic.
The Exchange believes the proposed
rule change is not designed to permit
unfair discrimination between market
participants as all market participants
are allowed to submit auction
responses. Additionally, the Exchange
believes it’s reasonable to adopt the
proposed functionality for auction
responses as compared to other
messages because auction responses are
submitted only for the purpose of
executing (and possibly providing price
improvement) in auctions with short
durations, whereas other messages are
generally submitted to rest in or execute
against the book (and generally not used
to submit liquidity into auctions). As
discussed above, the Exchange believes
the benefits that result from the
adoption of the proposed functionality
for auction responses would outweigh
any potential negative impact to other
message traffic, including customer
orders, which have an incredibly low
chance of being affected by the
proposed change as discussed above
and which continue to receive priority
allocation in any event.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed changes will impose any
burden on intra-market competition that
is not necessary or appropriate in
furtherance of the purposes of the Act,
as the proposed rule change would
apply equally to all Members that
submit auction responses. As noted
E:\FR\FM\31OCN1.SGM
31OCN1
86860
Federal Register / Vol. 89, No. 211 / Thursday, October 31, 2024 / Notices
above, all market participants are able to
submit auction responses. Additionally,
the Exchange believes the adoption of
the proposed functionality for auction
responses would have little to no impact
on non-auction response message traffic.
As discussed, auction response
messages account for an incredibly
small fraction of message traffic
submitted to the Exchange. The
Exchange therefore believes the
processing of such a small amount of
message traffic by using the
functionality would have a de minimis,
if any, impact on the processing of nonauction response messages. Moreover,
the Exchange believes it’s reasonable to
adopt the proposed functionality for
auction responses as compared to other
messages because auction responses are
submitted only for the purpose of
executing (and possibly providing price
improvement) in auctions with short
durations, whereas other messages are
generally submitted to rest in or execute
against the book (and generally not used
to submit liquidity into auctions).
Lastly, the Exchange does not believe
the proposed rule change will impose
any burden on inter-market competition
that is not necessary or appropriate in
furtherance of the purposes of the Act,
as the proposed change affects how the
System processes auction responses that
may only participate in auctions that
occur on the Exchange.
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.
lotter on DSK11XQN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 21 and Rule
19b–4(f)(6) thereunder.22 Because the
proposed rule change does not: (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
21 15
22 17
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
VerDate Sep<11>2014
18:18 Oct 30, 2024
Jkt 265001
of the Act 23 and Rule 19b–4(f)(6)(iii)
thereunder.24
A proposed rule change filed under
Rule 19b–4(f)(6) 25 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),26 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. As discussed above, the Exchange
states that this proposed rule change
provides substantively identical
functionality as a rule previously
approved by the Commission from the
Exchange’s affiliate, Cboe Options.27
The Exchange believes that the waiver
of the operative delay will protect
investors by allowing the Exchange to
implement the proposed functionality
as soon as possible, which will benefit
investors as the System will potentially
process more, if not all, timely
submitted auction responses. The
Commission believes that the waiver of
the operative delay is consistent with
the protection of investors and the
public interest because it may permit
the Exchange to provide further
opportunities for auctioned orders to
receive price improvement, which may
in turn remove impediments to a free
and open market and benefit investors.
Accordingly, the Commission hereby
waives the 30-day operative delay and
designates the proposal operative upon
filing.28
At any time within 60 days of the
filing of this proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 29 of the Act to
23 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
25 17 CFR 240.19b–4(f)(6).
26 17 CFR 240.19b–4(f)(6)(iii).
27 See supra note 17.
28 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
29 15 U.S.C. 78s(b)(2)(B).
24 17
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CboeEDGX–2024–067 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–CboeEDGX–2024–067. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeEDGX–2024–067 and should be
E:\FR\FM\31OCN1.SGM
31OCN1
Federal Register / Vol. 89, No. 211 / Thursday, October 31, 2024 / Notices
submitted on or before November 21,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–25320 Filed 10–30–24; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–101443; File No. SR–
NASDAQ–2024–060]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Fees for Connectivity and Co-Location
Services
October 25, 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 October
11, 2024, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
lotter on DSK11XQN23PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s fees for connectivity and colocation services, as described further
below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, 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
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
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
18:18 Oct 30, 2024
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
VerDate Sep<11>2014
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
Jkt 265001
The purpose of the proposed rule
change is to amend the Exchange’s fees
relating to connectivity and co-location
services.3 Specifically, the Exchange
proposes a one-time adjustment to raise
its fees for connectivity and co-location
services in General 8, fees assessed for
remote multi-cast ITCH (‘‘MITCH’’)
Wave Ports in Equity 7, Section 115,
and certain fees related to Nasdaq
Testing Facilities in Equity 7, Section
130 by 10%, with certain exceptions.
General 8, Section 1 includes the
Exchange’s fees that relate to
connectivity, including fees for cabinets,
external telco/inter-cabinet connectivity
fees, fees for connectivity to the
Exchange, fees for connectivity to third
party services, fees for market data
connectivity, fees for cabinet power
install, and fees for additional charges
and services. General 8, Section 2
includes the Exchange’s fees for direct
connectivity services, including fees for
direct circuit connection to the
Exchange, fees for direct circuit
connection to third party services, and
fees for point of presence connectivity.
With the exceptions of the Exchange’s
GPS Antenna fees and the Cabinet
Proximity Option Fee for cabinets with
power density >10kW,4 the Exchange
3 The Exchange initially filed the proposed
pricing change on March 1, 2024 (SR–NASDAQ–
2024–008). On April 29, 2024, the Exchange
withdrew that filing and submitted SR–NASDAQ–
2024–020. The Exchange withdrew SR–NASDAQ–
2024–020 on June 27, 2024 and replaced it with
SR–NASDAQ–2024–032. The Exchange withdrew
SR–NASDAQ–2024–032 and replaced it with SR–
NASDAQ–2024–053 on September 10, 2024. The
instant filing replaces SR–NASDAQ–2024–053.
4 The Exchange proposes to exclude the GPS
Antenna fees from the proposed fee increase
because, unlike the other fees in General 8, the
Exchange recently increased its GPS Antenna fees.
See Securities Exchange Act Release No. 34–99126
(December 8, 2023), 88 FR 86712 (December 14,
2023) (SR–NASDAQ–2023–052). The Exchange also
proposes to exclude the Cabinet Proximity Option
Fee for cabinets with power density >10kW from
the proposed fee increase because the Exchange
recently established such fee. See Securities
Exchange Act Release No. 34–99796 (March 20,
2024), 89 FR 21088 (March 26, 2024) (SR–
NASDAQ–2024–013). Similarly, the Exchange
proposes to exclude from the proposed fee increase
those fees that the Exchange recently established for
services in its new NY11–4 expansion facility. See
Securities Exchange Act Release No. 34–101267
(October 7, 2024), 89 FR 82666 (October 11, 2024)
(SR–NASDAQ–2024–056).
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
86861
proposes to increase its fees throughout
General 8 by 10%.
In addition to increasing fees in
General 8, the Exchange also proposes
to increase certain fees in Equity 7.
First, the Exchange proposes to increase
the installation and recurring monthly
fees assessed for remote MITCH Wave
Ports 5 in Equity 7, Section 115(g)(1) by
10%. In addition, the Exchange
proposes to increase certain fees in
Section 130(d), which relate to the
Nasdaq Testing Facility. Equity 7,
Section 130(d)(1)(C) provides that
subscribers to the Nasdaq Testing
Facility (‘‘NTF’’) located in Carteret,
New Jersey shall pay a fee of $1,000 per
hand-off, per month for connection to
the NTF. The hand-off fee includes
either a 1Gb or 10Gb switch port and a
cross connect to the NTF. In addition,
Equity 7, Section 130(d)(1)(C) provides
that subscribers shall also pay a onetime installation fee of $1,000 per handoff. The Exchange proposes to increase
these aforementioned fees by 10% to
require that subscribers to the NTF shall
pay a fee of $1,100 per hand-off, per
month for connection to the NTF and a
one-time installation fee of $1,100 per
hand-off.
The proposed increases in fees would
enable the Exchange to maintain and
improve its market technology and
services to remain competitive with its
peers. Over the years, customer demand
for more sophisticated, higherthroughput, lower-latency, and higherpower connectivity solutions has
increased. The Exchange continues to
invest in maintaining, improving, and
enhancing its connectivity and colocation products, services, and
facilities—for the benefit and often at
the behest of its customers. Such
enhancements include refreshing
hardware and expanding Nasdaq’s
existing co-location facility to offer
customers additional space and power.
Nevertheless, and with the exception of
fees that were established as part of a
new service in 2017 (and have remained
unchanged since their adoption), the
Exchange has not increased any of the
fees included in the proposal since prior
to 2017, and many of the fees date back
to between 2010 and 2014 (where
inflation has been between roughly 15–
17%, as measured using the metric
described below). Nevertheless, the
Exchange proposes to increase its fees
only with respect to inflation that has
occurred since 2017.
5 Remote MITCH Wave Ports are for clients colocated at other third-party data centers, through
which NASDAQ TotalView ITCH market data is
distributed after delivery to those data centers via
wireless network.
E:\FR\FM\31OCN1.SGM
31OCN1
]]>Agencies
[Federal Register Volume 89, Number 211 (Thursday, October 31, 2024)]
[Notices]
[Pages 86856-86861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25320]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101434; File No. SR-CboeEDGX-2024-067]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt New Functionality Relating to the Processing of Auction Responses
October 25, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 16, 2024, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
````EDGX'''') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
[[Page 86857]]
the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
adopt new functionality relating to the processing of auction
responses. The text of the proposed rule change is provided in Exhibit
5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange currently offers a variety of auction mechanisms which
provide price improvement opportunities for eligible orders.
Particularly, the Exchange offers the following auction mechanisms:
Complex Order Auction (``COA''),\5\ Step Up Mechanism (``SUM''),\6\
Automated Improvement Mechanism (``AIM''),\7\ Complex AIM (``C-
AIM''),\8\ Solicitation Auction Mechanism (``SAM''),\9\ and Complex SAM
(``C-SAM'').\10\ The Exchange notes that eligible orders (``auctioned
order'') are electronically exposed for an Exchange-determined period
(collectively referred to herein as ``auction response period'') in
accordance with the applicable Exchange Rule, during which time Users
may submit responses (collectively referred to herein as ``auction
responses'' or ``auction response messages'') to an auction message. An
auction response may only execute in the applicable auction and is
cancelled if it does not execute during an auction. If an auction
response is unable to be processed by the System during the auction
response period, that auction response is unable to receive any
execution opportunity or provide liquidity (and possible price
improvement) on the Exchange.\11\
---------------------------------------------------------------------------
\5\ See Rule 21.20(d).
\6\ See Rule 21.18.
\7\ See Rule 21.19.
\8\ See Rule 21.22.
\9\ See Rule 21.21.
\10\ See Rule 21.23.
\11\ The Exchange notes that its review of auction responses
during August 2024 indicated that approximately 4.25% of auction
responses had no opportunity to execute in their respective
auctions, notwithstanding being submitted within the auction
response period.
---------------------------------------------------------------------------
By way of further background, Members may submit auction responses
via logical port connectivity.\12\ Each logical port corresponds to a
single running order handler application.\13\ Each order handler
application processes the messages it receives from the connected
Member. This processing includes determining whether the message
contains the required information to enter the System and where to send
that message within the System (i.e., to which matching engine).
Messages are sent from an order handler application to a matching
engine via User Datagram Protocol (``UDP''). The Exchange has multiple
matching engines, each of which controls the book for one or more
classes of options listed for trading on the Exchange. The Exchange may
run multiple matching engine applications on a single server. Once at a
matching engine, the message is received at a server Network Interface
Card (``NIC''), which timestamps each message upon arrival and places
it in a queue. Currently, each matching engine processes all messages
it receives from a single queue from the NIC and prioritizes the
processing of all message traffic, including auction responses, in the
order in which the NIC received each message (i.e., in time priority).
---------------------------------------------------------------------------
\12\ A User connects to the Exchange using a logical port
available through an API, such as the industry-standard FIX or BOE
protocol. Logical ports represent a technical port established by
the Exchange within the Exchange's trading system for the delivery
and/or receipt of trading messages, including orders, cancels, and
auction responses.
\13\ The Exchange has numerous order handlers and uses an
algorithm to determine at random which ports connect to which order
handlers. This algorithm attempts to spread out a single Member's
ports across order handlers as well as balance the number of ports
that connect to a single order handler.
---------------------------------------------------------------------------
Auction response messages historically have waited in the same
queue as all other order and quote message traffic. As such, if an
auction response is submitted at a time where there is a deep queue of
other message traffic such as mass cancellation messages or other
orders and quotes, it is possible that the auction response may not be
``processed'' by the System in sufficient time (i.e., prior to the end
of the auction response period).\14\ Particularly, the queued auction
response may not be able to participate in the applicable auction
mechanism because the System had unprocessed (queued) messages at the
time of the auction execution despite the fact that the User submitted
the auction response prior to the end of the auction response period.
Auctioned orders may therefore be missing out on potential price
improvement that may have otherwise resulted if queued timely auction
response(s) were able to participate in the auction.
---------------------------------------------------------------------------
\14\ For example, it currently takes the Exchange's system an
approximate average of 12 microseconds to process a single order/
quote or auction response message and, on average, approximately 79
microseconds to process a mass cancel message. As such, under the
current system, an auction response that is entered after a mass
cancel message is more likely to be detrimentally delayed as
compared to a mass cancel message that is entered after an auction
response (i.e., a 79 microsecond ``wait time'' versus a 12
microsecond ``wait time'').
---------------------------------------------------------------------------
The Exchange proposes to adopt new functionality under Rule 21.14,
new subparagraph (e), which would apply across all of its auction
mechanisms to increase the likelihood that timely submitted auction
responses may participate in the applicable auction, even during
periods of high message traffic.\15\ Under the proposed functionality,
at the time an auction response period ends, the System will continue
to process its inbound queue for any messages that were received by the
System before the end of the auction period (including auction
messages) for up to an Exchange-determined period of time, not to
exceed 100 milliseconds (which the Exchange may determine on a class-
by-class basis which would apply to all auction mechanisms and which
would be announced with reasonable advanced notice via Exchange
Notice). That is, any auction responses that were in the queue before
the conclusion of the auction (as identified by the NIC timestamp on
the message) would be processed as long as
[[Page 86858]]
the Exchange-determined time on a class-by-class basis (not to exceed
100 milliseconds) is not exceeded. Only auction messages received prior
to the execution of the applicable auction are eligible to be processed
for that auction. The applicable auction will execute once all
messages, including auction responses, received before the end time of
the auction response period have been processed or the Exchange-
determined maximum time limit of up to 100 milliseconds has elapsed,
whichever occurs first. This continuation of processing the queue for
an additional amount of time for messages that were received before the
end of the auction allows for auction responses that would otherwise
have been canceled due to the conclusion of the auction response period
to still have an opportunity to participate in the auction. This
provides such responses with increased opportunities to participate in
the auction, even during periods of high message traffic, thereby
potentially providing customers with additional opportunities for price
improvement, while still providing a processing cut off time to ensure
auction executions aren't unduly delayed.
---------------------------------------------------------------------------
\15\ Particularly, the proposed functionality would apply to the
following Exchange auction mechanisms: COA, SUM, AIM, C-AIM, SAM,
and C-SAM.
---------------------------------------------------------------------------
By way of an example, if an auction with an auction response period
set to 100 milliseconds were to start at 9:00:00 a.m., only auction
responses that were able to be processed by the System by the
conclusion of the auction at 9:00:100 would participate in the auction.
Accordingly, if, for example, an auction response that was submitted at
9:00:090 (within the auction time response period), is still in the
message queue at 9:00:100, that response under the current System
functionality would be canceled and not eligible to participate in the
auction. Under the proposal, at 9:00:100, because the System continues
to process all messages timestamped before 9:00:100, that same auction
response submitted at 9:00:090 would not automatically be canceled but
rather included in the auction as long as it was able to be processed
within an additional 50 milliseconds, which is the additional
processing time set by the Exchange and announced to market
participants with reasonable advance notice via Exchange Notice for
that class in this example. Once that auction response is up for
processing (because the System processes messages sequentially in time
order sequence), the response will be able to participate in the
auction so long as it's processed by 9:00:150, notwithstanding such
processing would occur after the 100-millisecond auction response
period has concluded. Any auction responses for the pending auction
that are still pending after the execution of the auction would be
canceled.\16\ The Exchange notes that using the same example, if an
auction response was submitted at 9:00:120, it would not be eligible
for processing because the timestamp would identify it as being
submitted outside the auction response period which was otherwise set
to conclude at 9:00:100.
---------------------------------------------------------------------------
\16\ If, for example, the System processed all messages received
before 9:00:100 by 9:00:110, then the auction would execute at
9:00:110 (i.e., the System does not need to wait until 9:00:150 to
execute an auction if all messages submitted prior to the end time
of the auction have been processed).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change will result in
increased execution opportunities for liquidity providers that submit
auction responses and enhance the potential for price improvement for
orders submitted to each mechanism to the benefit of investors and
public interest. Indeed, the Exchange believes the proposed
functionality will increase the possibility that timely submitted
auction responses are processed by the Exchange and have an opportunity
for execution in the applicable auction mechanism, even if there is a
deep pending message queue. The Exchange believes the proposed maximum
amount of additional time for processing (i.e., 100 milliseconds) is
both an adequate amount of time to provide pending auction responses
with such execution opportunity, but also an amount minimal enough that
impact to other message traffic, if any, would be de minimis. The
Exchange also notes that it previously discussed the proposed maximum
amount with market participants who indicated that 100 milliseconds was
acceptable to them. The Exchange anticipates that in the vast majority
of cases, the additional time needed after the conclusion of auction
response period, if any, to process all pending auction responses will
be shorter than the maximum 100 milliseconds. To the extent the
Exchange determines a lesser amount of time would be sufficient, the
Exchange could implement an additional amount of time for processing
auction responses that is less than 100 milliseconds, which time would
be announced with reasonable advance notice to market participants via
Exchange Notice. Additionally, all message traffic (including auction
responses) will continue to be processed in time-priority.
The Exchange also believes the proposal will continue to allow the
Exchange to set each auction response period to an amount of time that
provides Members submitting responses with sufficient time to respond
to, compete for, and provide price improvement for orders, but also
continues to provide auctioned orders with quick executions that may
reduce market and execution risk. Further, the Exchange believes some
market participants choose to submit auction responses towards the end
of an auction response period to better ensure the response is at a
price that the market participant is willing to trade given the market
at the time the auction response period concludes. As such, merely
extending the auction response period in each auction would not itself
prevent auction responses from continuing to miss the auction
notwithstanding being timely submitted.
Moreover, the Exchange notes that it recently adopted the same
functionality on its affiliated exchange, Cboe Exchange, Inc (``Cboe
Options'').\17\
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 97738 (June 15,
2023) 88 FR 40878 (June 22, 2023) (SR-CBOE-2022-051) (Order Granting
Accelerated Approval of Proposed Rule Change as Modified by
Amendment Nos. 1 and 2 Relating to the Processing of Auction
Responses).
---------------------------------------------------------------------------
Implementation
The Exchange will announce via Exchange Notice the implementation
date of implement the proposed rule change, which shall be no later
than 60 days after the operative date of this rule filing.
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.\18\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \19\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \20\ requirement that
[[Page 86859]]
the rules of an exchange not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
\20\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes modifying its System to allow
it to potentially process more, if not all, timely submitted auction
responses may provide further opportunities for auctioned orders to
receive price improvement, which removes impediments to a free and open
market and ultimately protects and benefits investors. In particular,
the proposed rule change will continue to provide investors with timely
processing of their options quote and order messages, while providing
investors who submit auction orders with additional auction liquidity.
Indeed, the proposed rule change may allow more investors additional
opportunities to receive price improvement through an auction
mechanism. Additionally, because the proposed functionality may provide
liquidity providers that submit auction responses with additional
execution opportunities in auctions, the Exchange believes they may be
further encouraged to submit more auction responses, which may
contribute to a deeper, more liquid auction process that provides
investors with additional price improvement opportunities.
The Exchange believes the proposed rule change will result in
increased execution opportunities for liquidity providers that submit
auction responses and enhance the potential for price improvement for
orders submitted to each mechanism to the benefit of investors and
public interest. As described above, the Exchange believes the proposed
functionality will increase the possibility that timely submitted
auction responses are processed by the Exchange and have an opportunity
for execution in the applicable auction mechanism, even if there is a
deep pending message queue. The Exchange believes the proposed maximum
amount of additional time for processing (i.e., 100 milliseconds) is
both an adequate amount of time to provide pending auction responses
with such execution opportunity, but also an amount minimal enough that
impact to other message traffic, if any, would be de minimis. The
Exchange also discussed the proposed maximum amount of time with market
participants who indicated that 100 milliseconds was acceptable to
them. As represented above, the Exchange anticipates that in the vast
majority of cases, the additional time needed after the conclusion of
auction response period, if any, to process all pending auction
responses will be shorter than the maximum 100 milliseconds. To the
extent the Exchange determines a lesser amount of time would be
sufficient, the Exchange could implement an additional amount of time
for processing auction responses that is less than 100 milliseconds,
which time would be announced with reasonable advance notice to market
participants via Exchange Notice. Additionally, all message traffic
(including auction responses) will continue to be processed in time-
priority.
While the Exchange may increase the length of auction response
periods to accommodate more auction responses, the Exchange believes
the proposed functionality better addresses the issue of missed auction
responses. Particularly, the Exchange believes the proposed rule change
will accommodate more auction responses while also mitigating market
risk that may accompany a longer auction period by setting the length
of an auction response period to a timeframe that allows an adequate
amount of time for Members to respond to an auction message and
provides the auctioned order with fast executions. Additionally, the
Exchange believes Members may wait until the end of an auction response
period regardless of how long the Exchange sets it to in order to
ensure they are comfortable with the price the response may execute at
the conclusion of such auction. As such, extending the auction response
period in each auction would not itself prevent auction responses from
continuing to miss the auction notwithstanding being timely submitted.
The Exchange believes adopting the proposed functionality for
auction responses would also better provide customers with additional
opportunities for price improvements with little to no impact to non-
auction response message traffic. Currently, auction responses account
for an incredibly small fraction of message traffic submitted to the
Exchange. Indeed, based on the Exchange's analysis in August 2024,
auction response messages accounted for a mere 0.01% of all message
traffic submitted to the Exchange. The Exchange believe the processing
of such a small amount of message traffic, even after the conclusion of
an auction response period, would therefore have de minimis, if any,
impact on the processing of non-auction response messages waiting in
the queue. The Exchange also notes that all messages are currently
processed one at a time by the System. Therefore, the System still
needs to ``process'' all pending auction responses, regardless of
whether that processing involves canceling the pending auction response
because it wasn't processed in time to participate in the auction or
actually processing the response to participate in the auction. Either
way, the non-auction response messages will still have to wait for
processing of any pending responses ahead of it. Conversely, the
current system may cause investors to miss out on opportunities to
receive price improvement through the Exchange's auction mechanisms as
the System is configured to cancel pending auction responses that
``miss'' the auction execution, even if such responses were timely
submitted but not processed due to the System being otherwise occupied
processing messages in queue ahead of it. The Exchange therefore
believes its proposal will make it more likely that the System
processes timely submitted auction responses and includes them in
applicable auctions, thus providing them with more opportunities to
execute against auctioned orders, even during periods of high message
traffic.
The Exchange believes the proposed rule change is not designed to
permit unfair discrimination between market participants as all market
participants are allowed to submit auction responses. Additionally, the
Exchange believes it's reasonable to adopt the proposed functionality
for auction responses as compared to other messages because auction
responses are submitted only for the purpose of executing (and possibly
providing price improvement) in auctions with short durations, whereas
other messages are generally submitted to rest in or execute against
the book (and generally not used to submit liquidity into auctions). As
discussed above, the Exchange believes the benefits that result from
the adoption of the proposed functionality for auction responses would
outweigh any potential negative impact to other message traffic,
including customer orders, which have an incredibly low chance of being
affected by the proposed change as discussed above and which continue
to receive priority allocation in any event.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed changes will impose any burden on intra-
market competition that is not necessary or appropriate in furtherance
of the purposes of the Act, as the proposed rule change would apply
equally to all Members that submit auction responses. As noted
[[Page 86860]]
above, all market participants are able to submit auction responses.
Additionally, the Exchange believes the adoption of the proposed
functionality for auction responses would have little to no impact on
non-auction response message traffic. As discussed, auction response
messages account for an incredibly small fraction of message traffic
submitted to the Exchange. The Exchange therefore believes the
processing of such a small amount of message traffic by using the
functionality would have a de minimis, if any, impact on the processing
of non-auction response messages. Moreover, the Exchange believes it's
reasonable to adopt the proposed functionality for auction responses as
compared to other messages because auction responses are submitted only
for the purpose of executing (and possibly providing price improvement)
in auctions with short durations, whereas other messages are generally
submitted to rest in or execute against the book (and generally not
used to submit liquidity into auctions). Lastly, the Exchange does not
believe the proposed rule change will impose any burden on inter-market
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, as the proposed change affects how the System
processes auction responses that may only participate in auctions that
occur on the Exchange.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \21\ and Rule 19b-4(f)(6) thereunder.\22\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 19b-
4(f)(6)(iii) thereunder.\24\
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(3)(A)(iii).
\22\ 17 CFR 240.19b-4(f)(6).
\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. As discussed above, the
Exchange states that this proposed rule change provides substantively
identical functionality as a rule previously approved by the Commission
from the Exchange's affiliate, Cboe Options.\27\ The Exchange believes
that the waiver of the operative delay will protect investors by
allowing the Exchange to implement the proposed functionality as soon
as possible, which will benefit investors as the System will
potentially process more, if not all, timely submitted auction
responses. The Commission believes that the waiver of the operative
delay is consistent with the protection of investors and the public
interest because it may permit the Exchange to provide further
opportunities for auctioned orders to receive price improvement, which
may in turn remove impediments to a free and open market and benefit
investors. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\28\
---------------------------------------------------------------------------
\25\ 17 CFR 240.19b-4(f)(6).
\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ See supra note 17.
\28\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of this proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeEDGX-2024-067 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeEDGX-2024-067. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeEDGX-2024-067 and should
be
[[Page 86861]]
submitted on or before November 21, 2024.
---------------------------------------------------------------------------
\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-25320 Filed 10-30-24; 8:45 am]
BILLING CODE 8011-01-P
