83 FR 1050 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Risk Controls and Modify Rules 21.1, 21.10, and 21.17 in Connection With Technology Migration of Cboe Exchanges
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 6 (January 9, 2018)
Federal Register Volume 83, Issue 6 (January 9, 2018)
| Page Range | 1050-1054 | |
| FR Document | 2018-00158 |
[Federal Register Volume 83, Number 6 (Tuesday, January 9, 2018)] [Notices] [Pages 1050-1054] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-00158] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82436; File No. SR-CboeBZX-2017-022] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Risk Controls and Modify Rules 21.1, 21.10, and 21.17 in Connection With Technology Migration of Cboe Exchanges January 3, 2018. 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 December 21, 2017, Cboe BZX Exchange, Inc. (the ``Exchange'') 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 has designated this proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with the Commission. 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). \4\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to update Rule 21.1, Rule 21.10, and Rule 21.17 to make modifications to the Exchange's rules and functionality applicable to the Exchange's options platform (``BZX Options'') in preparation for the technology migration of the Exchange's affiliated options exchanges onto the same technology as the Exchange. The text of the proposed rule change is available at the Exchange's website at www.markets.cboe.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 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 parts of such statements. (A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In 2016, the Exchange and its affiliates Cboe BYX Exchange, Inc. (``BYX''), Cboe EDGA Exchange, Inc. (``EDGA''), and Cboe EDGX Exchange, Inc. (``EDGX'') received approval to affect a merger (the ``Merger'') of the Exchange's then-current indirect parent company, Bats Global Markets, Inc., with Cboe Global Markets f/k/a CBOE Holdings, Inc. (``Cboe''), the direct parent of Cboe Exchange, Inc. (``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2 Options'', and together with the Exchange, EDGX, and Cboe Options the ``Cboe Affiliated Exchanges'').\5\ The Cboe Affiliated Exchanges are working to align certain system functionality, retaining only intended differences between the Cboe Affiliated Exchanges, [[Page 1051]] in the context of a technology migration. Thus, the proposals set forth below are intended to add certain functionality to the Exchange's System \6\ that is more similar to functionality offered by Cboe Options and C2 Options in order to ultimately provide a consistent technology offering for market participants who interact with the Cboe Affiliated Exchanges. Although the Exchange intentionally offers certain features that differ from those offered by its affiliates and will continue to do so, the Exchange believes that offering similar functionality to the extent practicable will reduce potential confusion for Users. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 79585 (December 16, 2016), 81 FR 93988 (December 22, 2016) (SR-BatsBZX-2016-68; SR- BatsBYX-2016-29; SR-BatsEDGA-2016-24; SR-BatsEDGX-2016-60). The Exchange notes that BYX and EDGA are also affiliated exchanges but do not operate options platforms and thus the integration described in this proposal is inapplicable to such exchanges. \6\ The ``System'' is the automated trading system used by BZX Options for the trading of options contracts. See Rule 16.1(a)(59). --------------------------------------------------------------------------- The Exchange is proposing to adopt periodic but relatively minor changes to functionality in order to reduce risk in connection with the technology migration described above; this proposal is related to two such proposed changes. First, the Exchange proposes to adopt certain risk functionality in Rule 21.17, which is based on functionality on Cboe Options, C2 Options and/or the options trading platform operated by EDGX (``EDGX Options''). The Exchange notes that it also proposes to make a related change to Rule 21.1 to eliminate functionality that overlaps with the proposed risk functionality. Second, the Exchange proposes to modify Rule 21.10 to allow it to provide additional information on transaction reports. Risk Controls The Exchange currently provides certain controls to Users \7\ of BZX Options pursuant to Rule 21.16, which describes the Exchange's ``Risk Monitor Mechanism.'' In addition, the Exchange provides a variety of optional risk controls to all Exchange Users pursuant to Interpretation and Policy .01 to Rule 11.13, including various controls related to the price of an order.\8\ The Exchange proposes to adopt various risk controls currently offered by Cboe Options, C2 Options, and/or EDGX Options and to codify such risk controls in Rule 21.17. --------------------------------------------------------------------------- \7\ The term ``User'' means any Options Member or Sponsored Participant who is authorized to obtain access to the Exchange's System (as defined below) pursuant to Rule 11.3. See Rule 16.1(a)(63). \8\ See Rule 11.13, Interpretation and Policy .01; see also Securities Exchange Act Release Nos. 60236 (July 2, 2009), 74 FR 34068 (July 14, 2009) (SR-BATS-2009-019) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Establish a Sponsored Access Risk Management Tool); 68330 (November 30, 2012), 77 FR 72894 (December 6, 2012) (SR-BATS-2012-045) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Expand the Availability of Risk Management Tools). --------------------------------------------------------------------------- Rule 21.17 currently permits the Exchange to share a User's risk settings with the Clearing Member that clears transactions on behalf of the User, which is a provision that the Exchange does not propose to modify. Rule 21.17 does not currently describe any applicable risk settings. As noted above, though certain risk settings offered for Users of BZX Options are codified in Rule 21.16, other optional risk settings offered by the Exchange are more generally described in Interpretation and Policy .01 to Rule 11.13 and have been described in other filings previously made by the Exchange.\9\ The Exchange proposes to provide more specificity in proposed Rule 21.17 regarding the risk settings the Exchange proposes to implement for BZX Options, which is consistent with the approach taken by Cboe Options and C2 Options. --------------------------------------------------------------------------- \9\ See id. --------------------------------------------------------------------------- As a general matter, the Exchange proposes to adopt various numeric values that would apply to the risk settings offered by the Exchange. Consistent with the rules of EDGX Options,\10\ the Exchange proposes to maintain all numeric values established by the Exchange pursuant to Rule 21.17 in publicly available specifications and/or published in a Regulatory Circular. Further, as a general matter, the proposed risk settings would be applied to all orders and quotes received by BZX Options rather than optionally configured and enabled by Users. Thus, proposed Rule 21.17 would explicitly state that unless otherwise specified, the price protections in the Rule, including the numeric values established by the Exchange, may not be disabled or adjusted. Below are descriptions of the specific risk settings proposed by the Exchange. --------------------------------------------------------------------------- \10\ See, e.g., Interpretation and Policies .04(c)(1), .04(e), .04(f) and .06 to EDGX Rule 21.20, which refer to various risk control values offered by EDGX Options with respect to complex orders that are communicated to members of EDGX via specifications and/or Regulatory Circular. --------------------------------------------------------------------------- The first risk control the Exchange proposes to adopt is the Market Order NBBO Width Protection. As proposed, if a User submits a Market Order \11\ to the System when the NBBO \12\ width is greater than x% of the midpoint of the NBBO, subject to minimum and maximum dollar values established by the Exchange, the System will reject or cancel back to the User the Market Order. The Exchange proposes to establish ``x'' and the minimum and maximum values on a class-by-class basis. The proposed Market Order NBBO Width Protection is based on and similar to the Market-Width Parameter set forth in C2 Options Rule 6.17(a)(1).\13\ In particular, similar to C2 Options Rule 6.17(a)(1), the Exchange would reject or cancel Market Orders when the width of the NBBO is greater than an acceptable range and would establish the numeric values that would ultimately determine acceptable quote widths on a class-by-class basis. However, in contrast to C2 Options Rule 6.17(a)(1), the Exchange does not propose to set forth specific boundaries for quote widths within the proposed rule. The Exchange believes that it needs flexibility to modify acceptable quote widths based on experience with the risk control and Users would always have access to the applicable settings in the Exchange's publicly available specifications and/or as published in a Regulatory Circular. The Exchange notes that the Nasdaq Options Market (``NOM'') has a similar quote width protection in place for market orders that does not specify the applicable limits within the rule.\14\ The Exchange notes that it does not currently have an NBBO width protection in place for Market Orders, and thus this protection is an additive control to protect against erroneous executions. --------------------------------------------------------------------------- \11\ See Rule 21.1(d)(5). \12\ As defined in Rule 16.1(a)(29), the term ``NBB'' means the national best bid, the term ``NBO'' means the national best offer, and the term ``NBBO'' means the national best bid or offer as calculated by BZX Options based on market information received by BZX Options from OPRA. \13\ The Exchange notes that identical or similar rules regarding risk controls offered by C2 Options are also provided in the rules of Cboe Options and on other options exchanges. However, the Exchange has focused on the Rules of C2 Options as well as EDGX Options for purposes of this proposal. \14\ See NOM Chapter VI, Section 6(c), which describes the NOM Market Order Spread Protection and states that ``System Orders that are Market Orders will be rejected if the best of the NBBO and the internal market BBO (the ``Reference BBO'') is wider than a preset threshold at the time the order is received by the System.'' --------------------------------------------------------------------------- The second risk control the Exchange proposes to adopt is the Limit Order Fat Finger Check. As proposed, if a User submits a buy (sell) limit order to the System with a price that is more than a buffer amount established by the Exchange above (below) the NBO (NBB), or, in the case of an order received prior to 9:30 a.m., above (below) the midpoint of the NBBO at the close of the market on the previous trading day, the System will reject or cancel back to the User the limit order. The proposed Limit Order Fat Finger Check is based on and similar to certain Limit Order Price Parameters set forth in C2 Options Rule 6.17(b). In particular, similar to C2 Options Rule 6.17(b)(1) and (b)(2), the Exchange would reject or cancel limit orders that are more than an acceptable difference from the applicable reference price and [[Page 1052]] would distinguish the applicable reference price depending on whether an order was received prior to market open or during the trading day. However, in contrast to C2 Options Rule 6.17(b), which states that the acceptable tick distance shall be no less than two minimum increment ticks for simple orders, the Exchange does not propose to set forth specific boundaries for the acceptable difference within the proposed rule. As is true for the Market Order NBBO Width Protection described above, the Exchange believes that it needs flexibility to modify the acceptable price range based on experience with the risk control and Users would always have access to the applicable settings in the Exchange's publicly available specifications and/or as published in a Regulatory Circular. The Exchange notes that the BOX Options Exchange (``BOX'') has a similar price protection in place for limit orders that does specify potential percentages in the Rule but also permits BOX to modify such percentages via Information Circular without establishing outer boundaries.\15\ The Exchange notes that EDGX Options also currently applies mandatory fat finger protection to complex orders received by EDGX Options pursuant to Interpretation and Policy .06 to EDGX Rule 21.20. The Exchange also notes that it currently offers price protections analogous to the proposed Limit Order Fat Finger Check for orders other than complex orders (i.e., ``simple orders''), however, as noted above such price protections are optional. --------------------------------------------------------------------------- \15\ See BOX Rule 7290, which describes the Price Protection for Limit Orders and Quotes and states that ``[t]he price parameter is set by either the Exchange or the Participant on an underlying security basis and is a percentage of the NBBO on the opposite side of the incoming order or quote. Unless determined otherwise by the Exchange and announced to Participants via Informational Circular, the specified percentage shall be: 100% for the contra-side NBB or NBO priced at or below $0.25; and 50% for the contraside NBB or NBO priced above $0.25.'' --------------------------------------------------------------------------- The third risk control the Exchange proposes to adopt is the Buy Order Put Check. As proposed, if a User enters a buy limit order for a put with a price that is higher than or equal to the strike price of the option, the System will reject or cancel back to the User the limit order. Similarly, if a User enters a buy Market Order for a put that would execute at (or the remaining portion would execute at) a price higher than or equal to the strike price of the option, the System will reject or cancel back to the User the Market Order (or remaining portion). The Exchange does not propose to apply this check to adjusted options. The proposed Buy Order Put Check is based on and substantively identical to the Put Strike Price Value Check set forth in C2 Options Rule 6.17(d)(1)(A). The Exchange notes that it does not currently have an analogous risk control in place, and thus, this protection is an additive control to protect against erroneous executions. The fourth and final risk control the Exchange proposes to adopt is the Drill-Through Price Protection. As proposed, the Drill-Through Price Protection feature is a price protection mechanism applicable to all orders under which a buy (sell) order will not be executed at a price that is higher (lower) than the NBO (NBB) at the time of order entry plus (minus) a buffer amount established by the Exchange (the ``Drill-Through Price''). If a buy (sell) order would execute or post to the BZX Options Book at a price higher (lower) than the Drill- Through Price, the System will instead post the order to the BZX Options Book at the Drill-Through Price, unless the terms of the order instruct otherwise. Any order (or unexecuted portion thereof) will rest in the BZX Options Book (based on the time at which it enters the book for priority purposes) for a time period in milliseconds that may not exceed three seconds with a price equal to the Drill-Through Price. If the order (or unexecuted portion thereof) does not execute during that time period, the System will cancel it. While similar to and based on C2 Options Rule 6.17(a)(2), the proposed Rule is more directly based on Interpretation and Policy .04, to EDGX Options Rule 21.20, which describes Drill-Through Price Protection applicable to complex orders on EDGX Options. The proposed Drill-Through Price Protection is identical to Interpretation and Policy .04 to EDGX Options Rule 21.20 with the exceptions of necessary differences between language related to simple orders and complex orders and that in contrast to a User being able to modify the protection to a more or less restrictive control, which is available for the control on EDGX Options for complex orders, the Exchange proposes to apply standard Drill-Through Price Protection to all orders and such protection cannot be modified. In connection with the changes described above, the Exchange proposes to remove a portion of the definition of a [sic] Market Orders to remove a risk protection currently in place that overlaps with various risk controls described above. Market Orders are currently defined in in Rule 21.1(d)(5) as ``orders to buy or sell at the best price available at the time of execution.'' Rule 21.1(d)(5) further states that ``[a]ny portion of a Market Order that would execute at a price more than $0.50 or 5 percent worse than the NBBO at the time the order initially reaches BZX Options, whichever is greater, will be cancelled.'' The Exchange proposes to remove this price protection for Market Orders because it is no longer necessary in light of the proposed risk controls described above (other than the Limit Order Fat Finger Check, which is inapplicable to Market Orders). In particular, the Drill-Through Price Protection provides a control with respect to the execution prices of Market Orders and would be duplicative of the existing control. Details in Transaction Reports The Exchange also proposes to modify Rule 21.10, Anonymity, to allow it to provide additional information on transaction reports. Current Rule 21.10(a) states that ``[t]he intra-day transaction reports produced by the System will indicate the details of the transactions, and shall not reveal contra party identities.'' The Exchange notes that this provision is consistent with Rule 11.15(d) of its cash equities trading platform (``BZX Equities'') but is not a common provision in the rules of other options exchanges, including Cboe Options or C2 Options, which do not have such a provision. The Exchange currently provides details regarding contra-parties on various end of day and end of month reports for clearing purposes, and this information is similarly readily available through the Options Clearing Corporation (``OCC'') for clearing purposes. The Exchange proposes to remove the restriction on providing contra party identities and to specifically state that aggregated and individual transaction reports produced by the System will indicate the details of a User's transactions, including the contra party's MPID, capacity, and clearing firm account number. Current paragraph (c) of Rule 21.10 contains three exceptions to the general rule of anonymity, providing that the ``Exchange shall reveal a User's identity in the following circumstances: (1) For regulatory purposes or to comply with an order of an arbitrator or court; (2) if both Users to the transaction consent; (3) Unless otherwise instructed by a User, the Exchange will reveal to a User, no later than the end of the day on the date an anonymous trade was executed, when the User's Order has been decremented by another Order submitted by that same User.'' The Exchange proposes to retain only the first exception, regarding regulatory purposes or to comply with an order of [[Page 1053]] an arbitrator or court, as the second and third exceptions are no longer necessary to the extent the Exchange will provide information on individual and aggregate transaction reports produced by the System. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \16\ in general, and furthers the objectives of Section 6(b)(5) of the Act \17\ in particular, in that it is designed 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. In particular, consistent rules and functionality between the Exchange and its affiliated exchanges will reduce complexity and help avoid potential confusion by the Users of the Exchange that are also participants on other Cboe Affiliated Exchanges.\18\ --------------------------------------------------------------------------- \16\ 15 U.S.C. 78f(b). \17\ 15 U.S.C. 78f(b)(5). \18\ The Exchange notes that its affiliate, EDGX, also intends to adopt changes that are substantively identical to the changes set forth in this proposal. In addition, as Cboe Options and C2 Options migrate to the same technology platform as the Exchange, Cboe Options and C2 Options intend to modify rules and functionality to be consistent with the Exchange and EDGX, unless the retention of differences is intended. --------------------------------------------------------------------------- The Exchange believes the proposed amendment will reduce complexity and increase the understanding of the Exchange's operations for all Users of the Exchange. In particular, by adopting certain mandatory risk controls, the Exchange's functionality will be more similar to that of Cboe Options and C2 Options. In turn, when Cboe Options and C2 Options are migrated to the same technology as that of the Exchange, Users of the Exchange and other Cboe Affiliated Exchanges will have access to similar functionality on all Cboe Affiliated Exchanges. As such, the proposed rule change would foster cooperation and coordination with persons engaged in facilitating transactions in securities and would remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange further believes that the proposed price protection mechanisms and risk controls will protect investors and the public interest and maintain fair and orderly markets by mitigating potential risks associated with market participants entering orders and quotes at unintended prices, and risks associated with orders and quotes trading at prices that are extreme and potentially erroneous, which may likely have resulted from human or operational error. While the Exchange has previously offered many risk controls under Interpretation and Policy .01 to Rule 11.13 and other filings previously made by the Exchange,\19\ the Exchange believes that Users will benefit from the additional specificity provided under the proposed rules, particularly because, in contrast to optional risk control functionality, the proposed rules provide that each proposed risk control will be applied to all orders received by BZX Options. Although the Exchange's proposed price protection mechanisms and risk controls are similar to and based on existing rules of C2 Options or the Exchange, the Exchange notes that it has not proposed to establish outer boundaries or limits to the levels at which the mechanisms can be set. The Exchange believes this is reasonable and is necessary to afford the Exchange the flexibility to establish and modify the default parameters in order to protect investors and the public interest and maintain a fair and orderly market. The Exchange again notes that the applicable specified levels will always be available in the Exchange's publicly available specifications and/or as published in a Regulatory Circular. The Exchange also notes that this approach is consistent with certain rules of other options exchanges, which similarly offer risk controls that can be modified without regard to a rule based limitation.\20\ --------------------------------------------------------------------------- \19\ See supra, note 8. \20\ See supra, notes 14 and 15. --------------------------------------------------------------------------- The Exchange believes the proposed changes to Rule 21.10 that will permit the Exchange to provide additional detail in transaction reports is consistent with the rules of other options exchanges that do not contain explicit restrictions on providing such information. The proposed changes are similarly consistent with a variety of current Exchange and options industry practices, including the fact that clearing information available through OCC already provides contra- party information, as well as the ability of a User on the Exchange to disclose their identity when quoting.\21\ Based on the foregoing, the Exchange believes the proposed changes to Rule 21.10 are consistent with Section 6(b)(5) of the Act \22\ in particular, in that they are designed to foster cooperation and coordination with persons engaged in clearing, settling, processing information with respect to, and facilitating transactions in securities. --------------------------------------------------------------------------- \21\ See, e.g., Rule 21.1(c)(1), defining ``Attributable Orders'' as orders that are designated for display (price and size) including the User's market participant identifier (``MPID''). \22\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- (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 notes that the proposal will further promote consistency between the Exchange and its affiliated exchanges, and is part of a larger technology integration that will ultimately reduce complexity for Users of the Exchange that are also participants on other Cboe Affiliated Exchanges. The Exchange does not believe that the proposed changes will have any direct impact on competition. Thus, the Exchange does not believe that the proposal creates any significant impact on competition. (C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act \23\ and paragraph (f)(6) of Rule 19b-4 thereunder,\24\ the Exchange has designated this rule filing as non-controversial. The Exchange has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. --------------------------------------------------------------------------- \23\ 15 U.S.C. 78s(b)(3)(A). \24\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- 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, Rule [[Page 1054]] 19b-4(f)(6)(iii) \26\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange notes that the proposal will promote consistency between the Exchange and its affiliated exchanges, and is part of a larger technology integration that will ultimately reduce complexity for Users of the Exchange that are also participants on other Cboe Affiliated Exchanges. The Exchange further notes that allowing the Exchange to move forward with the proposed changes without an operative delay will ensure that the technology integration can continue with periodic but measured changes rather than implementing several changes at once. Furthermore, the Exchange states that the implementation of the risk controls will help to avoid potentially erroneous executions. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change as operative upon filing.\27\ --------------------------------------------------------------------------- \25\ 17 CFR 240.19b-4(f)(6). \26\ 17 CFR 240.19b-4(f)(6)(iii). \27\ For purposes only of waiving the 30-day operative delay, the Commission has also 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 the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-CboeBZX-2017-022 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-CboeBZX-2017-022. 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 (http://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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CboeBZX-2017-022 and should be submitted on or before January 30, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\28\ --------------------------------------------------------------------------- \28\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-00158 Filed 1-8-18; 8:45 am] BILLING CODE 8011-01-P
![1050 Federal Register / Vol. 83, No. 6 / Tuesday, January 9, 2018 / Notices
III. Date of Effectiveness of the Washington, DC 20549 on official I. Self-Regulatory Organization’s
Proposed Rule Change, and Timing for business days between the hours of Statement of the Terms of Substance of
Commission Action 10:00 a.m. and 3:00 p.m. Copies of the the Proposed Rule Change
Within 45 days of the date of filing also will be available for The Exchange filed a proposal to
publication of this notice in the Federal inspection and copying at the principal update Rule 21.1, Rule 21.10, and Rule
Register or within such longer period office of DTC and on DTCC’s website 21.17 to make modifications to the
up to 90 days (i) as the Commission may (http://dtcc.com/legal/sec-rule- Exchange’s rules and functionality
designate if it finds such longer period filings.aspx). All comments received applicable to the Exchange’s options
to be appropriate and publishes its will be posted without change. Persons platform (‘‘BZX Options’’) in
reasons for so finding or (ii) as to which submitting comments are cautioned that preparation for the technology migration
the self- regulatory organization we do not redact or edit personal of the Exchange’s affiliated options
consents, the Commission will: identifying information from comment exchanges onto the same technology as
(A) By order approve or disapprove submissions. You should submit only the Exchange.
such proposed rule change, or information that you wish to make The text of the proposed rule change
(B) institute proceedings to determine available publicly. All submissions is available at the Exchange’s website at
whether the proposed rule change should refer to File Number SR–DTC– www.markets.cboe.com, at the principal
should be disapproved. 2017–024 and should be submitted on office of the Exchange, and at the
The proposal shall not take effect or before January 30, 2018. Commission’s Public Reference Room.
until all regulatory actions required For the Commission, by the Division of
with respect to the proposal are Trading and Markets, pursuant to delegated II. Self-Regulatory Organization’s
completed. authority.39 Statement of the Purpose of, and
Eduardo A. Aleman, Statutory Basis for, the Proposed Rule
IV. Solicitation of Comments Change
Assistant Secretary.
Interested persons are invited to [FR Doc. 2018–00159 Filed 1–8–18; 8:45 am] In its filing with the Commission, the
submit written data, views and BILLING CODE 8011–01–P Exchange included statements
arguments concerning the foregoing, concerning the purpose of and basis for
including whether the proposed rule the proposed rule change and discussed
change is consistent with the Act. SECURITIES AND EXCHANGE any comments it received on the
Comments may be submitted by any of COMMISSION proposed rule change. The text of these
the following methods: statements may be examined at the
[Release No. 34–82436; File No. SR– places specified in Item IV below. The
Electronic Comments CboeBZX–2017–022] Exchange has prepared summaries, set
• Use the Commission’s internet forth in Sections A, B, and C below, of
comment form (http://www.sec.gov/ Self-Regulatory Organizations; Cboe
the most significant parts of such
rules/sro.shtml); or BZX Exchange, Inc.; Notice of Filing
statements.
• Send an email to rule-comments@ and Immediate Effectiveness of a
sec.gov. Please include File Number SR– Proposed Rule Change To Adopt Risk (A) Self-Regulatory Organization’s
DTC–2017–024 on the subject line. Controls and Modify Rules 21.1, 21.10, Statement of the Purpose of, and
and 21.17 in Connection With Statutory Basis for, the Proposed Rule
Paper Comments Technology Migration of Cboe Change
• Send paper comments in triplicate Exchanges
1. Purpose
to Secretary, Securities and Exchange January 3, 2018.
Commission, 100 F Street NE, In 2016, the Exchange and its
Pursuant to Section 19(b)(1) of the affiliates Cboe BYX Exchange, Inc.
Washington, DC 20549.
Securities Exchange Act of 1934 (the (‘‘BYX’’), Cboe EDGA Exchange, Inc.
All submissions should refer to File ‘‘Act’’),1 and Rule 19b–4 thereunder,2 (‘‘EDGA’’), and Cboe EDGX Exchange,
Number SR–DTC–2017–024. This file notice is hereby given that on December Inc. (‘‘EDGX’’) received approval to
number should be included on the 21, 2017, Cboe BZX Exchange, Inc. (the affect a merger (the ‘‘Merger’’) of the
subject line if email is used. To help the ‘‘Exchange’’) filed with the Securities Exchange’s then-current indirect parent
Commission process and review your and Exchange Commission company, Bats Global Markets, Inc.,
comments more efficiently, please use (‘‘Commission’’) the proposed rule with Cboe Global Markets f/k/a CBOE
only one method. The Commission will change as described in Items I and II Holdings, Inc. (‘‘Cboe’’), the direct
post all comments on the Commission’s below, which Items have been prepared parent of Cboe Exchange, Inc. (‘‘Cboe
internet website (http://www.sec.gov/ by the Exchange. The Exchange has Options’’) and Cboe C2 Exchange, Inc.
rules/sro.shtml). Copies of the designated this proposal as a ‘‘non- (‘‘C2 Options’’, and together with the
submission, all subsequent controversial’’ proposed rule change Exchange, EDGX, and Cboe Options the
amendments, all written statements pursuant to Section 19(b)(3)(A) of the ‘‘Cboe Affiliated Exchanges’’).5 The
with respect to the proposed rule Act 3 and Rule 19b–4(f)(6)(iii) Cboe Affiliated Exchanges are working
change that are filed with the thereunder,4 which renders it effective to align certain system functionality,
Commission, and all written upon filing with the Commission. The retaining only intended differences
communications relating to the Commission is publishing this notice to between the Cboe Affiliated Exchanges,
proposed rule change between the
sradovich on DSK3GMQ082PROD with NOTICES
solicit comments on the proposed rule
Commission and any person, other than change from interested persons. 5 See Securities Exchange Act Release No. 79585
those that may be withheld from the (December 16, 2016), 81 FR 93988 (December 22,
public in accordance with the 39 17 CFR 200.30–3(a)(12).
2016) (SR–BatsBZX–2016–68; SR–BatsBYX–2016–
provisions of 5 U.S.C. 552, will be 1 15
29; SR–BatsEDGA–2016–24; SR–BatsEDGX–2016–
U.S.C. 78s(b)(1). 60). The Exchange notes that BYX and EDGA are
available for website viewing and 2 17 CFR 240.19b–4.
also affiliated exchanges but do not operate options
printing in the Commission’s Public 3 15 U.S.C. 78s(b)(3)(A).
platforms and thus the integration described in this
Reference Room, 100 F Street NE, 4 17 CFR 240.19b–4(f)(6)(iii). proposal is inapplicable to such exchanges.
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![1052 Federal Register / Vol. 83, No. 6 / Tuesday, January 9, 2018 / Notices
would distinguish the applicable Check is based on and substantively portion of a Market Order that would
reference price depending on whether identical to the Put Strike Price Value execute at a price more than $0.50 or 5
an order was received prior to market Check set forth in C2 Options Rule percent worse than the NBBO at the
open or during the trading day. 6.17(d)(1)(A). The Exchange notes that it time the order initially reaches BZX
However, in contrast to C2 Options Rule does not currently have an analogous Options, whichever is greater, will be
6.17(b), which states that the acceptable risk control in place, and thus, this cancelled.’’ The Exchange proposes to
tick distance shall be no less than two protection is an additive control to remove this price protection for Market
minimum increment ticks for simple protect against erroneous executions. Orders because it is no longer necessary
orders, the Exchange does not propose The fourth and final risk control the in light of the proposed risk controls
to set forth specific boundaries for the Exchange proposes to adopt is the Drill- described above (other than the Limit
acceptable difference within the Through Price Protection. As proposed, Order Fat Finger Check, which is
proposed rule. As is true for the Market the Drill-Through Price Protection inapplicable to Market Orders). In
Order NBBO Width Protection feature is a price protection mechanism particular, the Drill-Through Price
described above, the Exchange believes applicable to all orders under which a Protection provides a control with
that it needs flexibility to modify the buy (sell) order will not be executed at respect to the execution prices of Market
acceptable price range based on a price that is higher (lower) than the Orders and would be duplicative of the
experience with the risk control and NBO (NBB) at the time of order entry existing control.
Users would always have access to the plus (minus) a buffer amount
established by the Exchange (the ‘‘Drill- Details in Transaction Reports
applicable settings in the Exchange’s
publicly available specifications and/or Through Price’’). If a buy (sell) order The Exchange also proposes to modify
as published in a Regulatory Circular. would execute or post to the BZX Rule 21.10, Anonymity, to allow it to
The Exchange notes that the BOX Options Book at a price higher (lower) provide additional information on
Options Exchange (‘‘BOX’’) has a similar than the Drill-Through Price, the System transaction reports. Current Rule
price protection in place for limit orders will instead post the order to the BZX 21.10(a) states that ‘‘[t]he intra-day
that does specify potential percentages Options Book at the Drill-Through Price, transaction reports produced by the
in the Rule but also permits BOX to unless the terms of the order instruct System will indicate the details of the
modify such percentages via otherwise. Any order (or unexecuted transactions, and shall not reveal contra
Information Circular without portion thereof) will rest in the BZX party identities.’’ The Exchange notes
establishing outer boundaries.15 The Options Book (based on the time at that this provision is consistent with
Exchange notes that EDGX Options also which it enters the book for priority Rule 11.15(d) of its cash equities trading
currently applies mandatory fat finger purposes) for a time period in platform (‘‘BZX Equities’’) but is not a
protection to complex orders received milliseconds that may not exceed three common provision in the rules of other
by EDGX Options pursuant to seconds with a price equal to the Drill- options exchanges, including Cboe
Interpretation and Policy .06 to EDGX Through Price. If the order (or Options or C2 Options, which do not
Rule 21.20. The Exchange also notes unexecuted portion thereof) does not have such a provision. The Exchange
that it currently offers price protections execute during that time period, the currently provides details regarding
analogous to the proposed Limit Order System will cancel it. While similar to contra-parties on various end of day and
Fat Finger Check for orders other than and based on C2 Options Rule end of month reports for clearing
complex orders (i.e., ‘‘simple orders’’), 6.17(a)(2), the proposed Rule is more purposes, and this information is
however, as noted above such price directly based on Interpretation and similarly readily available through the
protections are optional. Policy .04, to EDGX Options Rule 21.20, Options Clearing Corporation (‘‘OCC’’)
The third risk control the Exchange which describes Drill-Through Price for clearing purposes.
proposes to adopt is the Buy Order Put Protection applicable to complex orders The Exchange proposes to remove the
Check. As proposed, if a User enters a on EDGX Options. The proposed Drill- restriction on providing contra party
buy limit order for a put with a price Through Price Protection is identical to identities and to specifically state that
that is higher than or equal to the strike Interpretation and Policy .04 to EDGX aggregated and individual transaction
price of the option, the System will Options Rule 21.20 with the exceptions reports produced by the System will
reject or cancel back to the User the of necessary differences between indicate the details of a User’s
limit order. Similarly, if a User enters a language related to simple orders and transactions, including the contra
buy Market Order for a put that would complex orders and that in contrast to party’s MPID, capacity, and clearing
execute at (or the remaining portion a User being able to modify the firm account number.
would execute at) a price higher than or protection to a more or less restrictive Current paragraph (c) of Rule 21.10
equal to the strike price of the option, control, which is available for the contains three exceptions to the general
the System will reject or cancel back to control on EDGX Options for complex rule of anonymity, providing that the
the User the Market Order (or remaining orders, the Exchange proposes to apply ‘‘Exchange shall reveal a User’s identity
portion). The Exchange does not standard Drill-Through Price Protection in the following circumstances: (1) For
propose to apply this check to adjusted to all orders and such protection cannot regulatory purposes or to comply with
options. The proposed Buy Order Put be modified. an order of an arbitrator or court; (2) if
In connection with the changes both Users to the transaction consent;
15 See BOX Rule 7290, which describes the Price described above, the Exchange proposes (3) Unless otherwise instructed by a
Protection for Limit Orders and Quotes and states to remove a portion of the definition of User, the Exchange will reveal to a User,
that ‘‘[t]he price parameter is set by either the no later than the end of the day on the
sradovich on DSK3GMQ082PROD with NOTICES
a [sic] Market Orders to remove a risk
Exchange or the Participant on an underlying
security basis and is a percentage of the NBBO on
protection currently in place that date an anonymous trade was executed,
the opposite side of the incoming order or quote. overlaps with various risk controls when the User’s Order has been
Unless determined otherwise by the Exchange and described above. Market Orders are decremented by another Order
announced to Participants via Informational currently defined in in Rule 21.1(d)(5) submitted by that same User.’’ The
Circular, the specified percentage shall be: 100% for
the contra-side NBB or NBO priced at or below
as ‘‘orders to buy or sell at the best price Exchange proposes to retain only the
$0.25; and 50% for the contraside NBB or NBO available at the time of execution.’’ Rule first exception, regarding regulatory
priced above $0.25.’’ 21.1(d)(5) further states that ‘‘[a]ny purposes or to comply with an order of
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![1054 Federal Register / Vol. 83, No. 6 / Tuesday, January 9, 2018 / Notices
19b–4(f)(6)(iii) 26 permits the • Send an email to rule-comments@ SECURITIES AND EXCHANGE
Commission to designate a shorter time sec.gov. Please include File Number SR– COMMISSION
if such action is consistent with the CboeBZX–2017–022 on the subject line.
protection of investors and the public [Release No. 34–82442; File No. SR–Phlx–
interest. The Exchange has asked the Paper Comments 2017–108]
Commission to waive the 30-day • Send paper comments in triplicate Self-Regulatory Organizations; Nasdaq
operative delay so that the proposal may to Brent J. Fields, Secretary, Securities PHLX LLC; Notice of Filing and
become operative immediately upon Immediate Effectiveness of Proposed
and Exchange Commission, 100 F Street
filing. The Exchange notes that the Rule Change To Amend the
NE, Washington, DC 20549–1090.
proposal will promote consistency Exchange’s Pricing Schedule
between the Exchange and its affiliated All submissions should refer to File
exchanges, and is part of a larger Number SR–CboeBZX–2017–022. This January 4, 2018.
technology integration that will file number should be included on the Pursuant to Section 19(b)(1) of the
ultimately reduce complexity for Users subject line if email is used. To help the Securities Exchange Act of 1934
of the Exchange that are also Commission process and review your (‘‘Act’’),1 and Rule 19b–4 thereunder,2
participants on other Cboe Affiliated comments more efficiently, please use notice is hereby given that on December
Exchanges. The Exchange further notes only one method. The Commission will 21, 2017, Nasdaq PHLX LLC (‘‘Phlx’’ or
that allowing the Exchange to move post all comments on the Commission’s ‘‘Exchange’’) filed with the Securities
forward with the proposed changes internet website (http://www.sec.gov/ and Exchange Commission
without an operative delay will ensure rules/sro.shtml). Copies of the (‘‘Commission’’) the proposed rule
that the technology integration can submission, all subsequent change as described in Items I, II, and
continue with periodic but measured III below, which Items have been
amendments, all written statements
changes rather than implementing prepared by the Exchange. The
with respect to the proposed rule
several changes at once. Furthermore, Commission is publishing this notice to
change that are filed with the
the Exchange states that the solicit comments on the proposed rule
implementation of the risk controls will Commission, and all written
change from interested persons.
help to avoid potentially erroneous communications relating to the
executions. The Commission believes proposed rule change between the I. Self-Regulatory Organization’s
that waiver of the 30-day operative Commission and any person, other than Statement of the Terms of Substance of
delay is consistent with the protection those that may be withheld from the the Proposed Rule Change
of investors and the public interest. public in accordance with the The Exchange proposes to amend the
Accordingly, the Commission hereby provisions of 5 U.S.C. 552, will be Exchange’s Pricing Schedule in the
waives the operative delay and available for website viewing and following respects: (i) Modify the
designates the proposed rule change as printing in the Commission’s Public Simple Order rebate applicable to
operative upon filing.27 Reference Room, 100 F Street NE, Specialists 3 and Market Makers 4 for
At any time within 60 days of the Washington, DC 20549, on official adding liquidity in SPY; 5 (ii) establish
filing of the proposed rule change, the business days between the hours of a new $0.05 per contract surcharge for
Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the Customers 6 whose SPY Complex Orders
temporarily suspend such rule change if filing also will be available for execute against simple Market Maker or
it appears to the Commission that such inspection and copying at the principal Specialist orders resting on the Simple
action is: (1) Necessary or appropriate in office of the Exchange. All comments Order Book; (iii) reduce the per contract
the public interest; (2) for the protection received will be posted without change.
1 15 U.S.C. 78s(b)(1).
of investors; or (3) otherwise in Persons submitting comments are 2 17 CFR 240.19b–4.
furtherance of the purposes of the Act. cautioned that we do not redact or edit 3 The term ‘‘Specialist’’ applies to transactions for
If the Commission takes such action, the personal identifying information from the account of a Specialist (as defined in Exchange
Commission shall institute proceedings comment submissions. You should Rule 1020(a)). A Specialist is an Exchange member
to determine whether the proposed rule submit only information that you wish who is registered as an options specialist pursuant
should be approved or disapproved. to Rule 1020(a). An options Specialist includes a
to make available publicly. All Remote Specialist which is defined as an options
IV. Solicitation of Comments submissions should refer to File specialist in one or more classes that does not have
Number SR–CboeBZX–2017–022 and a physical presence on an Exchange floor and is
Interested persons are invited to approved by the Exchange pursuant to Rule 501.
submit written data, views, and should be submitted on or before 4 The term ‘‘ROT, SQT and RSQT’’ applies to
arguments concerning the foregoing, January 30, 2018. transactions for the accounts of Registered Option
Traders (‘‘ROTs’’), Streaming Quote Traders
including whether the proposed rule For the Commission, by the Division of (‘‘SQTs’’), and Remote Streaming Quote Traders
change is consistent with the Act. Trading and Markets, pursuant to delegated (‘‘RSQTs’’). For purposes of the Pricing Schedule,
Comments may be submitted by any of authority.28 the term ‘‘Market Maker’’ will be utilized to
the following methods: Eduardo A. Aleman, describe fees and rebates applicable to ROTs, SQTs
and RSQTs. RSQTs may also be referred to as
Electronic Comments Assistant Secretary. Remote Market Markers (‘‘RMMs’’).
5 Options overlying Standard and Poor’s
[FR Doc. 2018–00158 Filed 1–8–18; 8:45 am]
• Use the Commission’s internet Depositary Receipts/SPDRs (‘‘SPY’’) are based on
BILLING CODE 8011–01–P
comment form (http://www.sec.gov/ the SPDR exchange-traded fund (‘‘ETF’’), which is
sradovich on DSK3GMQ082PROD with NOTICES
rules/sro.shtml); or designed to track the performance of the S&P 500
Index.
6 The term ‘‘Customer’’ applies to any transaction
26 17 CFR 240.19b–4(f)(6)(iii). that is identified by a member or member
27 For purposes only of waiving the 30-day organization for clearing in the Customer range at
operative delay, the Commission has also The Options Clearing Corporation (‘‘OCC’’) which
considered the proposed rule’s impact on is not for the account of a broker or dealer or for
efficiency, competition, and capital formation. See the account of a ‘‘Professional’’ (as that term is
15 U.S.C. 78c(f). 28 17 CFR 200.30–3(a)(12). defined in Rule 1000(b)(14)).
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Document Created: 2018-01-09 02:18:48
Document Modified: 2018-01-09 02:18:48
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 1050 |
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