83 FR 1058 - Self-Regulatory Organizations; Cboe EDGX 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 | 1058-1062 | |
| FR Document | 2018-00160 |
[Federal Register Volume 83, Number 6 (Tuesday, January 9, 2018)] [Notices] [Pages 1058-1062] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-00160] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82437; File No. SR-CboeEDGX-2017-009] Self-Regulatory Organizations; Cboe EDGX 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 EDGX 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 (``EDGX 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 BZX Exchange, Inc. (``BZX'') 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, BZX, 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 1059]] 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 EDGX 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 Exchange's functionality applicable to complex orders. 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 EDGX Options pursuant to Rule 21.16, which describes the Exchange's ``Risk Monitor Mechanism,'' and Rule 21.20, which describes the Exchange's functionality for complex orders. In addition, the Exchange provides a variety of optional risk controls to all Exchange Users pursuant to Interpretation and Policy .01 to Rule 11.10, 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 the Exchange with respect to complex orders 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 11.10, Interpretation and Policy .01; see also Securities Exchange Act Release No. 67266 (June 26, 2012), 77 FR 39300 (July 2, 2012) (SR-EDGX-2012-21) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to New Market Access Risk Management Service). --------------------------------------------------------------------------- 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 EDGX 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 11.10 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 EDGX 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 other rules of the Exchange,\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 EDGX 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 Rule 21.20, which refer to various risk control values offered by the Exchange with respect to complex orders that are communicated to members of the Exchange 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 EDGX Options based on market information received by EDGX 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 the Exchange's own rules applicable to complex orders 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 [[Page 1060]] are more than an acceptable difference from the applicable reference price and 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 it currently applies mandatory fat finger protection to complex orders received by the Exchange pursuant to Interpretation and Policy .06 to 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 EDGX Options Book at a price higher (lower) than the Drill- Through Price, the System will instead post the order to the EDGX 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 EDGX 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 Exchange 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 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 the Exchange 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 EDGX 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 11.13(d) of its cash equities trading platform (``EDGX 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 four 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) if a User is acting as either a Market Maker or sending Orders on behalf of a Priority Customer; or (4) 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 [[Page 1061]] retain only the first exception, regarding regulatory purposes or to comply with an order of an arbitrator or court, as the other 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, BZX, 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 BZX, 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 11.10 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 EDGX 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 7. \20\ See supra, notes 13 and 14. --------------------------------------------------------------------------- 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 [[Page 1062]] the date of the filing. However, Rule 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 [email protected]. Please include File Number SR-CboeEDGX-2017-009 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-CboeEDGX-2017-009. 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-CboeEDGX-2017-009 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. 2018-00160 Filed 1-8-18; 8:45 am] BILLING CODE 8011-01-P
![1058 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
The foregoing rule change has become filing also will be available for The Exchange filed a proposal to
effective pursuant to Section inspection and copying at the principal update Rule 21.1, Rule 21.10, and Rule
19(b)(3)(A)(ii) of the Act.17 office of the Exchange. All comments 21.17 to make modifications to the
At any time within 60 days of the received will be posted without change. Exchange’s rules and functionality
filing of the proposed rule change, the Persons submitting comments are applicable to the Exchange’s options
Commission summarily may cautioned that we do not redact or edit platform (‘‘EDGX Options’’) in
temporarily suspend such rule change if personal identifying information from preparation for the technology migration
it appears to the Commission that such comment submissions. You should of the Exchange’s affiliated options
action is: (i) Necessary or appropriate in submit only information that you wish exchanges onto the same technology as
the public interest; (ii) for the protection to make available publicly. All the Exchange.
of investors; or (iii) otherwise in submissions should refer to File The text of the proposed rule change
furtherance of the purposes of the Act. Number SR–Phlx–2017–108, and should is available at the Exchange’s website at
If the Commission takes such action, the be submitted on or before January 30, www.markets.cboe.com, at the principal
Commission shall institute proceedings 2018. office of the Exchange, and at the
to determine whether the proposed rule For the Commission, by the Division of Commission’s Public Reference Room.
should be approved or disapproved. Trading and Markets, pursuant to delegated
authority.18 II. Self-Regulatory Organization’s
IV. Solicitation of Comments Eduardo A. Aleman, Statement of the Purpose of, and
Interested persons are invited to Statutory Basis for, the Proposed Rule
Assistant Secretary.
submit written data, views, and Change
[FR Doc. 2018–00214 Filed 1–8–18; 8:45 am]
arguments concerning the foregoing, BILLING CODE 8011–01–P
In its filing with the Commission, the
including whether the proposed rule Exchange included statements
change is consistent with the Act. concerning the purpose of and basis for
Comments may be submitted by any of SECURITIES AND EXCHANGE the proposed rule change and discussed
the following methods: COMMISSION any comments it received on the
proposed rule change. The text of these
Electronic Comments
[Release No. 34–82437; File No. SR–
statements may be examined at the
• Use the Commission’s internet CboeEDGX–2017–009] places specified in Item IV below. The
comment form (http://www.sec.gov/ Exchange has prepared summaries, set
rules/sro.shtml); or Self-Regulatory Organizations; Cboe forth in Sections A, B, and C below, of
• Send an email to rule-comments@ EDGX Exchange, Inc.; Notice of Filing the most significant parts of such
sec.gov. Please include File Number SR– and Immediate Effectiveness of a statements.
Phlx–2017–108 on the subject line. Proposed Rule Change To Adopt Risk (A) Self-Regulatory Organization’s
Paper Comments 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
• Send paper comments in triplicate Technology Migration of Cboe
to Secretary, Securities and Exchange Change
Exchanges
Commission, 100 F Street NE, 1. Purpose
Washington, DC 20549–1090. January 3, 2018.
In 2016, the Exchange and its
All submissions should refer to File Pursuant to Section 19(b)(1) of the affiliates Cboe BYX Exchange, Inc.
Number SR–Phlx–2017–108. This file Securities Exchange Act of 1934 (the (‘‘BYX’’), Cboe EDGA Exchange, Inc.
number should be included on the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 (‘‘EDGA’’), and Cboe BZX Exchange,
subject line if email is used. To help the notice is hereby given that on December Inc. (‘‘BZX’’) received approval to affect
Commission process and review your 21, 2017, Cboe EDGX Exchange, Inc. a merger (the ‘‘Merger’’) of the
comments more efficiently, please use (the ‘‘Exchange’’) filed with the Exchange’s then-current indirect parent
only one method. The Commission will Securities and Exchange Commission company, Bats Global Markets, Inc.,
post all comments on the Commission’s (‘‘Commission’’) the proposed rule with Cboe Global Markets f/k/a CBOE
internet website (http://www.sec.gov/ change as described in Items I and II Holdings, Inc. (‘‘Cboe’’), the direct
rules/sro.shtml). Copies of the below, which Items have been prepared parent of Cboe Exchange, Inc. (‘‘Cboe
submission, all subsequent by the Exchange. The Exchange has Options’’) and Cboe C2 Exchange, Inc.
amendments, all written statements designated this proposal as a ‘‘non- (‘‘C2 Options’’, and together with the
with respect to the proposed rule controversial’’ proposed rule change Exchange, BZX, and Cboe Options the
change that are filed with the pursuant to Section 19(b)(3)(A) of the ‘‘Cboe Affiliated Exchanges’’).5 The
Commission, and all written Act 3 and Rule 19b–4(f)(6)(iii) Cboe Affiliated Exchanges are working
communications relating to the thereunder,4 which renders it effective to align certain system functionality,
proposed rule change between the upon filing with the Commission. The retaining only intended differences
Commission and any person, other than Commission is publishing this notice to between the Cboe Affiliated Exchanges,
sradovich on DSK3GMQ082PROD with NOTICES
those that may be withheld from the solicit comments on the proposed rule
public in accordance with the change from interested persons. 5 See Securities Exchange Act Release No. 79585
provisions of 5 U.S.C. 552, will be (December 16, 2016), 81 FR 93988 (December 22,
available for website viewing and 18 17 CFR 200.30–3(a)(12).
2016) (SR–BatsBZX–2016–68; SR–BatsBYX–2016–
printing in the Commission’s Public 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
Reference Room, 100 F Street NE, 2 17 CFR 240.19b–4.
also affiliated exchanges but do not operate options
3 15 U.S.C. 78s(b)(3)(A).
platforms and thus the integration described in this
17 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(6)(iii). proposal is inapplicable to such exchanges.
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![1060 Federal Register / Vol. 83, No. 6 / Tuesday, January 9, 2018 / Notices
are more than an acceptable difference options. The proposed Buy Order Put portion of a Market Order that would
from the applicable reference price and Check is based on and substantively execute at a price more than $0.50 or 5
would distinguish the applicable identical to the Put Strike Price Value percent worse than the NBBO at the
reference price depending on whether Check set forth in C2 Options Rule time the order initially reaches EDGX
an order was received prior to market 6.17(d)(1)(A). The Exchange notes that it Options, whichever is greater, will be
open or during the trading day. does not currently have an analogous cancelled.’’ The Exchange proposes to
However, in contrast to C2 Options Rule risk control in place, and thus, this remove this price protection for Market
6.17(b), which states that the acceptable protection is an additive control to Orders because it is no longer necessary
tick distance shall be no less than two protect against erroneous executions. in light of the proposed risk controls
minimum increment ticks for simple The fourth and final risk control the described above (other than the Limit
orders, the Exchange does not propose Exchange proposes to adopt is the Drill- Order Fat Finger Check, which is
to set forth specific boundaries for the Through Price Protection. As proposed, inapplicable to Market Orders). In
acceptable difference within the the Drill-Through Price Protection particular, the Drill-Through Price
proposed rule. As is true for the Market feature is a price protection mechanism Protection provides a control with
Order NBBO Width Protection applicable to all orders under which a respect to the execution prices of Market
described above, the Exchange believes buy (sell) order will not be executed at Orders and would be duplicative of the
that it needs flexibility to modify the a price that is higher (lower) than the existing control.
acceptable price range based on NBO (NBB) at the time of order entry
plus (minus) a buffer amount Details in Transaction Reports
experience with the risk control and
Users would always have access to the established by the Exchange (the ‘‘Drill- The Exchange also proposes to modify
applicable settings in the Exchange’s Through Price’’). If a buy (sell) order Rule 21.10, Anonymity, to allow it to
publicly available specifications and/or would execute or post to the EDGX provide additional information on
as published in a Regulatory Circular. Options Book at a price higher (lower) transaction reports. Current Rule
The Exchange notes that the BOX than the Drill-Through Price, the System 21.10(a) states that ‘‘[t]he intra-day
Options Exchange (‘‘BOX’’) has a similar will instead post the order to the EDGX transaction reports produced by the
price protection in place for limit orders Options Book at the Drill-Through Price, System will indicate the details of the
that does specify potential percentages unless the terms of the order instruct transactions, and shall not reveal contra
in the Rule but also permits BOX to otherwise. Any order (or unexecuted party identities.’’ The Exchange notes
modify such percentages via portion thereof) will rest in the EDGX that this provision is consistent with
Information Circular without Options Book (based on the time at Rule 11.13(d) of its cash equities trading
establishing outer boundaries.15 The which it enters the book for priority platform (‘‘EDGX Equities’’) but is not a
Exchange notes that it currently applies purposes) for a time period in common provision in the rules of other
mandatory fat finger protection to milliseconds that may not exceed three options exchanges, including Cboe
complex orders received by the seconds with a price equal to the Drill- Options or C2 Options, which do not
Exchange pursuant to Interpretation and Through Price. If the order (or have such a provision. The Exchange
Policy .06 to Rule 21.20. The Exchange unexecuted portion thereof) does not currently provides details regarding
also notes that it currently offers price execute during that time period, the contra-parties on various end of day and
protections analogous to the proposed System will cancel it. While similar to end of month reports for clearing
Limit Order Fat Finger Check for orders and based on C2 Options Rule purposes, and this information is
other than complex orders (i.e., ‘‘simple 6.17(a)(2), the proposed Rule is more similarly readily available through the
orders’’), however, as noted above such directly based on Interpretation and Options Clearing Corporation (‘‘OCC’’)
price protections are optional. Policy .04, to Exchange Rule 21.20, for clearing purposes.
The third risk control the Exchange which describes Drill-Through Price The Exchange proposes to remove the
proposes to adopt is the Buy Order Put Protection applicable to complex orders restriction on providing contra party
Check. As proposed, if a User enters a on EDGX Options. The proposed Drill- identities and to specifically state that
buy limit order for a put with a price Through Price Protection is identical to aggregated and individual transaction
that is higher than or equal to the strike Interpretation and Policy .04 to Rule reports produced by the System will
price of the option, the System will 21.20 with the exceptions of necessary indicate the details of a User’s
reject or cancel back to the User the differences between language related to transactions, including the contra
limit order. Similarly, if a User enters a simple orders and complex orders and party’s MPID, capacity, and clearing
buy Market Order for a put that would that in contrast to a User being able to firm account number.
execute at (or the remaining portion modify the protection to a more or less Current paragraph (c) of Rule 21.10
would execute at) a price higher than or restrictive control, which is available for contains four exceptions to the general
equal to the strike price of the option, the control on the Exchange for complex rule of anonymity, providing that the
the System will reject or cancel back to orders, the Exchange proposes to apply ‘‘Exchange shall reveal a User’s identity
the User the Market Order (or remaining standard Drill-Through Price Protection in the following circumstances: (1) For
portion). The Exchange does not to all orders and such protection cannot regulatory purposes or to comply with
propose to apply this check to adjusted 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) if a User is acting as either a Market
Protection for Limit Orders and Quotes and states to remove a portion of the definition of Maker or sending Orders on behalf of a
that ‘‘[t]he price parameter is set by either the Priority Customer; or (4) unless
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 otherwise instructed by a User, the
the opposite side of the incoming order or quote. overlaps with various risk controls Exchange will reveal to a User, no later
Unless determined otherwise by the Exchange and described above. Market Orders are than the end of the day on the date an
announced to Participants via Informational currently defined in in Rule 21.1(d)(5) anonymous trade was executed, when
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 the User’s Order has been decremented
$0.25; and 50% for the contraside NBB or NBO available at the time of execution.’’ Rule by another Order submitted by that
priced above $0.25.’’ 21.1(d)(5) further states that ‘‘[a]ny same User.’’ The Exchange proposes to
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![1062 Federal Register / Vol. 83, No. 6 / Tuesday, January 9, 2018 / Notices
the date of the filing. However, Rule • Send an email to rule-comments@ SECURITIES AND EXCHANGE
19b–4(f)(6)(iii) 26 permits the sec.gov. Please include File Number SR– COMMISSION
Commission to designate a shorter time CboeEDGX–2017–009 on the subject
[Release No. 34–82439; File No. SR–
if such action is consistent with the line. NASDAQ–2017–128]
protection of investors and the public
interest. The Exchange has asked the Paper Comments
Self-Regulatory Organizations; The
Commission to waive the 30-day
• Send paper comments in triplicate Nasdaq Stock Market LLC; Notice of
operative delay so that the proposal may Filing of Proposed Rule Change To
to Brent J. Fields, Secretary, Securities
become operative immediately upon List and Trade the Shares of the
filing. The Exchange notes that the and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090. Western Asset Total Return ETF
proposal will promote consistency
between the Exchange and its affiliated All submissions should refer to File January 3, 2018.
exchanges, and is part of a larger Number SR–CboeEDGX–2017–009. This Pursuant to Section 19(b)(1) of the
technology integration that will file number should be included on the Securities Exchange Act of 1934
ultimately reduce complexity for Users subject line if email is used. To help the (‘‘Act’’),1 and Rule 19b–4 thereunder,2
of the Exchange that are also Commission process and review your notice is hereby given that on December
participants on other Cboe Affiliated comments more efficiently, please use 20, 2017, The Nasdaq Stock Market LLC
Exchanges. The Exchange further notes (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
only one method. The Commission will
that allowing the Exchange to move Securities and Exchange Commission
post all comments on the Commission’s
forward with the proposed changes (‘‘SEC’’ or ‘‘Commission’’) the proposed
without an operative delay will ensure internet website (http://www.sec.gov/
rule change as described in Items I and
that the technology integration can rules/sro.shtml). Copies of the II below, which Items have been
continue with periodic but measured submission, all subsequent prepared by the Exchange. The
changes rather than implementing amendments, all written statements Commission is publishing this notice to
several changes at once. Furthermore, with respect to the proposed rule solicit comments on the proposed rule
the Exchange states that the change that are filed with the change from interested persons.
implementation of the risk controls will Commission, and all written
help to avoid potentially erroneous communications relating to the I. Self-Regulatory Organization’s
executions. The Commission believes proposed rule change between the Statement of the Terms of Substance of
that waiver of the 30-day operative Commission and any person, other than the Proposed Rule Change
delay is consistent with the protection those that may be withheld from the The Exchange proposes to list and
of investors and the public interest. public in accordance with the trade the shares of the Western Asset
Accordingly, the Commission hereby provisions of 5 U.S.C. 552, will be Total Return ETF (the ‘‘Fund’’), a series
waives the operative delay and available for website viewing and of Legg Mason ETF Investment Trust
designates the proposed rule change as printing in the Commission’s Public (the ‘‘Trust’’) under Nasdaq Rule 5735
operative upon filing.27 Reference Room, 100 F Street NE, (‘‘Managed Fund Shares’’).3 The shares
At any time within 60 days of the
Washington, DC 20549, on official
filing of the proposed rule change, the 1 15 U.S.C. 78s(b)(1).
business days between the hours of
Commission summarily may 2 17 CFR 240.19b–4.
temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of the 3 The Commission approved Nasdaq Rule 5735 in
it appears to the Commission that such filing also will be available for Securities Exchange Act Release No. 57962 (June
inspection and copying at the principal 13, 2008), 73 FR 35175 (June 20, 2008) (SR–
action is: (1) Necessary or appropriate in NASDAQ–2008–039). There are already multiple
the public interest; (2) for the protection office of the Exchange. All comments actively-managed funds listed on the Exchange.
of investors; or (3) otherwise in received will be posted without change. See, e.g., Securities Exchange Act Release Nos.
furtherance of the purposes of the Act. Persons submitting comments are 80946 (June 15, 2017), 82 FR 28126 (June 20, 2017)
(SR–NASDAQ–2017–039) (order approving listing
If the Commission takes such action, the cautioned that we do not redact or edit and trading of Guggenheim Limited Duration ETF);
Commission shall institute proceedings personal identifying information from 78592 (August 16, 2016), 81 FR 56729 (August 22,
to determine whether the proposed rule comment submissions. You should 2016) (SR–NASDAQ–2016–061) (order approving
submit only information that you wish listing and trading of First Trust Equity Market
should be approved or disapproved. Neutral ETF); 78443 (July 29, 2016), 81 FR 51517
to make available publicly. All (August 4, 2016) (SR–NASDAQ–2016–064) (order
IV. Solicitation of Comments
submissions should refer to File approving listing and trading of First Trust Strategic
Interested persons are invited to Number SR–CboeEDGX–2017–009 and Mortgage REIT ETF); 71913 (April 9, 2014), 79 FR
submit written data, views, and 21333 (April 15, 2014) (SR–NASDAQ–2014–019)
should be submitted on or before (order approving listing and trading of First Trust
arguments concerning the foregoing, January 30, 2018. Managed Municipal ETF); 69464 (April 26, 2013),
including whether the proposed rule 78 FR 25774 (May 2, 2013) (SR–NASDAQ–2013–
change is consistent with the Act. For the Commission, by the Division of 036) (order approving listing and trading of First
Comments may be submitted by any of Trading and Markets, pursuant to delegated Trust Senior Loan Fund); 66489 (February 29,
the following methods: authority.28 2012), 77 FR 13379 (March 6, 2012) (SR–NASDAQ–
2012–004) (order approving listing and trading of
Eduardo A. Aleman,
Electronic Comments WisdomTree Emerging Markets Corporate Bond
Assistant Secretary. Fund); see also filings for similar ETFs listed on
• Use the Commission’s internet [FR Doc. 2018–00160 Filed 1–8–18; 8:45 am] other national securities exchanges: Securities
comment form (http://www.sec.gov/ Exchange Act Release Nos. 80657 (May 11, 2017)
sradovich on DSK3GMQ082PROD with NOTICES
BILLING CODE 8011–01–P 82 FR 22702 (May 17, 2017) (SR–NYSE Arca–2017–
rules/sro.shtml); or 09) (order approving listing and trading of Janus
Short Duration Income ETF); 79683 (December 23,
26 17 CFR 240.19b–4(f)(6)(iii). 2016), 81 FR 96539 (December 30, 2016) (SR–
27 For purposes only of waiving the 30-day NYSEArca–2016–82) (order approving listing and
operative delay, the Commission has also trading of JPMorgan Diversified Event Driven ETF);
considered the proposed rule’s impact on 77904 (May 25, 2016), 81 FR 35101 (SR–NYSE
efficiency, competition, and capital formation. See Arca–2016–17) (order approving listing and trading
15 U.S.C. 78c(f). 28 17 CFR 200.30–3(a)(12). of JPMorgan Diversified Alternative ETF); 68870
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Document Created: 2018-01-09 02:18:53
Document Modified: 2018-01-09 02:18:53
| 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 1058 |
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