83 FR 13534 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Paragraph (c)(5) of Exchange Rule 11.9 Describing the Operation of Minimum Quantity Orders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 61 (March 29, 2018)
Federal Register Volume 83, Issue 61 (March 29, 2018)
| Page Range | 13534-13537 | |
| FR Document | 2018-06299 |
[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)] [Notices] [Pages 13534-13537] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-06299] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82941; File No. SR-CboeBYX-2018-003] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Paragraph (c)(5) of Exchange Rule 11.9 Describing the Operation of Minimum Quantity Orders March 23, 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 March 16, 2018, Cboe BYX Exchange, Inc. (``BYX'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The 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 amend paragraph (c)(5) of Exchange Rule 11.9 describing the operation of Minimum Quantity Orders.\5\ --------------------------------------------------------------------------- \5\ See Exchange Rule 11.9(c)(5) for a complete description of the operation of Minimum Quantity Orders. --------------------------------------------------------------------------- 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 The Exchange proposes to amend paragraph (c)(5) of Exchange Rule 11.9 describing the operation of Minimum Quantity Orders by removing language that provided for the re-pricing of incoming Minimum Quantity Orders to avoid an internally crossed book. As a result of this change, the Exchange proposes to specify within the rule when a Minimum Quantity Order would not be eligible to trade to prevent executions from occurring that may be inconsistent with intra-market price priority or that would cause a non-displayed order to trade ahead of a displayed order. In sum, a Minimum Quantity Order is a non-displayed order that enables a User \6\ to specify a minimum share amount at which the order will execute.\7\ A Minimum Quantity Order will not execute unless the volume of contra-side liquidity available to execute against the order meets or exceeds the designated minimum size. By default, a Minimum Quantity Order will execute upon entry against a single order or multiple aggregated orders simultaneously. The Exchange recently amended the operation of Minimum Quantity Orders to permit a User to alternatively specify the order not execute against multiple aggregated orders simultaneously and that the minimum quantity condition be satisfied by each individual order resting on the BYX Book.\8\ --------------------------------------------------------------------------- \6\ The term ``User'' is defined as ``any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3.'' See Exchange Rule 1.5(cc). \7\ The Exchange will only honor a specified minimum quantity on BYX Only Orders that are non-displayed or Immediate-Or-Cancel and will disregard a minimum quantity on any other order. See Exchange Rule 11.9(c)(5). \8\ See Securities Exchange Act Release No. 81806 (October 3, 2017), 82 FR 47047 (October 10, 2017) (SR-BatsBYX-2017-24). This functionality is pending deployment and the implementation date will be announced via a trading notice. --------------------------------------------------------------------------- The Exchange also recently amended the operation of Minimum Quantity Orders to re-price incoming Minimum Quantity Orders where that order may cross an order posted on the BYX Book.\9\ Specifically, where there is insufficient size to satisfy an incoming order's minimum quantity condition and that incoming order, if posted at its limit price, would cross an order(s), whether displayed or non-displayed, resting on the BYX Book, the order with the minimum quantity condition would be re-priced to and ranked at the locking price. This functionality has not yet been implemented \10\ and the Exchange now proposes to amend paragraph (c)(5) of Rule 11.9 to remove this re- pricing requirement. --------------------------------------------------------------------------- \9\ Id. \10\ See supra note 8. Exchange Rule 11.9(c)(5) does not require re-pricing where the Minimum Quantity Order is resting on the BYX Book. As such, an internally crossed book may occur where the incoming order is of insufficient size to satisfy the resting order's minimum quantity condition and that incoming order, if posted at its limit price, would cross that order with a minimum quantity condition resting on the BYX Book. --------------------------------------------------------------------------- As a result of the above change, the Exchange proposes to amend paragraph (c)(5) of Rule 11.9 to describe when a Minimum Quantity Order will not be eligible to trade to prevent executions from occurring that may be inconsistent with intra-market price priority or would result in a non-displayed order trading ahead of a same-priced, same-side displayed order.\11\ The Exchange would not permit a Minimum Quantity Order that crosses other displayed or non-displayed orders on the BYX Book to trade at prices that are worse than the price of such contra- side orders. The Exchange would also not permit a resting Minimum Quantity Order to trade at a price equal to a contra-side displayed order. This proposal is based on recently adopted NYSE Arca, Inc. (``NYSE Arca'') Rule 7.31-E(i)(3)(C).\12\ --------------------------------------------------------------------------- \11\ Exchange Rule 11.12(a) states that orders on the BYX Book are ranked and maintained by the Exchange according to price-time priority. Exchange Rule 11.12(a) further prohibits a non-displayed order from trading ahead of a same-side, same-priced displayed order. This proposed rule change adds language to Exchange Rule 11.9(c)(5) to clarify this priority scheme during an internally crossed market. \12\ See Securities Exchange Act Release No. 82504 (January 16, 2018), 83 FR 3038 (January 22, 2018) (SR-NYSEArca-2018-01) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-E Relating to Mid-Point Liquidity Orders and the Minimum Trade Size Modifier and Rule 7.36-E To Add a Definition of ``Aggressing Order''). --------------------------------------------------------------------------- [[Page 13535]] Paragraph (c)(5) of Rule 11.9 would state that a Minimum Quantity Order to buy (sell) that is ranked in the BYX Book will not be eligible to trade: (i) At a price equal to or above (below) any sell (buy) orders that are displayed and that have a ranked price equal to or below (above) the price of such Minimum Quantity Order; or (ii) at a price above (below) any sell (buy) order that is non-displayed and has a ranked price below (above) the price of such Minimum Quantity Order.\13\ However, a Minimum Quantity Order that crosses an order on BYX Book may execute at a price less aggressive than its ranked price against an incoming order so long as such execution is consistent with the above restrictions. --------------------------------------------------------------------------- \13\ A Minimum Quantity Order to buy (sell) may execute at a price above (below) any sell (buy) order that is Non-Displayed and has a ranked price below (above) the price of such Minimum Quantity Order if that Non-Displayed order itself included a minimum quantity condition that prevented it from executing. See infra note 16. --------------------------------------------------------------------------- The following examples describe the proposed operation of a Minimum Quantity Order during an internally crossed market. This first example addresses intra-market priority amongst a Minimum Quantity Order and other non-displayed orders in an internally crossed market as well as when an execution may occur at prices less aggressive than the resting order's ranked price. Assume the NBBO is $10.10 by $10.16. A non- displayed order to sell 50 shares at $10.12 is resting on the BYX Book (``Order A''). A non-displayed order to sell 25 shares at $10.11 is also resting on the BYX Book (``Order B''). The Exchange receives a Mid-Point Peg \14\ order to buy at $10.14 with a minimum quantity condition to execute against a single order of 100 shares (``Order C''). Because Order C's minimum quantity condition cannot be met, Order C will not trade with Orders A or B and will be posted and ranked on the BYX Book at $10.13, the midpoint of the NBBO. The Exchange now has a non-displayed order crossing both non-displayed orders on the BYX Book. If the Exchange then receives a non-displayed order to sell for 100 shares at $10.11 (``Order D''),\15\ although Order D would be marketable against Order C at $10.13, it would not trade at $10.13 because it is above the price of all resting sell orders. Order D will instead execute against Order C at $10.11, receiving price improvement relative to the midpoint of the NBBO. --------------------------------------------------------------------------- \14\ See Exchange Rule 11.9(c)(9). \15\ On NYSE Arca, Order D will be posted to the NYSE Arca book at $10.11 and not execute against Order C at $10.13. See supra note 12. --------------------------------------------------------------------------- This second example addresses intra-market priority amongst displayed orders, Minimum Quantity Orders and other non-displayed orders. The Exchange notes that the below behavior is not unique to an internally crossed market as the Exchange's priority rule, 11.12(a), currently prohibits non-displayed orders, including Minimum Quantity Orders, from trading ahead of same-priced, same-side displayed orders. Assume the NBBO is $10.00 by $10.04. A non-displayed order to buy 500 shares at $10.00 is resting on the BYX Book (``Order A''). A displayed order to buy 100 shares at $10.00 is then entered and posted to the BYX Book (``Order B''). The Exchange receives a non-displayed order to sell 600 shares at $10.00 with a minimum quantity condition to execute against a single order of 500 shares (``Order C''). Although Order A satisfies Order C's minimum quantity condition and has time priority ahead of Order B, no execution occurs because Order B is a displayed order and has execution priority over Order A, a non-displayed order. Order C does not execute against Order B because Order B does not satisfy Order C's minimum quantity condition. Order C is then posted to the BYX Book at $10.00, non-displayed. The Exchange also proposes two clarifying changes to paragraph (c)(5) of Exchange Rule 11.9. The rule currently states that a Minimum Quantity Order cedes execution priority when it would lock an order against which it would otherwise execute if it were not for the minimum execution size restriction.\16\ The Exchange now proposes to add additional language to the rule to clarify when a resting non-displayed order may cede execution priority to a subsequent arriving same-side order. As amended, paragraph (h) of Rule 11.6 would state that if a resting non-displayed sell (buy) order did not meet the minimum quantity condition of a same-priced resting Minimum Quantity Order to buy (sell), a subsequently arriving sell (buy) order that meets the minimum quantity condition will trade ahead of such resting non- displayed sell (buy) order at that price. For example, assume the NBBO is $10.00 by $10.10 and no orders are resting on the BYX Book. A non- displayed order to buy 700 shares at $10.10 with a minimum quantity condition to execute against a single order of 500 shares is resting on the BYX Book (Order A). A non-displayed order to sell 100 shares at $10.10 is then entered and posted to the BYX Book (Order B). Order B does not execute against Order A because Order B does not satisfy Order A's single minimum quantity condition of 500 shares. As a result, Order B is posted to the BYX Book at $10.10, creating an internally locked book. An order to sell 500 shares at $10.10 is then entered and executes against Order A at $10.10 for 500 shares because the incoming order is of sufficient size to satisfy Order A's minimum quantity condition of 500 shares. This clarification is also based on recently adopted NYSE Arca Rule 7.31-E(i)(3)(E)(ii).\17\ --------------------------------------------------------------------------- \16\ The Exchange proposes to amend this provision to clarify that a Minimum Quantity Order would cede execution priority when it would also cross an order against which it would otherwise execute if it were not for the minimum execution size restriction. \17\ Supra note 12. --------------------------------------------------------------------------- Lastly, the Exchange proposes to clarify that an incoming Minimum Quantity Order would be canceled where, if posted, it would cross the displayed price of an order on the BYX Book.\18\ Conversely, an incoming Minimum Quantity Order would be posted to the BYX Book where it would not cross the displayed price of a resting contra-side order. For example, an order to buy at $11.00 with a minimum quantity condition of 500 shares is entered (Order A) and there is a displayed order resting on the BYX Book to sell 200 shares at $10.99 (Order B). Oder A would be cancelled because it crosses the displayed price of Order B and Order B does not contain sufficient size to satisfy Order A's minimum quantity condition of 500 shares. However, should Order A be priced at $10.99, it would not be cancelled and would be posted to the BYX Book, resulting in an internally locked market. Order A would not be executable at that price because it is priced equal to a contra- side displayed order. An internally crossed market may subsequently occur should an order to sell priced more aggressively than Order A be entered but not be of sufficient size to satisfy Order A's minimum quantity condition of 500 shares (e.g., an order to sell 100 shares at $10.98) and posted to the BYX Book. --------------------------------------------------------------------------- \18\ A Minimum Quantity Order will be repriced in accordance with Exchange Rule 11.9(g)(4) where it would cross a protected quote displayed on an away market center. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \19\ in general, and furthers the objectives of Section 6(b)(5) of the Act \20\ in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the [[Page 13536]] mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The proposed rule change removes impediments to and perfects the mechanism of a free and open market and a national market system because it would ensure that Minimum Quantity Orders do not trade through displayed orders or violate intra-market price priority. Specifically, the proposed rule change would protect displayed orders by preventing a Minimum Quantity Order from executing where it is locked by a contra-side Displayed order. The proposed rule change protects intra-market price priority by preventing a resting Minimum Quantity Order from executing where it is crossed by either a displayed or non-displayed order on the BYX Book. The proposed clarifications remove impediments to and perfect the mechanism of a free and open market and a national market system because they provide additional specificity regarding the operation of a Minimum Quantity Order, thereby avoiding potential investor confusion. In particular, the Exchange believes it is reasonable for a resting non-displayed order to cede execution priority to a subsequent arriving same-side order where that order is of sufficient size to satisfy a resting contra-side order's minimum quantity condition because doing so facilitates executions in accordance with the terms and conditions of each order. The proposed rule change is also substantially similar to a proposed rule change recently submitted by NYSE Arca for immediate effectiveness and published by the Commission.\21\ The only differences between the proposed rule change and that of NYSE Arca is that: (i) NYSE Arca does not cancel a minimum quantity order that would cross a displayed order on the NYSE Arca book; and (ii) NYSE Arca will not execute resting orders at prices less aggressive than their limit prices in crossed markets. The Exchange believes that these differences are immaterial because they are designed to reduce the occurrences of internally crossed markets and facilitate executions that may not otherwise occur. These differences will also continue to ensure that executions occur in accordance with intra-market price priority on the Exchange while accounting for the differences in functionality and order types. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78f(b). \20\ 15 U.S.C. 78f(b)(5). \21\ See supra notes 12 and 15. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. On the contrary, the proposed rule change is not designed to address any competitive issues because it is intended to provide clarity regarding the operation of Minimum Quantity Orders and when such orders are eligible to trade and not trade through displayed orders or violate intra-market price priority. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No comments were solicited or received on the proposed rule change. 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 \22\ and paragraph (f)(6) of Rule 19b-4 thereunder,\23\ 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. --------------------------------------------------------------------------- \22\ 15 U.S.C. 78s(b)(3)(A). \23\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- 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-CboeBYX-2018-003 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-CboeBYX-2018-003. 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-CboeBYX-2018-003, and should be submitted on or before April 19, 2018. [[Page 13537]] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\24\ --------------------------------------------------------------------------- \24\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2018-06299 Filed 3-28-18; 8:45 am] BILLING CODE 8011-01-P
![13534 Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices
SUPPLEMENTARY INFORMATION: The office of the Exchange, and at the satisfied by each individual order
United States Postal Service® hereby Commission’s Public Reference Room. resting on the BYX Book.8
gives notice that, pursuant to 39 U.S.C. The Exchange also recently amended
II. Self-Regulatory Organization’s the operation of Minimum Quantity
3642 and 3632(b)(3), on March 23, 2018,
Statement of the Purpose of, and Orders to re-price incoming Minimum
it filed with the Postal Regulatory
Statutory Basis for, the Proposed Rule Quantity Orders where that order may
Commission a USPS Request to Add
Change cross an order posted on the BYX Book.9
Priority Mail Contract 426 to
Competitive Product List. Documents In its filing with the Commission, the Specifically, where there is insufficient
are available at www.prc.gov, Docket Exchange included statements size to satisfy an incoming order’s
Nos. MC2018–134, CP2018–190. concerning the purpose of and basis for minimum quantity condition and that
the proposed rule change and discussed incoming order, if posted at its limit
Elizabeth Reed, any comments it received on the price, would cross an order(s), whether
Attorney, Corporate and Postal Business Law. proposed rule change. The text of these displayed or non-displayed, resting on
[FR Doc. 2018–06265 Filed 3–28–18; 8:45 am] statements may be examined at the the BYX Book, the order with the
BILLING CODE 7710–12–P places specified in Item IV below. The minimum quantity condition would be
Exchange has prepared summaries, set re-priced to and ranked at the locking
forth in Sections A, B, and C below, of price. This functionality has not yet
SECURITIES AND EXCHANGE the most significant parts of such been implemented 10 and the Exchange
COMMISSION statements. now proposes to amend paragraph (c)(5)
[Release No. 34–82941; File No. SR– A. Self-Regulatory Organization’s of Rule 11.9 to remove this re-pricing
CboeBYX–2018–003] Statement of the Purpose of, and requirement.
As a result of the above change, the
Statutory Basis for, the Proposed Rule
Self-Regulatory Organizations; Cboe Exchange proposes to amend paragraph
Change
BYX Exchange, Inc.; Notice of Filing (c)(5) of Rule 11.9 to describe when a
and Immediate Effectiveness of a 1. Purpose Minimum Quantity Order will not be
Proposed Rule Change To Amend The Exchange proposes to amend eligible to trade to prevent executions
Paragraph (c)(5) of Exchange Rule 11.9 paragraph (c)(5) of Exchange Rule 11.9 from occurring that may be inconsistent
Describing the Operation of Minimum describing the operation of Minimum with intra-market price priority or
Quantity Orders Quantity Orders by removing language would result in a non-displayed order
that provided for the re-pricing of trading ahead of a same-priced, same-
March 23, 2018. side displayed order.11 The Exchange
incoming Minimum Quantity Orders to
Pursuant to Section 19(b)(1) of the would not permit a Minimum Quantity
avoid an internally crossed book. As a
Securities Exchange Act of 1934 (the Order that crosses other displayed or
result of this change, the Exchange
‘‘Act’’),1 and Rule 19b–4 thereunder,2 non-displayed orders on the BYX Book
proposes to specify within the rule
notice is hereby given that on March 16, to trade at prices that are worse than the
when a Minimum Quantity Order
2018, Cboe BYX Exchange, Inc. (‘‘BYX’’ price of such contra-side orders. The
would not be eligible to trade to prevent
or the ‘‘Exchange’’) filed with the Exchange would also not permit a
executions from occurring that may be
Securities and Exchange Commission resting Minimum Quantity Order to
inconsistent with intra-market price
(‘‘Commission’’) the proposed rule trade at a price equal to a contra-side
priority or that would cause a non-
change as described in Items I, II, and displayed order. This proposal is based
displayed order to trade ahead of a
III below, which Items have been on recently adopted NYSE Arca, Inc.
displayed order.
prepared by the Exchange. The In sum, a Minimum Quantity Order is (‘‘NYSE Arca’’) Rule 7.31–E(i)(3)(C).12
Exchange has designated this proposal a non-displayed order that enables a
as a ‘‘non-controversial’’ proposed rule User 6 to specify a minimum share
8 See Securities Exchange Act Release No. 81806
change pursuant to Section 19(b)(3)(A) (October 3, 2017), 82 FR 47047 (October 10, 2017)
amount at which the order will (SR–BatsBYX–2017–24). This functionality is
of the Act 3 and Rule 19b–4(f)(6)(iii) execute.7 A Minimum Quantity Order pending deployment and the implementation date
thereunder,4 which renders it effective will not execute unless the volume of will be announced via a trading notice.
upon filing with the Commission. The contra-side liquidity available to
9 Id.
Commission is publishing this notice to execute against the order meets or
10 See supra note 8. Exchange Rule 11.9(c)(5) does
solicit comments on the proposed rule not require re-pricing where the Minimum Quantity
exceeds the designated minimum size. Order is resting on the BYX Book. As such, an
change from interested persons. By default, a Minimum Quantity Order internally crossed book may occur where the
will execute upon entry against a single incoming order is of insufficient size to satisfy the
I. Self-Regulatory Organization’s resting order’s minimum quantity condition and
Statement of the Terms of Substance of order or multiple aggregated orders that incoming order, if posted at its limit price,
the Proposed Rule Change simultaneously. The Exchange recently would cross that order with a minimum quantity
amended the operation of Minimum condition resting on the BYX Book.
The Exchange filed a proposal to 11 Exchange Rule 11.12(a) states that orders on the
amend paragraph (c)(5) of Exchange Quantity Orders to permit a User to
BYX Book are ranked and maintained by the
Rule 11.9 describing the operation of alternatively specify the order not Exchange according to price-time priority.
Minimum Quantity Orders.5 execute against multiple aggregated Exchange Rule 11.12(a) further prohibits a non-
The text of the proposed rule change orders simultaneously and that the displayed order from trading ahead of a same-side,
minimum quantity condition be same-priced displayed order. This proposed rule
is available at the Exchange’s website at change adds language to Exchange Rule 11.9(c)(5)
www.markets.cboe.com, at the principal to clarify this priority scheme during an internally
sradovich on DSK3GMQ082PROD with NOTICES
6 The term ‘‘User’’ is defined as ‘‘any Member or
crossed market.
1 15
Sponsored Participant who is authorized to obtain 12 See Securities Exchange Act Release No. 82504
U.S.C. 78s(b)(1). access to the System pursuant to Rule 11.3.’’ See
2 17 CFR 240.19b–4.
(January 16, 2018), 83 FR 3038 (January 22, 2018)
Exchange Rule 1.5(cc). (SR–NYSEArca–2018–01) (Notice of Filing and
3 15 U.S.C. 78s(b)(3)(A). 7 The Exchange will only honor a specified Immediate Effectiveness of Proposed Rule Change
4 17 CFR 240.19b–4(f)(6)(iii).
minimum quantity on BYX Only Orders that are To Amend Rule 7.31–E Relating to Mid-Point
5 See Exchange Rule 11.9(c)(5) for a complete non-displayed or Immediate-Or-Cancel and will Liquidity Orders and the Minimum Trade Size
description of the operation of Minimum Quantity disregard a minimum quantity on any other order. Modifier and Rule 7.36–E To Add a Definition of
Orders. See Exchange Rule 11.9(c)(5). ‘‘Aggressing Order’’).
VerDate Sep<11>2014 19:09 Mar 28, 2018 Jkt 244001 PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 E:\FR\FM\29MRN1.SGM 29MRN1](https://thefederalregister.org/doc/83_FR_13595/page/1.svg)
![Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices 13537
For the Commission, by the Division of institutes proceedings under Section exchange listed bitcoin futures
Trading and Markets, pursuant to delegated 19(b)(2)(B) of the Act 7 to determine contracts, if available (together with
authority.24 whether to approve or disapprove the Benchmark Futures Contracts,
Brent J. Fields, proposed rule change. collectively, ‘‘Bitcoin Futures
Secretary. Contracts’’).12
I. Summary of the Proposal 8 and
[FR Doc. 2018–06299 Filed 3–28–18; 8:45 am]
Comments Received In addition, the Exchange states that
BILLING CODE 8011–01–P
The Exchange proposes to list and the ProShares Short Bitcoin ETF’s
trade the Shares under NYSE Arca Rule investment objective will be to seek
SECURITIES AND EXCHANGE 8.200–E, Commentary .02, which results, for a single day, that correspond
COMMISSION governs the listing and trading of Trust (before fees and expenses) to the inverse
Issued Receipts on the Exchange.9 Each of the daily performance of the
[Release No. 34–82939; File No. SR– Benchmark Futures Contract. This Fund
NYSEArca–2017–139]
Fund will be a series of the Trust, and
the Trust and the Funds will be generally intends to invest substantially
managed and controlled by ProShare all of its assets through short positions
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Instituting Capital Management LLC (‘‘Sponsor’’). in Benchmark Futures Contracts, but
Proceedings To Determine Whether To Brown Brothers Harriman & Co. will be may invest through short positions in
Approve or Disapprove a Proposed the custodian and administrator for the Bitcoin Futures Contracts, if available.13
Rule Change To List and Trade the Trust. SEI Investments Distribution Co. Further, the Exchange states that, in
Shares of the ProShares Bitcoin ETF will serve as the distributor of the the event position, price, or
and the ProShares Short Bitcoin ETF Shares (‘‘Distributor’’). The Trust will accountability limits are reached with
Under NYSE Arca Rule 8.200–E, offer Shares of the Funds for sale respect to Bitcoin Futures Contracts,
Commentary .02 through the Distributor in ‘‘Creation each Fund may invest in listed options
Units.’’ 10 on Bitcoin Futures Contracts (should
March 23, 2018. According to the Exchange, the such listed options become available)
On December 4, 2017, NYSE Arca, ProShares Bitcoin ETF’s investment and OTC swap agreements referencing
Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed objective will be to seek results (before Bitcoin Futures Contracts (collectively,
with the Securities and Exchange fees and expenses) that, both for a single ‘‘Financial Instruments’’).14
Commission (‘‘Commission’’), pursuant day and over time, correspond to the
to Section 19(b)(1) of the Securities performance of lead month bitcoin The Commission has received one
Exchange Act of 1934 (‘‘Act’’) 1 and Rule futures contracts 11 listed and traded on comment letter, which expresses
19b–4 thereunder,2 a proposed rule either the Cboe Futures Exchange concerns about the proposed rule
change to list and trade the shares (‘‘CFE’’) or the Chicago Mercantile change.15 The commenter refers to the
(‘‘Shares’’) of the ProShares Bitcoin ETF Exchange (‘‘CME’’) (‘‘Benchmark proposal as a ‘‘house of cards’’ and
and the ProShares Short Bitcoin ETF Futures Contract’’). This Fund generally expresses concern that the Funds’
(each a ‘‘Fund’’ and, collectively, intends to invest substantially all of its attempt to replicate the bitcoin futures
‘‘Funds’’) issued by the ProShares Trust assets in the Benchmark Futures markets, which are related to underlying
II (‘‘Trust’’) under NYSE Arca Rule Contracts, but may invest in other U.S. cryptocurrencies that trade on
8.200–E, Commentary .02. The proposed unregulated exchanges, will lead to
rule change was published for comment 7 15 U.S.C. 78s(b)(2)(B). losses for retail investors, and that the
in the Federal Register on December 26, 8 The Commission notes that additional inclusion of an inverse Fund will add to
2017.3 information regarding the Trust, the Shares, and the the risk.16
Funds, including investment strategies, calculation
The Commission has received one of net asset value (‘‘NAV’’) and indicative fund
comment letter on the proposed rule II. Proceedings To Determine Whether
value, creation and redemption procedures, and
change.4 On January 30, 2018, pursuant additional background information about bitcoins, to Approve or Disapprove SR–
to Section 19(b)(2) of the Act,5 the the bitcoin network, and bitcoin futures contracts, NYSEArca–2017–139 and Grounds for
Commission designated a longer period
among other things, can be found in the Notice (see Disapproval Under Consideration
supra note 3) and the registration statement filed
within which to approve the proposed with the Commission on Form S–1 (File No. 333– The Commission is instituting
rule change, disapprove the proposed 220680) under the Securities Act of 1933
proceedings pursuant to Section
rule change, or institute proceedings to (‘‘Registration Statement’’), as applicable.
9 See NYSE Arca Rule 8.200–E, Commentary .02. 19(b)(2)(B) of the Act 17 to determine
determine whether to disapprove the NYSE Arca Rule 8.200–E permits the listing and whether the proposed rule change
proposed rule change.6 This order trading of ‘‘Trust Issued Receipts,’’ defined as a should be approved or disapproved.
security (1) that is used by the trust which holds
24 17 specific securities deposited with the trust; (2) that,
Institution of such proceedings is
CFR 200.30–3(a)(12).
1 15 when aggregated in some specified minimum appropriate at this time in view of the
U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
number, may be surrendered to the trust by the legal and policy issues raised by the
beneficial owner to receive the securities; and (3) proposed rule change. Institution of
3 See Securities Exchange Act Release No. 82350
that pay beneficial owners dividends and other
(Dec. 19, 2017), 82 FR 61100 (Dec. 26, 2017) distributions on the deposited securities, if any are proceedings does not indicate that the
(‘‘Notice’’). declared and paid to the trustee by an issuer of the Commission has reached any
4 See Letter from Abe Kohen, AK Financial
deposited securities. Commentary .02 applies to conclusions with respect to any of the
Engineering Consultants, LLC (Dec. 27, 2017) Trust Issued Receipts that invest in any
(‘‘Kohen Letter’’). All comments on the proposed
issues involved. Rather, as described
combination of investments, including cash;
rule change are available on the Commission’s securities; options on securities and indices; futures below, the Commission seeks and
sradovich on DSK3GMQ082PROD with NOTICES
website at: https://www.sec.gov/comments/sr- contracts; options on futures contracts; forward encourages interested persons to
nysearca-2017-139/nysearca2017139.htm. contracts; equity caps, collars, and floors; and swap
5 15 U.S.C. 78s(b)(2). agreements. 12 See
6 See Securities Exchange Act Release No. 82602 10 See Notice, supra note 3, at 61101.
Notice, supra note 3, at 61101.
13 See id.
(Jan. 30, 2018), 83 FR 4941 (Feb. 2, 2018). The 11 According to the Exchange, lead month futures
14 See id. at 61102.
Commission designated March 26, 2018, as the date contracts are the monthly contracts with the earliest
15 See supra note 4 and accompanying text.
by which it should approve, disapprove, or institute expiration date. See Notice, supra note 3, at 61101,
16 See Kohen Letter, supra note 4.
proceedings to determine whether to disapprove the n.6. See also Notice and Registration Statement,
proposed rule change. supra notes 3 and 8. 17 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014 19:09 Mar 28, 2018 Jkt 244001 PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 E:\FR\FM\29MRN1.SGM 29MRN1](https://thefederalregister.org/doc/83_FR_13595/page/4.svg)
Document Created: 2018-03-29 00:25:09
Document Modified: 2018-03-29 00:25:09
| 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 13534 |
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