83 FR 31001 - Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.6, Definitions and Rule 11.8, Order Types
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 127 (July 2, 2018)
Federal Register Volume 83, Issue 127 (July 2, 2018)
| Page Range | 31001-31003 | |
| FR Document | 2018-14108 |
[Federal Register Volume 83, Number 127 (Monday, July 2, 2018)] [Notices] [Pages 31001-31003] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-14108] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83521; File No. SR-CboeEDGA-2018-011] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.6, Definitions and Rule 11.8, Order Types June 26, 2018 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on June 13, 2018, Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') 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) 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). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to (i) amend paragraph (n) of Exchange Rule 11.6, Routing/Posting Instructions to add a new optional order instruction to be known as Non-Displayed Swap; and (ii) make a related change to description of Limit Orders and MidPoint Peg Orders under Exchange Rule 11.8. The proposed amendments are identical to the rules of Cboe EDGX Exchange, Inc. (``EDGX'') \5\ and substantially similar to the rules of the Nasdaq Stock Market LLC (``Nasdaq'') \6\ and NYSE Arca, Inc. (``Arca'').\7\ --------------------------------------------------------------------------- \5\ See EDGX Rules 11.6(n)(7), 11.8(b)(7) and 11.8(d)(5); see also Securities Exchange Act Release No. 80841 (June 1, 2017), 82 FR 26559 (June 7, 2017), (Notice of Filing and Immediate Effectiveness To Add a New Optional Order Instruction Known as Non-Displayed Swap). \6\ See Nasdaq Rule 4703(m) (defining the Trade Now order modifier); see also Securities Exchange Act Release No. 79282 (November 10, 2016), 81 FR 81219 (November 17, 2016) (Notice of Filing and Immediate Effectiveness of Proposed Rule change to Amend Rule 4702 and Rule 4703 to Add a ``Trade Now'' Instruction to Certain Order Types). \7\ See Arca Rule 7.31-E(d)(2)(B) (describing the Non-Display Remove Modifier); see also Securities Exchange Act Release No. 76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (Order Approving Proposed Rule change Adopting New Equity Trading Rules Relating to Orders and Modifiers and Retail Liquidity Program To Reflect the Implementation of Pillar, the Exchange's New Trading Technology Platform). --------------------------------------------------------------------------- The text of the proposed rule change is available at the Exchange's website at www.markets.cboe.com, at the Exchange's principal office and at the Public Reference Room of the Commission. 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: (i) Amend paragraph (n) of Exchange Rule 11.6, Routing/Posting Instructions to add a new optional order instruction to be known as Non-Displayed Swap; and (ii) make a related change to description of Limit Orders and MidPoint Peg Orders under Exchange Rule 11.8. These proposed amendments are identical to the rules of EDGX \8\ and substantially similar to the rules of Nasdaq and Arca.\9\ --------------------------------------------------------------------------- \8\ See supra note 5. \9\ See supra notes 6 and 7. --------------------------------------------------------------------------- The proposed Non-Displayed Swap (``NDS'') instruction would provide orders with a Non-Displayed \10\ instruction resting on the EDGA Book \11\ with a greater ability to receive an execution when that resting order is locked by an incoming order (e.g., the price of the resting non-displayed order is equal to the price of the incoming order that is to be placed on the EDGA Book). The NDS instruction would be an optional order instruction that would allow Users \12\ to have their resting non-displayed orders execute against an incoming order with a Post Only instruction rather than have it be locked by the incoming order. NDS would be defined as an instruction that may be attached to an order with a Non-Displayed instruction that when such order is resting on the EDGA Book and would be locked by an incoming order with a Post Only instruction that does not remove liquidity pursuant to paragraph (4) of Exchange Rule 11.6(n),\13\ the order with a NDS [[Page 31002]] instruction is converted to an executable order and will remove liquidity against such incoming order. An order with a NDS instruction would not be eligible for routing pursuant to Exchange Rule 11.11, Routing to Away Trading Centers. The proposed NDS instruction assists in the avoidance of an internally locked EDGA Book (though such lock would not be displayed by the Exchange) \14\ by facilitating the execution of orders that would otherwise lock each other. --------------------------------------------------------------------------- \10\ See Exchange Rule 11.6(e)(2). \11\ See Exchange Rule 1.5(d). \12\ See Exchange Rule 1.5(ee). \13\ Under Exchange Rule 11.6(n)(4), an order with a Post Only instruction will remove contra-side liquidity from the EDGA Book if the order is an order to buy or sell a security priced below $1.00 or if the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. To determine at the time of a potential execution whether the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, the Exchange will use the highest possible rebate paid and highest possible fee charged for such executions on the Exchange. \14\ See Exchange Rule 11.10(a)(4)(C). --------------------------------------------------------------------------- The following example illustrates the operation of an order with a NDS instruction. Assume the National Best Bid and Offer is $10.00 by $10.04. There is a Limit Order to buy with a Non-Displayed instruction resting on the EDGA Book at $10.03. An order to sell with a Post Only instruction priced at $10.03 is entered. Under current behavior, the incoming sell order with a Post Only instruction would post to the EDGA Book because it would not receive sufficient price improvement.\15\ This would result in the EDGA Book being internally locked.\16\ As proposed, if the Limit Order to buy with Non-Displayed instruction also included a NDS instruction, the orders would instead execute against each other at $10.03, with the resting buy order with the NDS instruction becoming the remover of liquidity and the incoming sell order with a Post Only instruction becoming the liquidity provider. --------------------------------------------------------------------------- \15\ Id. [sic] \16\ In the event the incoming order with a Post Only instruction was to be displayed, it would post and display at $10.03 and the resting buy order with a Non-Displayed instruction would not execute against it or subsequent incoming sell orders at $10.03 for so long as the sell order was displayed on the Exchange. See Exchange Rule 11.10(a)(4)(C) and (D). --------------------------------------------------------------------------- Assume the same facts as above, but that a Limit Order with a Non- Displayed instruction to buy at $10.03 (``Order A'') is also resting on the EDGA Book with time priority ahead of the Limit Order to buy with a Non-Displayed instruction mentioned above (``Order B''). Like above, an order to sell with a Post Only instruction priced at $10.03 is entered. Under current behavior, the incoming sell order with a Post Only instruction would post to the EDGA Book because the value of such execution against the resting buy interest when removing liquidity does not equal or exceed the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. As proposed, if Order B also included a NDS instruction, the incoming sell order would execute against Order B and such order would become the remover of liquidity and the incoming sell order with a Post Only instruction would become the liquidity provider. In such case, Order A cedes time priority to Order B because Order A did not also include a NDS instruction and thus the User that submitted Order A did not indicate the preference to be treated as the remover of liquidity in favor of an execution; instead, by not using NDS, a User indicates the preference to remain posted on the EDGA Book as a liquidity provider.\17\ However, if the incoming sell order was priced at $10.02, it would receive sufficient price improvement to execute upon entry against all resting buy Limit Orders in time priority at $10.03.\18\ --------------------------------------------------------------------------- \17\ Should the Limit Order to buy at $10.03 with time priority (i.e., Order A) be displayed on the EDGA Book, the incoming sell order at $10.03 with a Post Only instruction will not execute against the non-displayed buy order with a NDS instruction because displayed orders have priority over non-displayed orders. In such a case, the incoming Limit Order would be handled as it is today in accordance with existing Exchange rules. See, e.g., Exchange Rules 11.6(l), 11.9, and 11.10(a). \18\ The execution occurs here because the value of the execution against the buy order when removing liquidity exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. See supra note 13. --------------------------------------------------------------------------- If the order with a NDS instruction is only partially executed, the unexecuted portion of that order remains on the EDGA Book and maintains its priority, as is the case today for an order that is partially executed and not cancelled by the User.\19\ The Exchange is proposing to make the NDS instruction available to Limit Orders \20\ that include a Non-Displayed instruction and MidPoint Peg Orders.\21\ The NDS instruction would not be available to all other order types provided by the Exchange under its Rule 11.8, as the execution of these order types is governed by other Exchange rules and the NDS instruction would be inconsistent with the use of those order types. --------------------------------------------------------------------------- \19\ See Exchange Rule 11.9(a)(5). \20\ See Exchange Rule 11.8(b). \21\ See Exchange Rule 11.8(d); the Exchange notes that NDS can be combined with other instructions also available to Limit Orders with a Non-Displayed instruction, such as the Discretionary Range instruction, the Minimum Execution Quantity instruction and the Pegged instruction, as such terms are defined in Exchange Rules 11.6(d), 11.6(h) and 11.6(j), respectively. --------------------------------------------------------------------------- The Exchange notes that similar functionality exists on Nasdaq and Arca. Nasdaq refers to their functionality as the ``Trade Now'' instruction \22\ and Arca refers to their functionality as the ``Non- Display Remove Modifier''.\23\ On Arca, a Limit Non-Displayed Order may be designated with a Non-Display Remove Modifier. If so designated, a Limit Non-Displayed Order to buy (sell) will trade as the remover of liquidity with an incoming Adding Liquidity Only Order (``ALO Order'') to sell (buy) that has a working price equal to the working price of the Limit Non-Displayed Order.\24\ On Nasdaq, Trade Now is an order attribute that allows a resting order that becomes locked by an incoming Displayed Order to execute against the available size of the contra-side locking order as a liquidity taker, and any remaining shares of the resting order will remain posted on the Nasdaq Book with the same priority.\25\ Nasdaq requires the contra-side order to be display eligible, while the Exchange proposes to enable an order with a NDS instruction to remove liquidity regardless of whether the incoming order would have ultimately been eligible for display consistent with Arca's Non-Display Remove Modifier. --------------------------------------------------------------------------- \22\ See Nasdaq Rule 4703(m). See also Securities and Exchange Act Release No. 79282 (November 10, 2016), 81 FR 81219 (November 17, 2016) (SR-Nasdaq-2016-156) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Rule 4703 and Rule 4703 to add a ``Trade Now'' Instruction to Certain Order Types). \23\ See Arca Rule 7.31-E(d)(2)(B). See also Securities and Exchange Act Release No. 76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (SR-NYSEArca-2015-56) (Order Approving Proposed Rule Change, and Notice of Filing and Order Granting Accelerated Approval of Amendment Nos. 1 and 2 Thereto, Adopting New Equity Trading Rules Relating to Orders and Modifiers and the Retail Liquidity Program To Reflect the Implementation of Pillar, the Exchange's New Trading Technology Platform) (including the Non- Display Remove Modifier). \24\ See Arca Rule 7.31-E(d)(2)(b). \25\ Arca provides their Non-Display Remove Modifier to their Mid-Point Liquidity Orders (``MPL Orders'') designated Day and MPL- ALO Orders and Arca Only Orders. Nasdaq's Trade Now functionality is available to Price to Comply Orders, Price to Display Orders, Non- Displayed Orders, Post-Only Orders, Midpoint Peg Post-Only Orders, and Market Maker Peg Orders. To the extent the NDS instruction is only available to Limit Orders with a Non-Displayed instruction and MidPoint Peg Orders, the Exchange notes that the NDS instruction will apply to different order types than Arca's Non-Display Remove Modifier and Nasdaq's Trade Now functionality. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \26\ in general, and furthers the objectives of Section 6(b)(5) of the Act \27\ 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 mechanism of a free and open market and a national market system and, in [[Page 31003]] general, to protect investors and the public interest by offering Users optional functionality that will facilitate the execution of orders that would otherwise remain unexecuted, thereby increasing the efficient functioning of the Exchange. The NDS instruction is an optional feature that is intended to reflect the order management practices of various market participants. The proposed NDS instruction assists in the avoidance of an internally locked EDGA Book by facilitating the execution of orders that would otherwise post, or remain posted, to the EDGA Book. --------------------------------------------------------------------------- \26\ 15 U.S.C. 78f(b). \27\ 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 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 Exchange believes the proposed rule change promotes competition because it will enable the Exchange to offer functionality substantially similar to that offered by Nasdaq and Arca (in addition to the fact that such functionality is identical to that already offered by the Exchange's affiliate, EDGX).\28\ Therefore, the Exchange does not believe the proposed rule change will result in any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As the NDS feature will be equally available to all Users, the Exchange does not believe the proposed rule change will result in any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. --------------------------------------------------------------------------- \28\ See supra notes 5-7. --------------------------------------------------------------------------- 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: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) 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)(iii) of the Act \29\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\30\ --------------------------------------------------------------------------- \29\ 15 U.S.C. 78s(b)(3)(A)(iii). \30\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of the filing. However, Rule 19b-4(f)(6)(iii) \31\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing, EDGA requested that the Commission waive the 30-day operative delay so that the Exchange can implement the proposed rule change promptly after filing. The Exchange noted that the proposed functionality is optional, may lead to increased order interaction on the Exchange, and is identical to functionality already provided on EDGX. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest, as such waiver will permit the Exchange to update its rule without delay so that it provides the same optional NDS functionality as is available on EDGX and potentially increase order interaction on the Exchange. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.\32\ --------------------------------------------------------------------------- \31\ 17 CFR 240.19b-4(f)(6)(iii). \32\ 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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-CboeEDGA-2018-011 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-CboeEDGA-2018-011. 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-CboeEDGA-2018-011, and should be submitted on or before July 23, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\33\ --------------------------------------------------------------------------- \33\ 17 CFR 200.30-3(a)(12) and (59). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-14108 Filed 6-29-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices 31001
Commission process and review your (‘‘Commission’’) the proposed rule statements may be examined at the
comments more efficiently, please use change as described in Items I and II places specified in Item IV below. The
only one method. The Commission will below, which Items have been prepared Exchange has prepared summaries, set
post all comments on the Commission’s by the Exchange. The Exchange has forth in Sections A, B, and C below, of
internet website (http://www.sec.gov/ designated this proposal as a ‘‘non- the most significant parts of such
rules/sro.shtml). Copies of the controversial’’ proposed rule change statements.
submission, all subsequent pursuant to Section 19(b)(3)(A) of the
amendments, all written statements Act 3 and Rule 19b–4(f)(6) thereunder,4 A. Self-Regulatory Organization’s
with respect to the proposed rule which renders it effective upon filing Statement of the Purpose of, and
change that are filed with the with the Commission. The Commission Statutory Basis for, the Proposed Rule
Commission, and all written is publishing this notice to solicit Change
communications relating to the comments on the proposed rule change 1. Purpose
proposed rule change between the from interested persons.
Commission and any person, other than The Exchange proposes to: (i) Amend
I. Self-Regulatory Organization’s paragraph (n) of Exchange Rule 11.6,
those that may be withheld from the
public in accordance with the Statement of the Terms of Substance of Routing/Posting Instructions to add a
provisions of 5 U.S.C. 552, will be the Proposed Rule Change new optional order instruction to be
available for website viewing and The Exchange filed a proposal to (i) known as Non-Displayed Swap; and (ii)
printing in the Commission’s Public amend paragraph (n) of Exchange Rule make a related change to description of
Reference Room, 100 F Street NE, 11.6, Routing/Posting Instructions to Limit Orders and MidPoint Peg Orders
Washington, DC 20549 on official add a new optional order instruction to under Exchange Rule 11.8. These
business days between the hours of be known as Non-Displayed Swap; and proposed amendments are identical to
10:00 a.m. and 3:00 p.m. Copies of such (ii) make a related change to description the rules of EDGX 8 and substantially
filing also will be available for of Limit Orders and MidPoint Peg similar to the rules of Nasdaq and Arca.9
inspection and copying at the principal Orders under Exchange Rule 11.8. The The proposed Non-Displayed Swap
office of the Exchange. All comments proposed amendments are identical to (‘‘NDS’’) instruction would provide
received will be posted without change. the rules of Cboe EDGX Exchange, Inc. orders with a Non-Displayed 10
Persons submitting comments are (‘‘EDGX’’) 5 and substantially similar to instruction resting on the EDGA Book 11
cautioned that we do not redact or edit the rules of the Nasdaq Stock Market with a greater ability to receive an
personal identifying information from LLC (‘‘Nasdaq’’) 6 and NYSE Arca, Inc. execution when that resting order is
comment submissions. You should (‘‘Arca’’).7 locked by an incoming order (e.g., the
submit only information that you wish The text of the proposed rule change price of the resting non-displayed order
to make available publicly. All is available at the Exchange’s website at is equal to the price of the incoming
submissions should refer to File www.markets.cboe.com, at the order that is to be placed on the EDGA
Number SR–NASDAQ–2018–047, and Exchange’s principal office and at the Book). The NDS instruction would be an
should be submitted on or before July Public Reference Room of the optional order instruction that would
23, 2018. Commission. allow Users 12 to have their resting non-
For the Commission, by the Division of II. Self-Regulatory Organization’s displayed orders execute against an
Trading and Markets, pursuant to delegated Statement of the Purpose of, and incoming order with a Post Only
authority.22 instruction rather than have it be locked
Statutory Basis for, the Proposed Rule
Eduardo A. Aleman, Change by the incoming order. NDS would be
Assistant Secretary. defined as an instruction that may be
In its filing with the Commission, the attached to an order with a Non-
[FR Doc. 2018–14109 Filed 6–29–18; 8:45 am]
Exchange included statements Displayed instruction that when such
BILLING CODE 8011–01–P
concerning the purpose of and basis for order is resting on the EDGA Book and
the proposed rule change and discussed would be locked by an incoming order
SECURITIES AND EXCHANGE any comments it received on the with a Post Only instruction that does
COMMISSION proposed rule change. The text of these not remove liquidity pursuant to
paragraph (4) of Exchange Rule
[Release No. 34–83521; File No. SR– 3 15 U.S.C. 78s(b)(3)(A).
CboeEDGA–2018–011] 4 17
11.6(n),13 the order with a NDS
CFR 240.19b–4(f)(6).
5 See EDGX Rules 11.6(n)(7), 11.8(b)(7) and
8 See supra note 5.
Self-Regulatory Organizations; Cboe 11.8(d)(5); see also Securities Exchange Act Release
9 See supra notes 6 and 7.
EDGA Exchange, Inc.; Notice of Filing No. 80841 (June 1, 2017), 82 FR 26559 (June 7,
10 See Exchange Rule 11.6(e)(2).
and Immediate Effectiveness of a 2017), (Notice of Filing and Immediate
Effectiveness To Add a New Optional Order 11 See Exchange Rule 1.5(d).
Proposed Rule Change to Rule 11.6, Instruction Known as Non-Displayed Swap). 12 See Exchange Rule 1.5(ee).
Definitions and Rule 11.8, Order Types 6 See Nasdaq Rule 4703(m) (defining the Trade 13 Under Exchange Rule 11.6(n)(4), an order with
Now order modifier); see also Securities Exchange a Post Only instruction will remove contra-side
June 26, 2018 Act Release No. 79282 (November 10, 2016), 81 FR liquidity from the EDGA Book if the order is an
Pursuant to Section 19(b)(1) of the 81219 (November 17, 2016) (Notice of Filing and order to buy or sell a security priced below $1.00
Securities Exchange Act of 1934 Immediate Effectiveness of Proposed Rule change to or if the value of such execution when removing
Amend Rule 4702 and Rule 4703 to Add a ‘‘Trade liquidity equals or exceeds the value of such
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Now’’ Instruction to Certain Order Types). execution if the order instead posted to the EDGA
notice is hereby given that on June 13,
daltland on DSKBBV9HB2PROD with NOTICES
7 See Arca Rule 7.31–E(d)(2)(B) (describing the Book and subsequently provided liquidity,
2018, Cboe EDGA Exchange, Inc. (the Non-Display Remove Modifier); see also Securities including the applicable fees charged or rebates
‘‘Exchange’’ or ‘‘EDGA’’) filed with the Exchange Act Release No. 76267 (October 26, 2015), provided. To determine at the time of a potential
Securities and Exchange Commission 80 FR 66951 (October 30, 2015) (Order Approving execution whether the value of such execution
Proposed Rule change Adopting New Equity when removing liquidity equals or exceeds the
Trading Rules Relating to Orders and Modifiers and value of such execution if the order instead posted
22 17 CFR 200.30–3(a)(12). Retail Liquidity Program To Reflect the to the EDGA Book and subsequently provided
1 15 U.S.C. 78s(b)(1). Implementation of Pillar, the Exchange’s New liquidity, the Exchange will use the highest possible
2 17 CFR 240.19b–4. Trading Technology Platform). Continued
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instruction is converted to an executable against Order B and such order would Arca refers to their functionality as the
order and will remove liquidity against become the remover of liquidity and the ‘‘Non-Display Remove Modifier’’.23 On
such incoming order. An order with a incoming sell order with a Post Only Arca, a Limit Non-Displayed Order may
NDS instruction would not be eligible instruction would become the liquidity be designated with a Non-Display
for routing pursuant to Exchange Rule provider. In such case, Order A cedes Remove Modifier. If so designated, a
11.11, Routing to Away Trading Centers. time priority to Order B because Order Limit Non-Displayed Order to buy (sell)
The proposed NDS instruction assists in A did not also include a NDS will trade as the remover of liquidity
the avoidance of an internally locked instruction and thus the User that with an incoming Adding Liquidity
EDGA Book (though such lock would submitted Order A did not indicate the Only Order (‘‘ALO Order’’) to sell (buy)
not be displayed by the Exchange) 14 by preference to be treated as the remover that has a working price equal to the
facilitating the execution of orders that of liquidity in favor of an execution; working price of the Limit Non-
would otherwise lock each other. instead, by not using NDS, a User Displayed Order.24 On Nasdaq, Trade
The following example illustrates the indicates the preference to remain Now is an order attribute that allows a
operation of an order with a NDS posted on the EDGA Book as a liquidity resting order that becomes locked by an
instruction. Assume the National Best provider.17 However, if the incoming incoming Displayed Order to execute
Bid and Offer is $10.00 by $10.04. There sell order was priced at $10.02, it would against the available size of the contra-
is a Limit Order to buy with a Non- receive sufficient price improvement to side locking order as a liquidity taker,
Displayed instruction resting on the execute upon entry against all resting and any remaining shares of the resting
EDGA Book at $10.03. An order to sell buy Limit Orders in time priority at order will remain posted on the Nasdaq
with a Post Only instruction priced at $10.03.18 Book with the same priority.25 Nasdaq
$10.03 is entered. Under current If the order with a NDS instruction is requires the contra-side order to be
behavior, the incoming sell order with only partially executed, the unexecuted display eligible, while the Exchange
a Post Only instruction would post to portion of that order remains on the proposes to enable an order with a NDS
the EDGA Book because it would not EDGA Book and maintains its priority, instruction to remove liquidity
receive sufficient price improvement.15 as is the case today for an order that is regardless of whether the incoming
This would result in the EDGA Book partially executed and not cancelled by order would have ultimately been
being internally locked.16 As proposed, the User.19 The Exchange is proposing eligible for display consistent with
if the Limit Order to buy with Non- to make the NDS instruction available to Arca’s Non-Display Remove Modifier.
Displayed instruction also included a Limit Orders 20 that include a Non-
NDS instruction, the orders would 2. Statutory Basis
Displayed instruction and MidPoint Peg
instead execute against each other at Orders.21 The NDS instruction would The Exchange believes that its
$10.03, with the resting buy order with not be available to all other order types proposal is consistent with Section 6(b)
the NDS instruction becoming the provided by the Exchange under its of the Act 26 in general, and furthers the
remover of liquidity and the incoming Rule 11.8, as the execution of these objectives of Section 6(b)(5) of the Act 27
sell order with a Post Only instruction order types is governed by other in particular, in that it is designed to
becoming the liquidity provider. Exchange rules and the NDS instruction promote just and equitable principles of
Assume the same facts as above, but would be inconsistent with the use of trade, to foster cooperation and
that a Limit Order with a Non-Displayed those order types. coordination with persons engaged in
instruction to buy at $10.03 (‘‘Order A’’) The Exchange notes that similar facilitating transactions in securities, to
is also resting on the EDGA Book with functionality exists on Nasdaq and Arca. remove impediments to and perfect the
time priority ahead of the Limit Order Nasdaq refers to their functionality as mechanism of a free and open market
to buy with a Non-Displayed instruction the ‘‘Trade Now’’ instruction 22 and and a national market system and, in
mentioned above (‘‘Order B’’). Like
above, an order to sell with a Post Only 17 Should the Limit Order to buy at $10.03 with Effectiveness of Proposed Rule Change to Amend
instruction priced at $10.03 is entered. Rule 4703 and Rule 4703 to add a ‘‘Trade Now’’
time priority (i.e., Order A) be displayed on the
Instruction to Certain Order Types).
Under current behavior, the incoming EDGA Book, the incoming sell order at $10.03 with 23 See Arca Rule 7.31–E(d)(2)(B). See also
sell order with a Post Only instruction a Post Only instruction will not execute against the
non-displayed buy order with a NDS instruction Securities and Exchange Act Release No. 76267
would post to the EDGA Book because because displayed orders have priority over non- (October 26, 2015), 80 FR 66951 (October 30, 2015)
the value of such execution against the (SR–NYSEArca–2015–56) (Order Approving
displayed orders. In such a case, the incoming Limit
Proposed Rule Change, and Notice of Filing and
resting buy interest when removing Order would be handled as it is today in accordance
Order Granting Accelerated Approval of
liquidity does not equal or exceed the with existing Exchange rules. See, e.g., Exchange
Amendment Nos. 1 and 2 Thereto, Adopting New
Rules 11.6(l), 11.9, and 11.10(a).
value of such execution if the order 18 The execution occurs here because the value of
Equity Trading Rules Relating to Orders and
instead posted to the EDGA Book and Modifiers and the Retail Liquidity Program To
the execution against the buy order when removing Reflect the Implementation of Pillar, the Exchange’s
subsequently provided liquidity, liquidity exceeds the value of such execution if the New Trading Technology Platform) (including the
including the applicable fees charged or order instead posted to the EDGA Book and Non-Display Remove Modifier).
rebates provided. As proposed, if Order subsequently provided liquidity, including the 24 See Arca Rule 7.31–E(d)(2)(b).
applicable fees charged or rebates provided. See 25 Arca provides their Non-Display Remove
B also included a NDS instruction, the supra note 13. Modifier to their Mid-Point Liquidity Orders (‘‘MPL
incoming sell order would execute 19 See Exchange Rule 11.9(a)(5).
Orders’’) designated Day and MPL–ALO Orders and
20 See Exchange Rule 11.8(b).
Arca Only Orders. Nasdaq’s Trade Now
rebate paid and highest possible fee charged for 21 See Exchange Rule 11.8(d); the Exchange notes functionality is available to Price to Comply Orders,
such executions on the Exchange. that NDS can be combined with other instructions Price to Display Orders, Non-Displayed Orders,
14 See Exchange Rule 11.10(a)(4)(C). also available to Limit Orders with a Non-Displayed Post-Only Orders, Midpoint Peg Post-Only Orders,
daltland on DSKBBV9HB2PROD with NOTICES
15 Id. [sic] instruction, such as the Discretionary Range and Market Maker Peg Orders. To the extent the
16 In the event the incoming order with a Post instruction, the Minimum Execution Quantity NDS instruction is only available to Limit Orders
Only instruction was to be displayed, it would post instruction and the Pegged instruction, as such with a Non-Displayed instruction and MidPoint Peg
and display at $10.03 and the resting buy order terms are defined in Exchange Rules 11.6(d), 11.6(h) Orders, the Exchange notes that the NDS instruction
with a Non-Displayed instruction would not and 11.6(j), respectively. will apply to different order types than Arca’s Non-
execute against it or subsequent incoming sell 22 See Nasdaq Rule 4703(m). See also Securities Display Remove Modifier and Nasdaq’s Trade Now
orders at $10.03 for so long as the sell order was and Exchange Act Release No. 79282 (November 10, functionality.
26 15 U.S.C. 78f(b).
displayed on the Exchange. See Exchange Rule 2016), 81 FR 81219 (November 17, 2016) (SR–
11.10(a)(4)(C) and (D). Nasdaq–2016–156) (Notice of Filing and Immediate 27 15 U.S.C. 78f(b)(5).
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![Federal Register / Vol. 83, No. 127 / Monday, July 2, 2018 / Notices 31003
general, to protect investors and the subparagraph (f)(6) of Rule 19b–4 Electronic Comments
public interest by offering Users thereunder.30
optional functionality that will facilitate • Use the Commission’s internet
A proposed rule change filed under
the execution of orders that would comment form (http://www.sec.gov/
Rule 19b–4(f)(6) normally does not
otherwise remain unexecuted, thereby become operative for 30 days after the rules/sro.shtml); or
increasing the efficient functioning of date of the filing. However, Rule 19b– • Send an email to rule-comments@
the Exchange. The NDS instruction is an 4(f)(6)(iii) 31 permits the Commission to sec.gov. Please include File Number SR–
optional feature that is intended to designate a shorter time if such action CboeEDGA–2018–011 on the subject
reflect the order management practices is consistent with the protection of line.
of various market participants. The investors and the public interest. In its
proposed NDS instruction assists in the filing, EDGA requested that the Paper Comments
avoidance of an internally locked EDGA Commission waive the 30-day operative • Send paper comments in triplicate
Book by facilitating the execution of delay so that the Exchange can to Secretary, Securities and Exchange
orders that would otherwise post, or implement the proposed rule change Commission, 100 F Street NE,
remain posted, to the EDGA Book. promptly after filing. The Exchange Washington, DC 20549–1090.
noted that the proposed functionality is
B. Self-Regulatory Organization’s All submissions should refer to File
optional, may lead to increased order
Statement on Burden on Competition Number SR–CboeEDGA–2018–011. This
interaction on the Exchange, and is
The Exchange does not believe that identical to functionality already file number should be included on the
the proposed rule change will result in provided on EDGX. The Commission subject line if email is used. To help the
any burden on competition that is not believes that waiver of the 30-day Commission process and review your
necessary or appropriate in furtherance operative delay is consistent with the comments more efficiently, please use
of the purposes of the Act, as amended. protection of investors and the public only one method. The Commission will
On the contrary, the Exchange believes interest, as such waiver will permit the post all comments on the Commission’s
the proposed rule change promotes Exchange to update its rule without internet website (http://www.sec.gov/
competition because it will enable the delay so that it provides the same rules/sro.shtml). Copies of the
Exchange to offer functionality optional NDS functionality as is submission, all subsequent
substantially similar to that offered by available on EDGX and potentially amendments, all written statements
Nasdaq and Arca (in addition to the fact increase order interaction on the with respect to the proposed rule
that such functionality is identical to Exchange. Accordingly, the Commission change that are filed with the
that already offered by the Exchange’s waives the 30-day operative delay and Commission, and all written
affiliate, EDGX).28 Therefore, the designates the proposed rule change communications relating to the
Exchange does not believe the proposed operative upon filing.32 proposed rule change between the
rule change will result in any burden on At any time within 60 days of the Commission and any person, other than
intermarket competition that is not filing of the proposed rule change, the those that may be withheld from the
necessary or appropriate in furtherance Commission summarily may public in accordance with the
of the purposes of the Act. As the NDS temporarily suspend such rule change if provisions of 5 U.S.C. 552, will be
feature will be equally available to all it appears to the Commission that such available for website viewing and
Users, the Exchange does not believe the action is: (i) Necessary or appropriate in printing in the Commission’s Public
proposed rule change will result in any the public interest; (ii) for the protection Reference Room, 100 F Street NE,
burden on intramarket competition that of investors; or (iii) otherwise in Washington, DC 20549, on official
is not necessary or appropriate in furtherance of the purposes of the Act. business days between the hours of
furtherance of the purposes of the Act. If the Commission takes such action, the 10:00 a.m. and 3:00 p.m. Copies of the
Commission shall institute proceedings filing also will be available for
C. Self-Regulatory Organization’s to determine whether the proposed rule
Statement on Comments on the inspection and copying at the principal
should be approved or disapproved.
Proposed Rule Change Received From office of the Exchange. All comments
Members, Participants, or Others IV. Solicitation of Comments received will be posted without change.
Persons submitting comments are
No comments were solicited or Interested persons are invited to cautioned that we do not redact or edit
received on the proposed rule change. submit written data, views, and
personal identifying information from
arguments concerning the foregoing,
comment submissions. You should
III. Date of Effectiveness of the including whether the proposed rule
submit only information that you wish
Proposed Rule Change and Timing for change is consistent with the Act.
to make available publicly. All
Commission Action Comments may be submitted by any of
submissions should refer to File
the following methods:
Because the foregoing proposed rule Number SR–CboeEDGA–2018–011, and
change does not: (i) Significantly affect 30 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
should be submitted on or before July
the protection of investors or the public 4(f)(6) requires a self-regulatory organization to give 23, 2018.
interest; (ii) impose any significant the Commission written notice of its intent to file For the Commission, by the Division of
burden on competition; and (iii) become the proposed rule change at least five business days
prior to the date of filing of the proposed rule Trading and Markets, pursuant to delegated
operative for 30 days from the date on authority.33
daltland on DSKBBV9HB2PROD with NOTICES
change, or such shorter time as designated by the
which it was filed, or such shorter time Commission. The Exchange has satisfied this Eduardo A. Aleman,
as the Commission may designate, it has requirement.
become effective pursuant to Section 31 17 CFR 240.19b–4(f)(6)(iii). Assistant Secretary.
19(b)(3)(A)(iii) of the Act 29 and 32 For purposes only of waiving the 30-day [FR Doc. 2018–14108 Filed 6–29–18; 8:45 am]
operative delay, the Commission has also BILLING CODE 8011–01–P
considered the proposed rule’s impact on
28 See supra notes 5–7. efficiency, competition, and capital formation. See
29 15 U.S.C. 78s(b)(3)(A)(iii). 15 U.S.C. 78c(f). 33 17 CFR 200.30–3(a)(12) and (59).
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Document Created: 2018-06-30 00:17:17
Document Modified: 2018-06-30 00:17:17
| 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 31001 |
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