83 FR 31229 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.9, Orders and Modifiers
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 128 (July 3, 2018)
Federal Register Volume 83, Issue 128 (July 3, 2018)
| Page Range | 31229-31232 | |
| FR Document | 2018-14296 |
[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)] [Notices] [Pages 31229-31232] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-14296] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83536; File No. SR-CboeBYX-2018-009] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 11.9, Orders and Modifiers June 28, 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 18, 2018, Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') 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 add a new optional order type modifier to be known as Non-Displayed Swap. The proposed amendments are substantively 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). --------------------------------------------------------------------------- [[Page 31230]] 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 add a new optional order type modifier to be known as Non-Displayed Swap. The proposed amendments are substantively 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 resting limit orders that are not displayed on the Exchange \10\ and Mid-Point Peg Orders resting on the BYX 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 BYX 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 on an order resting on the BYX Book that, when locked by an incoming order with a Post Only instruction that does not remove liquidity pursuant to paragraph (c)(6) of Exchange Rule 11.9,\13\ causes such order to be converted to an executable order that removes liquidity against such incoming order. An NDS instruction would only be eligible for inclusion on a non-displayed limit order or a Mid-Point Peg Order. An order with a NDS instruction would not be eligible for routing pursuant to Exchange Rule 11.13, Order Execution and Routing. The proposed NDS instruction assists in the avoidance of an internally locked BYX 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 11.9(c)(11). \11\ See Exchange Rule 1.5(e). \12\ See Exchange Rule 1.5(cc). \13\ Under Exchange Rule 11.9(c)(6), a BYX Post Only Order will remove contra-side liquidity from the BYX 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 BYX 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 BYX 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 11.13(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 non-displayed limit order to buy resting on the BYX Book at $10.03. A BYX Post Only Order to sell priced at $10.03 is entered. Under current behavior, the incoming sell order marked as Post Only would post to the BYX Book because it would not receive sufficient price improvement.\15\ This would result in the BYX Book being internally locked.\16\ As proposed, if the non-displayed limit order to buy 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 BYX Post Only Order to sell 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 11.13(a)(4)(C) and (D). --------------------------------------------------------------------------- Assume the same facts as above, but that a non-displayed limit order to buy at $10.03 (``Order A'') is also resting on the BYX Book with time priority ahead of the non-displayed limit order mentioned above (``Order B''). Like above, a BYX Post Only Order to sell priced at $10.03 is entered. Under current behavior, the incoming BYX Post Only Order to sell would post to the BYX 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 BYX 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 BYX Post Only Order to sell 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 BYX 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 BYX Book, the incoming BYX Post Only Order to sell at $10.03 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 11.9 and 11.13(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 BYX 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 BYX 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 are not displayed on the Exchange \21\ and MidPoint Peg Orders.\22\ Because the NDS instruction would be only available to limit orders not displayed on the Exchange and to MidPoint Peg Orders, the NDS instruction would not be available to other order types provided by the Exchange under its Rule 11.9, such as BYX Market Orders, Reserve Orders, and Market Maker Peg Orders,\23\ as the NDS instruction would be inconsistent with the use of those order types. The NDS instruction could, however, be [[Page 31231]] combined with other instructions also available to non-displayed limit orders, such as the Minimum Quantity Order instruction, the Primary Pegged Order instruction, the Market Pegged Order instruction or the Discretionary Order instruction.\24\ --------------------------------------------------------------------------- \19\ See Exchange Rule 11.12(a)(5). \20\ See Exchange Rule 11.9(a)(1). \21\ See Exchange Rule 11.9(c)(11). \22\ See Exchange Rule 11.9(c)(9). \23\ See Exchange Rules 11.9(a)(2), 11.9(c)(1) and 11.9(c)(16), respectively. \24\ See Exchange Rules 11.9(c)(5), 11.9(c)(8)(A), 11.9(c)(8)(B) and 11.9(c)(10), respectively. --------------------------------------------------------------------------- The Exchange notes that similar functionality exists on Nasdaq and Arca. Nasdaq refers to their functionality as the ``Trade Now'' instruction \25\ and Arca refers to their functionality as the ``Non- Display Remove Modifier''.\26\ 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.\27\ 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.\28\ 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. --------------------------------------------------------------------------- \25\ 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). \26\ 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). \27\ See Arca Rule 7.31-E(d)(2)(b). \28\ 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 non-displayed limit orders 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 \29\ in general, and furthers the objectives of Section 6(b)(5) of the Act \30\ 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 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 BYX Book by facilitating the execution of orders that would otherwise post, or remain posted, to the BYX Book. --------------------------------------------------------------------------- \29\ 15 U.S.C. 78f(b). \30\ 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).\31\ 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. --------------------------------------------------------------------------- \31\ 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 \32\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\33\ --------------------------------------------------------------------------- \32\ 15 U.S.C. 78s(b)(3)(A)(iii). \33\ 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) \34\ 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, BYX 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.\35\ --------------------------------------------------------------------------- \34\ 17 CFR 240.19b-4(f)(6)(iii). \35\ 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 [[Page 31232]] 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-CboeBYX-2018-009 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-2018-009. 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-CboeBYX-2018-009, and should be submitted on or before July 24, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\36\ --------------------------------------------------------------------------- \36\ 17 CFR 200.30-3(a)(12) and (59). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-14296 Filed 7-2-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31229
the date of the filing.12 However, Electronic Comments SECURITIES AND EXCHANGE
pursuant to Rule 19b–4(f)(6)(iii),13 the COMMISSION
Commission may designate a shorter • Use the Commission’s internet
time if such action is consistent with the comment form (http://www.sec.gov/ [Release No. 34–83536; File No. SR–
protection of investors and the public rules/sro.shtml); or CboeBYX–2018–009]
interest. The Exchange has asked the • Send an email to rule-comments@
Commission to waive the 30-day sec.gov. Please include File Number SR– Self-Regulatory Organizations; Cboe
operative delay so that the proposal may Phlx–2018–50 on the subject line. BYX Exchange, Inc.; Notice of Filing
become operative immediately upon and Immediate Effectiveness of a
Paper Comments Proposed Rule Change to Rule 11.9,
filing. The Commission believes that
Orders and Modifiers
waiving the 30-day operative delay is • Send paper comments in triplicate
consistent with the protection of to Secretary, Securities and Exchange June 28, 2018.
investors and the public interest Commission, 100 F Street NE, Pursuant to Section 19(b)(1) of the
because doing so will allow the Pilot Washington, DC 20549–1090. Securities Exchange Act of 1934
Program to continue without All submissions should refer to File (‘‘Act’’),1 and Rule 19b–4 thereunder,2
interruption in a manner that is Number SR–Phlx–2018–50. This file notice is hereby given that on June 18,
consistent with the Commission’s prior number should be included on the 2018, Cboe BYX Exchange, Inc. (the
approval of the extension and expansion ‘‘Exchange’’ or ‘‘BYX’’) filed with the
subject line if email is used. To help the
of the Pilot Program and will allow the Securities and Exchange Commission
Commission process and review your
Exchange and the Commission (‘‘Commission’’) the proposed rule
comments more efficiently, please use
additional time to analyze the impact of change as described in Items I and II
only one method. The Commission will below, which Items have been prepared
the Pilot Program.14 Accordingly, the post all comments on the Commission’s
Commission designates the proposed by the Exchange. The Exchange has
internet website (http://www.sec.gov/ designated this proposal as a ‘‘non-
rule change as operative upon filing rules/sro.shtml). Copies of the
with the Commission.15 controversial’’ proposed rule change
submission, all subsequent pursuant to Section 19(b)(3)(A) of the
At any time within 60 days of the amendments, all written statements Act 3 and Rule 19b–4(f)(6) thereunder,4
filing of such proposed rule change, the with respect to the proposed rule which renders it effective upon filing
Commission summarily may change that are filed with the with the Commission. The Commission
temporarily suspend such rule change if Commission, and all written is publishing this notice to solicit
it appears to the Commission that such communications relating to the comments on the proposed rule change
action is necessary or appropriate in the proposed rule change between the from interested persons.
public interest, for the protection of Commission and any person, other than
I. Self-Regulatory Organization’s
investors, or otherwise in furtherance of those that may be withheld from the Statement of the Terms of Substance of
the purposes of the Act. If the public in accordance with the the Proposed Rule Change
Commission takes such action, the provisions of 5 U.S.C. 552, will be
Commission shall institute proceedings available for website viewing and The Exchange filed a proposal to add
under Section 19(b)(2)(B) 16 of the Act to printing in the Commission’s Public a new optional order type modifier to be
determine whether the proposed rule Reference Room, 100 F Street NE, known as Non-Displayed Swap. The
change should be approved or Washington, DC 20549, on official proposed amendments are substantively
disapproved. business days between the hours of identical to the rules of Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) 5 and
IV. Solicitation of Comments 10:00 a.m. and 3:00 p.m. Copies of the
substantially similar to the rules of the
filing also will be available for
Nasdaq Stock Market LLC (‘‘Nasdaq’’) 6
Interested persons are invited to inspection and copying at the principal and NYSE Arca, Inc. (‘‘Arca’’).7
submit written data, views, and office of the Exchange. All comments
arguments concerning the foregoing, received will be posted without change. 1 15 U.S.C. 78s(b)(1).
including whether the proposed rule Persons submitting comments are 2 17 CFR 240.19b–4.
change is consistent with the Act. cautioned that we do not redact or edit 3 15 U.S.C. 78s(b)(3)(A).
Comments may be submitted by any of personal identifying information from 4 17 CFR 240.19b–4(f)(6).
the following methods: comment submissions. You should 5 See EDGX Rules 11.6(n)(7), 11.8(b)(7) and
11.8(d)(5); see also Securities Exchange Act Release
submit only information that you wish No. 80841 (June 1, 2017), 82 FR 26559 (June 7,
12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– to make available publicly. All 2017), (Notice of Filing and Immediate
4(f)(6)(iii) requires the Exchange to give the submissions should refer to File Effectiveness To Add a New Optional Order
Commission written notice of the Exchange’s intent Instruction Known as Non-Displayed Swap).
to file the proposed rule change along with a brief Number SR–Phlx–2018–50 and should 6 See Nasdaq Rule 4703(m) (defining the Trade
description and the text of the proposed rule be submitted on or before July 24, 2018. Now order modifier); see also Securities Exchange
change, at least five business days prior to the date Act Release No. 79282 (November 10, 2016), 81 FR
of filing of the proposed rule change, or such For the Commission, by the Division of
81219 (November 17, 2016) (Notice of Filing and
shorter time as designated by the Commission. The Trading and Markets, pursuant to delegated
Immediate Effectiveness of Proposed Rule change to
Exchange has satisfied this pre-filing requirement. authority.17 Amend Rule 4702 and Rule 4703 to Add a ‘‘Trade
13 17 CFR 240.19b–4(f)(6)(iii).
Eduardo A. Aleman, Now’’ Instruction to Certain Order Types).
sradovich on DSK3GMQ082PROD with NOTICES
14 See Securities Exchange Act Release No. 61061 7 See Arca Rule 7.31–E(d)(2)(B) (describing the
(November 24, 2009), 74 FR 62857 (December 1, Assistant Secretary. Non-Display Remove Modifier); see also Securities
2009) (SR–NYSEArca–2009–44). [FR Doc. 2018–14291 Filed 7–2–18; 8:45 am] Exchange Act Release No. 76267 (October 26, 2015),
15 For purposes only of waiving the operative
BILLING CODE 8011–01–P 80 FR 66951 (October 30, 2015) (Order Approving
delay for this proposal, the Commission has Proposed Rule change Adopting New Equity
considered the proposed rule’s impact on Trading Rules Relating to Orders and Modifiers and
efficiency, competition, and capital formation. See Retail Liquidity Program To Reflect the
15 U.S.C. 78c(f). Implementation of Pillar, the Exchange’s New
16 15 U.S.C. 78s(b)(2)(B). 17 17 CFR 200.30–3(a)(12). Trading Technology Platform).
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![31230 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices
The text of the proposed rule change to be converted to an executable order not equal or exceed the value of such
is available at the Exchange’s website at that removes liquidity against such execution if the order instead posted to
www.markets.cboe.com, at the principal incoming order. An NDS instruction the BYX Book and subsequently
office of the Exchange, and at the would only be eligible for inclusion on provided liquidity, including the
Commission’s Public Reference Room. a non-displayed limit order or a Mid- applicable fees charged or rebates
Point Peg Order. An order with a NDS provided. As proposed, if Order B also
II. Self-Regulatory Organization’s
instruction would not be eligible for included a NDS instruction, the
Statement of the Purpose of, and
routing pursuant to Exchange Rule incoming sell order would execute
Statutory Basis for, the Proposed Rule
11.13, Order Execution and Routing. against Order B and such order would
Change
The proposed NDS instruction assists in become the remover of liquidity and the
In its filing with the Commission, the the avoidance of an internally locked BYX Post Only Order to sell would
Exchange included statements BYX Book (though such lock would not become the liquidity provider. In such
concerning the purpose of and basis for be displayed by the Exchange) 14 by case, Order A cedes time priority to
the proposed rule change and discussed facilitating the execution of orders that Order B because Order A did not also
any comments it received on the would otherwise lock each other. include a NDS instruction and thus the
proposed rule change. The text of these The following example illustrates the User that submitted Order A did not
statements may be examined at the operation of an order with a NDS indicate the preference to be treated as
places specified in Item IV below. The instruction. Assume the National Best the remover of liquidity in favor of an
Exchange has prepared summaries, set Bid and Offer is $10.00 by $10.04. There execution; instead, by not using NDS, a
forth in Sections A, B, and C below, of is a non-displayed limit order to buy User indicates the preference to remain
the most significant parts of such resting on the BYX Book at $10.03. A posted on the BYX Book as a liquidity
statements. BYX Post Only Order to sell priced at provider.17 However, if the incoming
A. Self-Regulatory Organization’s $10.03 is entered. Under current sell order was priced at $10.02, it would
Statement of the Purpose of, and behavior, the incoming sell order receive sufficient price improvement to
Statutory Basis for, the Proposed Rule marked as Post Only would post to the execute upon entry against all resting
Change BYX Book because it would not receive buy limit orders in time priority at
sufficient price improvement.15 This $10.03.18
1. Purpose If the order with a NDS instruction is
would result in the BYX Book being
The Exchange proposes to add a new internally locked.16 As proposed, if the only partially executed, the unexecuted
optional order type modifier to be non-displayed limit order to buy also portion of that order remains on the
known as Non-Displayed Swap. The included a NDS instruction, the orders BYX Book and maintains its priority, as
proposed amendments are substantively would instead execute against each is the case today for an order that is
identical to the rules of EDGX 8 and other at $10.03, with the resting buy partially executed and not cancelled by
substantially similar to the rules of order with the NDS instruction the User.19 The Exchange is proposing
Nasdaq and Arca.9 becoming the remover of liquidity and to make the NDS instruction available to
The proposed Non-Displayed Swap the incoming BYX Post Only Order to limit orders 20 that are not displayed on
(‘‘NDS’’) instruction would provide sell becoming the liquidity provider. the Exchange 21 and MidPoint Peg
resting limit orders that are not Assume the same facts as above, but Orders.22 Because the NDS instruction
displayed on the Exchange 10 and Mid- that a non-displayed limit order to buy would be only available to limit orders
Point Peg Orders resting on the BYX not displayed on the Exchange and to
at $10.03 (‘‘Order A’’) is also resting on
Book 11 with a greater ability to receive MidPoint Peg Orders, the NDS
the BYX Book with time priority ahead
an execution when that resting order is instruction would not be available to
of the non-displayed limit order
locked by an incoming order (e.g., the other order types provided by the
mentioned above (‘‘Order B’’). Like
price of the resting non-displayed order Exchange under its Rule 11.9, such as
above, a BYX Post Only Order to sell
is equal to the price of the incoming BYX Market Orders, Reserve Orders,
priced at $10.03 is entered. Under
order that is to be placed on the BYX and Market Maker Peg Orders,23 as the
current behavior, the incoming BYX
Book). The NDS instruction would be an NDS instruction would be inconsistent
Post Only Order to sell would post to
optional order instruction that would with the use of those order types. The
the BYX Book because the value of such
allow Users 12 to have their resting non- NDS instruction could, however, be
execution against the resting buy
displayed orders execute against an interest when removing liquidity does 17 Should the limit order to buy at $10.03 with
incoming order with a Post Only
time priority (i.e., Order A) be displayed on the
instruction rather than have it be locked exceeds the value of such execution if the order BYX Book, the incoming BYX Post Only Order to
by the incoming order. NDS would be instead posted to the BYX Book and subsequently sell at $10.03 will not execute against the non-
defined as an instruction on an order provided liquidity, including the applicable fees displayed buy order with a NDS instruction because
resting on the BYX Book that, when charged or rebates provided. To determine at the displayed orders have priority over non-displayed
time of a potential execution whether the value of orders. In such a case, the incoming limit order
locked by an incoming order with a Post such execution when removing liquidity equals or would be handled as it is today in accordance with
Only instruction that does not remove exceeds the value of such execution if the order existing Exchange rules. See, e.g., Exchange Rules
liquidity pursuant to paragraph (c)(6) of instead posted to the BYX Book and subsequently 11.9 and 11.13(a).
Exchange Rule 11.9,13 causes such order provided liquidity, the Exchange will use the 18 The execution occurs here because the value of
highest possible rebate paid and highest possible the execution against the buy order when removing
fee charged for such executions on the Exchange. liquidity exceeds the value of such execution if the
8 See supra note 5. 14 See Exchange Rule 11.13(a)(4)(C). order instead posted to the BYX Book and
sradovich on DSK3GMQ082PROD with NOTICES
9 See supra notes 6 and 7. subsequently provided liquidity, including the
15 Id. [sic]
10 See Exchange Rule 11.9(c)(11).
16 In the event the incoming order with a Post applicable fees charged or rebates provided. See
11 See Exchange Rule 1.5(e). supra note 13.
Only instruction was to be displayed, it would post 19 See Exchange Rule 11.12(a)(5).
12 See Exchange Rule 1.5(cc).
and display at $10.03 and the resting buy order
20 See Exchange Rule 11.9(a)(1).
13 Under Exchange Rule 11.9(c)(6), a BYX Post with a Non-Displayed instruction would not
21 See Exchange Rule 11.9(c)(11).
Only Order will remove contra-side liquidity from execute against it or subsequent incoming sell
22 See Exchange Rule 11.9(c)(9).
the BYX Book if the order is an order to buy or sell orders at $10.03 for so long as the sell order was
a security priced below $1.00 or if the value of such displayed on the Exchange. See Exchange Rule 23 See Exchange Rules 11.9(a)(2), 11.9(c)(1) and
execution when removing liquidity equals or 11.13(a)(4)(C) and (D). 11.9(c)(16), respectively.
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![31232 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices
Commission summarily may submit only information that you wish 2017, the Commission again extended
temporarily suspend such rule change if to make available publicly. All the temporary exemption until June 30,
it appears to the Commission that such submissions should refer to File 2018 concurrently with an immediately
action is: (i) Necessary or appropriate in Number SR–CboeBYX–2018–009, and effective filing that extended the
the public interest; (ii) for the protection should be submitted on or before July operation of the RPI Program until
of investors; or (iii) otherwise in 24, 2018. December 1, 2017.6
furtherance of the purposes of the Act. For the Commission, by the Division of The Exchange now seeks to extend
If the Commission takes such action, the Trading and Markets, pursuant to delegated the exemption until December 31,
Commission shall institute proceedings authority.36 2018.7 The Exchange’s request was
to determine whether the proposed rule Eduardo A. Aleman, made in conjunction with an
should be approved or disapproved. Assistant Secretary. immediately effective filing that extends
IV. Solicitation of Comments [FR Doc. 2018–14296 Filed 7–2–18; 8:45 am] the operation of the RPI Program
BILLING CODE 8011–01–P
through the same date.8 In its request to
Interested persons are invited to extend the exemption, the Exchange
submit written data, views, and notes that given the gradual
arguments concerning the foregoing, implementation of the RPI Program and
including whether the proposed rule SECURITIES AND EXCHANGE
COMMISSION the preliminary participation and
change is consistent with the Act. results, extending the exemption would
Comments may be submitted by any of [Release No. 34–83542; File No. SR–BX– provide additional opportunities for
the following methods: 2014–048]
greater participation and assessment of
Electronic Comments Self-Regulatory Organizations; Nasdaq the results.9 Accordingly, the Exchange
• Use the Commission’s internet BX; Order Granting an Extension to has asked additional time to allow it
comment form (http://www.sec.gov/ Limited Exemptions From Rule 612(c) and the Commission to analyze data
rules/sro.shtml); or of Regulation NMS in Connection With concerning the RPI Program, which the
• Send an email to rule-comments@ the Exchange’s Retail Price Exchange committed to provide to the
sec.gov. Please include File Number SR– Improvement Program Until December Commission.10 For this reason and the
CboeBYX–2018–009 on the subject line. 31, 2018 reasons stated in the RPI Approval
Order originally granting the limited
Paper Comments June 28, 2018. exemption, the Commission, pursuant
• Send paper comments in triplicate On November 28, 2014 the Securities to its authority under Rule 612(c) of
to Secretary, Securities and Exchange and Exchange Commission Regulation NMS, finds that pursuant to
Commission, 100 F Street NE, (‘‘Commission’’) issued an order its authority under Rule 612(c) of
Washington, DC 20549–1090. pursuant to its authority under Rule Regulation NMS, extending the
All submissions should refer to File 612(c) of Regulation NMS (‘‘Sub-Penny exemption is appropriate in the public
Number SR–CboeBYX–2018–009. This Rule’’) 1 that granted Nasdaq BX, Inc. interest and consistent with the
file number should be included on the (‘‘BX’’ or ‘‘Exchange’’) a limited protection of investors.
subject line if email is used. To help the exemption from the Sub-Penny Rule in Therefore, it is hereby ordered that,
Commission process and review your connection with the operation of the pursuant to Rule 612(c) of Regulation
comments more efficiently, please use Exchange’s Retail Price Improvement NMS, the Exchange is granted a limited
only one method. The Commission will Program (the ‘‘RPI Program’’).2 The exemption from Rule 612 of Regulation
post all comments on the Commission’s limited exemption was granted NMS that allows the Exchange to accept
internet website (http://www.sec.gov/ concurrently with the Commission’s and rank orders priced equal to or
rules/sro.shtml). Copies of the approval of the Exchange’s proposal to greater than $1.00 per share in
submission, all subsequent adopt its RPI Program for a one-year increments of $0.001, in connection
amendments, all written statements pilot term.3 On November 20, 2015, the with the operation of its RPI Program,
with respect to the proposed rule Commission extended the temporary until December 31, 2018.
change that are filed with the exemption until December 2016 The limited and temporary exemption
Commission, and all written concurrently with an immediately extended by this Order is subject to
communications relating to the effective filing that extended the modification or revocation if at any time
proposed rule change between the operation of the RPI Program until the Commission determines that such
Commission and any person, other than December 1, 2016.4 On December 1, action is necessary or appropriate in
those that may be withheld from the 2016, the Commission extended the furtherance of the purposes of the
public in accordance with the temporary exemption until December 1, Securities Exchange Act of 1934.
provisions of 5 U.S.C. 552, will be 2017 concurrently with an immediately Responsibility for compliance with any
available for website viewing and effective filing that extended the applicable provisions of the Federal
printing in the Commission’s Public operation of the RPI Program until securities laws must rest with the
Reference Room, 100 F Street NE, December 1, 2017.5 On December 1,
Washington, DC 20549, on official 6 See Securities Exchange Act Release No. 82192
36 17
CFR 200.30–3(a)(12) and (59).
business days between the hours of (December 1, 2017), 82 FR 57809 (December 7,
1 17 CFR 242.612(c). 2017) (SR–BX–2017–055).
10:00 a.m. and 3:00 p.m. Copies of the 2 See Securities Exchange Act Release No. 73702, 7 See Letter from Jeffrey S. Davis, Vice President
filing also will be available for
sradovich on DSK3GMQ082PROD with NOTICES
79 FR 72049 (December 4, 2014) (SRBX–2014–048) and Deputy General Counsel and Secretary, Nasdaq
inspection and copying at the principal (‘‘RPI Approval Order’’). BX, Inc. to Eduardo A. Aleman, Assistant Secretary,
office of the Exchange. All comments 3 See id. Securities and Exchange Commission dated June
received will be posted without change. 4 See Securities Exchange Act Release No. 76490 21, 2018 (‘‘BX Letter’’).
8 See SR–BX–2018–026.
Persons submitting comments are (November 20, 2015), 80 FR 74165 (November 27,
2015) (SR–BX–2015–073). 9 See, e.g., BX Letter at 3; RPI Approval Order,
cautioned that we do not redact or edit 5 See Securities Exchange Act Release No. 79446 supra note 2.
personal identifying information from (December 1, 2016), 81 FR 88290 (December 7, 10 See, e.g., id.; RPI Approval Order, supra note
comment submissions. You should 2016) (SR–BX–2016–065). 2.
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Document Created: 2018-07-02 23:55:07
Document Modified: 2018-07-02 23:55:07
| 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 31229 |
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