83_FR_50610 83 FR 50416 - Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a New Order Type Called the MidPoint Discretionary Order (“MDO”) Under Paragraph (g) of Exchange Rule 11.8 and To Amend the Definition of the Super Aggressive Instruction Under Paragraph (n)(2) of Exchange Rule 11.6

83 FR 50416 - Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a New Order Type Called the MidPoint Discretionary Order (“MDO”) Under Paragraph (g) of Exchange Rule 11.8 and To Amend the Definition of the Super Aggressive Instruction Under Paragraph (n)(2) of Exchange Rule 11.6

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 194 (October 5, 2018)

Page Range50416-50422
FR Document2018-21680

Federal Register, Volume 83 Issue 194 (Friday, October 5, 2018)
[Federal Register Volume 83, Number 194 (Friday, October 5, 2018)]
[Notices]
[Pages 50416-50422]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-21680]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84327; File No. SR-CboeEDGX-2018-041]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Adopt a New Order Type Called the MidPoint Discretionary Order 
(``MDO'') Under Paragraph (g) of Exchange Rule 11.8 and To Amend the 
Definition of the Super Aggressive Instruction Under Paragraph (n)(2) 
of Exchange Rule 11.6

October 1, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 19, 2018, Cboe EDGX Exchange, Inc. (the ``Exchange'' 
or ``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to adopt a new order type called the 
MidPoint Discretionary Order (``MDO'') under paragraph (g) of Exchange 
Rule 11.8 and to amend the definition of the Super Aggressive 
instruction under paragraph (n)(2) of Exchange Rule 11.6.
    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 adopt a new order type known as the MDO 
under new paragraph (g) of Exchange Rule 11.8 and to amend the 
definition of the Super Aggressive instruction under paragraph (n)(2) 
of Exchange Rule 11.6.

Proposed MDOs on EDGX

    MDOs are designed to exercise discretion to execute to the midpoint 
of the NBBO and provide price improvement to contra-side orders over 
the NBBO. The proposed MDO would function similarly to the MDO offered 
by EDGA,\5\ but would also include certain aspects that mirror 
functionality currently available through the Discretionary Pegged 
Order and MPL-ALO Order offered by NYSE Arca, as well as the 
Discretionary Peg Order offered by IEX.\6\ The core functionality of 
the proposed MDO, EDGA's MDO, NYSE Arca's Discretionary Pegged Order, 
and IEX's Discretionary Peg Order would be the same--being pegged to 
the NBBO, as applicable, with discretion to execute to the midpoint of 
the NBBO.
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    \5\ See EDGA Rule 11.8(e).
    \6\ See NYSE Arca Rule 7.31-E(h)(3) (defining the Discretionary 
Pegged Order). See also Securities Exchange Act Release No. 78181 
(June 28, 2016), 81 FR 43297 (July 1, 2016) (order approving the 
Discretionary Pegged Order). See NYSE Arca Rule 7.31-E(d)(3)(F). See 
IEX Rule 11.190(a)(3) (defining Pegged Orders and a non-displayed 
order which may be pegged to the inside quote on the same side of 
the market with discretion to the midpoint of the NBBO, i.e., 
Discretionary Peg orders). See also Securities Exchange Act Release 
No. 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016) (order 
approving the IEX exchange application, which included IEX's 
Discretionary Peg Orders and Discretionary Peg Order).
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    Proposed Operation. An MDO would be defined as a Limit Order \7\ 
that is executable at the National Best Bid (``NBB'') for an order to 
buy or the National Best Offer (``NBO'') for an order to sell while 
resting on the EDGX Book,\8\ with discretion to execute at prices to 
and including the midpoint of the NBBO. Upon entry, an MDO will only 
execute against resting orders that include a Super Aggressive 
instruction \9\ priced at the MDO's pegged price if the MDO also 
contains a Displayed instruction \10\ and against orders with a Non-
Displayed Swap (``NDS'') instruction \11\ priced at the MDO's pegged 
price or within its discretionary range. As a result, an MDO will not 
act as a liquidity remover upon entry against resting orders at its 
pegged price or at any price within its discretionary range. Should a 
resting contra-side order within the MDO's discretionary range not 
include an NDS instruction, the incoming MDO will be placed on the EDGX 
Book and its discretionary range shortened to equal the limit price of 
the contra-side resting order. Likewise, where an incoming order with a 
Post Only instruction \12\ does not remove

[[Page 50417]]

liquidity on entry against a resting MDO, the discretionary range of 
the resting MDO will be shortened to equal the limit price of the 
incoming contra-side order with a Post Only instruction. Shortening the 
MDO's discretionary range in such circumstances is intended to avoid 
the discretionary range extending past the contra-side order's limit 
price, which could create a price priority issue should a later order 
be entered and be eligible to execute against the resting MDO within 
its discretionary range but at a price that extends beyond the contra-
side order with a Post Only instruction. Once resting on the EDGX Book, 
an MDO will only act as a liquidity provider against all incoming 
orders that are executable at the resting MDO's pegged price or at any 
price within the resting MDO's discretionary range.\13\
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    \7\ See Exchange Rule 11.8(b). In sum, a Limit Order is an order 
to buy or sell a stated amount of a security at a specified price or 
better.
    \8\ See Exchange Rule 1.5(d).
    \9\ See Exchange Rule 11.6(n)(2).
    \10\ Pursuant to the terms of the Super Aggressive instruction, 
such orders execute against incoming orders with a Post Only 
instruction only when such orders also contain a Displayed 
instruction. See Exchange Rule 11.6(n)(7). As noted below, the 
Exchange also proposes to amend the definition of the Super 
Aggressive instruction to reflect the addition of the MDO order 
type. Further, although an order with a Super Aggressive instruction 
resting at the pegged price of an MDO should be a rare occurrence, 
because orders with a Super Aggressive instruction route to locking 
or crossing quotes at away Trading Centers and an MDO is pegged to 
the NBBO (i.e., the locking price), it is possible to have an order 
with a Super Aggressive instruction at such price based on the 
Exchange's matching and routing logic as well as the Exchange's 
calculation of the NBBO and processing of quote updates. See, e.g., 
Securities Exchange Act Release No. 74072 (January 15, 2015), 80 FR 
3282 (January 22, 2015) (SR-EDGX-2015-02) (describing the Exchange's 
calculation of the NBBO, including router feedback and other 
details).
    \11\ See Exchange Rule 11.6(n)(7).
    \12\ See Exchange Rule 11.6(n)(4).
    \13\ See infra note 15 and accompanying text.
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    An MDO's pegged price and discretionary range would be bound by its 
limit price. For example, an MDO to buy or sell with a limit price that 
is less than the prevailing NBB or higher than the prevailing NBO, 
respectively, would be posted to the EDGX Book at its limit price. The 
pegged prices of an MDO are derived from the NBB or NBO, and cannot 
independently establish or maintain the NBB or NBO. An MDO will 
exercise the least amount of price discretion necessary from its pegged 
price to its discretionary price. An MDO in a stock priced at $1.00 or 
more can only be executed in sub-penny increments when it executes at 
the midpoint of the NBBO.
    Notwithstanding that an MDO may be a Limit Order and include a 
discretionary range, its operation and available modifiers would be 
limited to its description under proposed Rule 11.8(g). Exchange rules 
describe Discretionary Range as an instruction the User may attach to 
an order to buy (sell) a stated amount of a security at a specified, 
displayed or non-displayed ranked price with discretion to execute up 
(down) to another specified, non-displayed price.\14\ The discretionary 
range of an MDO would not operate like the Discretionary Range 
instruction in certain respects. For instance, orders that include a 
Discretionary Range instruction may become a liquidity remover for fee 
purposes despite being posted to the EDGX Book (i.e., a ``liquidity 
swap'') in certain scenarios that are outlined in Exchange Rule 
11.6(d).\15\ The Exchange does not propose for MDOs executed within 
their discretionary range to engage in the liquidity swapping scenarios 
set forth under the description of the Discretionary Range instruction 
under Exchange Rule 11.6(d), including where an MDO's displayed or non-
displayed ranked price is equal to an incoming order with a Post Only 
instruction that does not remove liquidity on entry pursuant to 
Exchange Rule 11.6(n)(4).\16\
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    \14\ See Exchange Rule 11.6(d).
    \15\ The scenarios under Exchange Rule 11.6(d) in which an order 
with a Discretionary Range may liquidity swap but the proposed MDO 
would not are: (i) To the extent an order with a Discretionary Range 
instruction's displayed or non-displayed ranked price is equal to an 
incoming order with a Post Only instruction that does not remove 
liquidity on entry pursuant to Exchange Rule 11.6(n)(4), the order 
with a Discretionary Range instruction will remove liquidity against 
such incoming order; and (ii) any contra-side order with a time-in-
force other than Immediate-or-Cancel or Fill-or-Kill and a price in 
the discretionary range but not at the displayed or non-displayed 
ranked price will be posted to the EDGX Book and then the 
Discretionary Order will remove liquidity against such posted order.
    \16\ Id.
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    While MDOs would function similarly to the MDO offered by EDGA,\17\ 
it would also include certain aspects that mirror functionality 
currently available through the Discretionary Pegged Order and MPL-ALO 
Order offered by NYSE Arca, as well as the Discretionary Peg Order 
offered by IEX.\18\ The core functionality of the proposed MDO, EDGA's 
MDO, NYSE Arca's Discretionary Pegged Order, and IEX's Discretionary 
Peg Order would be the same--being pegged to the NBBO, as applicable, 
with discretion to execute to the midpoint of the NBBO. The 
similarities and differences amongst these order types are explained 
below.
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    \17\ See EDGA Rule 11.8(e).
    \18\ See supra note 6.
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    Similarities to the EDGA MDO. The following aspects of the proposed 
MDO's functionality are identical to functionality of MDOs on EDGA.\19\ 
The proposed EDGX MDO's pegged price and discretionary range would be 
bound by its limit price. An MDO to buy or sell with a limit price that 
is less than the prevailing NBB or higher than the prevailing NBO, 
respectively, would be posted to the EDGX Book at its limit price. The 
pegged prices of an MDO would be derived from the NBB or NBO, and 
cannot independently establish or maintain the NBB or NBO. An MDO in a 
stock priced at $1.00 or more would only be executed in sub-penny 
increments when it executes at the midpoint of the NBBO.\20\
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    \19\ See EDGA Rule 11.8(e).
    \20\ Unlike the EDGA MDO, the proposed EDGX MDO would not 
execute upon entry at sub-penny prices pursuant to Exchange Rule 
11.10(a)(4)(D) because EDGX MDOs will only be eligible for execution 
upon entry against orders with a Super Aggressive instruction at its 
pegged price or against orders with an NDS instruction priced at its 
pegged price or within its discretionary range. Such execution will 
occur at the price of the contra-side order and not at a sub-penny 
increment. See, e.g., Securities Exchange Act Release No. 82087 
(November 15, 2017), 82 FR 55472 (November 21, 2017) (Notice of 
Filing and Immediate Effectiveness of SR-BatsEDGA-2017-29) 
(describing, among other things, when an MDO on EDGA may execute at 
a non-midpoint or sub-penny midpoint).
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    Also like EDGA's MDO,\21\ the proposed EDGX MDO may only contain 
the following time-in-force terms: Day, RHO, GTX, GTD, PRE, PTX, or 
PTD.\22\ Proposed paragraph (2) of Rule 11.8(g) would state that MDOs 
may be entered as a Round Lot or Mixed Lot.\23\ A User may include a 
Minimum Execution Quantity instruction on a MDO with a Non-Displayed 
instruction.\24\ Proposed paragraph (3) of Rule 11.8(g) would state 
that MDOs may be executed during the Early Trading Session, Pre-Opening 
Session, Regular Session, and Post-Closing Session.\25\ An MDO would 
default to a Displayed instruction unless the User \26\ includes a Non-
Displayed instruction on the order.\27\ Proposed paragraph (4) of Rule 
11.8(g) would also specify that a User may elect for an MDO that is 
displayed on the EDGX Book to include the User's market participant 
identifier (``MPID'') by selecting the Attributable instruction.\28\ 
Otherwise, an MDO with a Displayed instruction will automatically 
default to a Non-Attributable \29\ instruction. This is also consistent 
with the current operation of orders that are to be displayed on the 
EDGX Book.\30\ Under proposed paragraph (5) of Rule 11.8(g), MDOs would 
not be eligible for routing pursuant to Exchange Rule 11.11, Routing to 
Away Trading Centers.\31\
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    \21\ See EDGA Rule 11.8(e)(1).
    \22\ Each of these time-in-force instructions are defined in 
Exchange Rule 11.6(q).
    \23\ The terms Round Lot and Mixed Lot are defined in Exchange 
Rule 11.6(s). However, unlike on EDGA, MDOs may not be entered on 
EDGX as an Odd Lot. See EDGA Rule 11.8(e)(2). The term Odd Lot is 
defined in Exchange Rule 11.6(s).
    \24\ See Exchange Rule 11.6(h) for a description of the Minimum 
Execution Quantity instruction. The Exchange understands that EDGA 
plans to submit a proposed rule filing to allow non-displayed EDGA 
MDOs to also include a Minimum Execution Quantity instruction.
    \25\ The terms Early Trading Session, Pre-Opening Session, 
Regular Session, and Post-Closing Session are defined in Exchange 
Rule 1.5(ii), (s), (hh), and (r), respectively. See also EDGA Rule 
11.8(e)(3).
    \26\ See Exchange Rule 1.5(ee).
    \27\ The terms Displayed and Non-Displayed are defined in 
Exchange Rule 11.6(e). See also EDGA Rule 11.8(e)(4).
    \28\ See Exchange Rule 11.6(a). See also EDGA Rule 11.8(e)(4).
    \29\ See Exchange Rule 11.6(a)(1).
    \30\ See, e.g, Exchange Rule 11.8(b)(4).
    \31\ See EDGA Rule 11.8(e)(5).
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    Proposed paragraph (6) of Rule 11.8(g) would describe the operation 
of MDOs under the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608

[[Page 50418]]

of Regulation NMS under the Act (the ``Limit Up-Limit Down Plan'').\32\ 
Pursuant to Exchange Rule 11.10(a)(3), an MDO to buy would be re-priced 
to the Upper Price Band \33\ where the price of the Upper Price Band 
moves below an existing Protected Bid.\34\ An MDO to sell will be re-
priced to the Lower Price Band \35\ where the price of the Lower Price 
Band moves above an existing Protected Offer.\36\ MDOs will only 
execute at their pegged prices and not within their Discretionary 
Ranges when: (i) The price of the Upper Price Band equals or moves 
below an existing Protected Bid; or (ii) the price of the Lower Price 
Band equals or moves above an existing Protected Offer. When the 
conditions in (i) or (ii) of the preceding sentence no longer exist, 
MDOs will resume trading against other orders in their Discretionary 
Range and being pegged to the NBBO.
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    \32\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release''). See also EDGA Rule 11.8(e)(6).
    \33\ As defined in the Limit Up-Limit Down Plan.
    \34\ Id.
    \35\ Id.
    \36\ Id.
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    Pursuant to proposed paragraph (7) of Rule 11.8(g), any unexecuted 
portion of an MDO that is resting on the EDGX Book would receive a new 
time stamp each time its pegged price is automatically adjusted in 
response to changes in the NBBO.\37\
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    \37\ See EDGA Rule 11.8(e)(7).
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    Proposed paragraph (8) of Rule 11.8(g) would describe the operation 
of MDOs during a locked or crossed market.\38\ With respect to an MDO 
with either a Displayed instruction or a Non-Displayed instruction, 
when the EDGX Book is crossed by another market, the MDO's pegged price 
will be automatically adjusted to the current NBO (for bids) or the 
current NBB (for offers) with no discretion to the midpoint of the 
NBBO. If an MDO displayed on the Exchange would be a Locking Quotation 
or Crossing Quotation,\39\ the displayed price of the order will be 
automatically adjusted by the System to one Minimum Price Variation 
below the current NBO (for bids) or to one Minimum Price Variation 
above the current NBB (for offers) with no discretion to execute to the 
midpoint of the NBBO.
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    \38\ See EDGA Rule 11.8(e)(8).
    \39\ The terms Locking Quotation or Crossing Quotation are 
defined in Exchange Rule 11.6(g) and (c), respectively.
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    Differences with the EDGA MDO. As highlighted above, the proposed 
MDO would operate identically to EDGA's MDO \40\ in nearly all 
respects, however, as proposed, it will function differently in two 
areas. These differences are based on functionality included as part of 
NYSE Arca's Discretionary Pegged Order and MPL-ALO Order as well as 
IEX's Discretionary Pegged Order \41\ and are designed to provide Users 
with increased control over which price points their order may execute 
upon entry as well as when the order would act as a liquidity provider 
or remover once resting on the EDGX Book. These differences are: (i) 
The proposed EDGX MDO would only execute upon entry against resting 
orders that include a Super Aggressive instruction priced at the MDO's 
pegged price (if the MDO also contained a Displayed instruction) and 
against orders with an NDS instruction priced at the MDO's pegged price 
or within its discretionary range; and (ii) the proposed EDGX MDO would 
not engage in liquidity swapping behavior once resting on the EDGX Book 
as other orders with a Discretionary Range instruction may do, 
including the EDGA MDO. As a preliminary note, once posted to the EDGX 
Book, the proposed MDO would share the same core functionality as 
EDGA's MDO, NYSE Arca's Discretionary Pegged Order and IEX's 
Discretionary Peg Order--executable at the NBB for an order to buy or 
the NBO for an order to sell, with discretion to execute at prices to 
and including the midpoint of the NBBO. Additional similarities with 
NYSE Arca's Discretionary Pegged Order and MPL-ALO Order as well as 
IEX's Discretionary Pegged Order are explained below.
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    \40\ See EDGA Rule 11.8(e).
    \41\ See supra note 6.
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    First, an EDGX MDO would only execute upon entry against resting 
orders that include a Super Aggressive instruction priced at the MDO's 
pegged price if the MDO also contains a Displayed instruction and 
against orders with an NDS instruction priced at the MDO's pegged price 
or within its discretionary range. This would allow the MDO to ensure 
it would act as a liquidity adder even when executing upon entry. 
Orders with either a Super Aggressive instruction or NDS instruction 
are willing to engage in a liquidity swap with an incoming order priced 
at its limit price.\42\ In such case, an incoming MDO to buy (sell) 
would execute against an order to sell (buy) with either a Super 
Aggressive instruction or NDS instruction priced at the NBB (NBO). 
Similarly, an incoming MDO to buy (sell) would execute against an order 
to sell (buy) with an NDS instruction priced within its discretionary 
range. In both cases, the incoming MDO would act as the liquidity adder 
and the resting order with either a Super Aggressive or NDS instruction 
would act as the liquidity remover. In contrast, on EDGA an incoming 
MDO with a Displayed instruction will also execute on entry within its 
discretionary range against an order with a Super Aggressive 
instruction, not just at the price of the NBB (for a sell MDO) or NBO 
(for a buy MDO).
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    \42\ See paragraphs (n)(2) and (7) of Exchange Rule 11.6.
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    The Exchange believes it is reasonable to execute resting orders 
with an NDS instruction within the incoming MDO's discretionary range 
but not execute orders with a Super Aggressive instruction within the 
incoming MDO's discretionary range due to the different purposes of 
each order instruction. Orders including the Super Aggressive 
instruction will route to an away Trading Center that displays an order 
that either locks or crosses the limit price of the Super Aggressive 
order. Pursuant to Rule 11.6(n)(2), orders with a Super Aggressive 
instruction will likewise execute against incoming orders with a Post 
Only instruction and a Displayed instruction that are priced equal to 
its limit price. In general, Users of the Super Aggressive instruction 
tend to use it for best execution purposes because the order 
instruction enables the order to be routed away or executed locally 
when an order is displayed at a price equal to or better than the 
order's limit price. Furthermore, a User submitting an order with a 
Super Aggressive instruction wishes to execute against displayed 
liquidity either at its price or better, and if priced within the 
discretionary range of an incoming MDO order, that MDO would be 
displayed not at the price of the order with a Super Aggressive 
instruction, but rather the NBB/NBO to which it is pegged. For best 
execution, the intention of a User submitting an order with a Super 
Aggressive instruction is to ensure an execution at the best available 
price of a displayed order on another Trading Center or against an 
incoming order that would have been displayed on the EDGX Book but for 
the execution and is willing to engage in a liquidity swap on the 
Exchange to ensure an execution. Conversely, an order with an NDS 
instruction is not routable and engages in a liquidity swap only to 
execute against an incoming order that would lock it. Orders with an 
NDS instruction and Super Aggressive instruction differ on how they 
interact with contra-side orders--orders with a Super Aggressive 
instruction execute against displayed liquidity only while

[[Page 50419]]

an order with an NDS instruction will execute against an order that 
locks it, regardless of whether the contra-side order would have been 
displayed. Therefore, the Exchange believes it is reasonable to execute 
an incoming MDO against a resting order with an NDS instruction priced 
within its discretionary range as the NDS order is aggressively seeking 
to execute against incoming orders at its limit price and is willing to 
act as a liquidity remover to do so.
    The above-proposed behavior is similar to the operation of NYSE 
Arca's MPL-ALO order, which also does not act as a liquidity remover 
upon entry.\43\ Specifically, NYSE Arca's MPL-ALO order will only 
execute upon entry against a resting order that includes a Non-Display 
Remove modifier which, like the NDS and Super Aggressive instructions, 
enables that order to switch from a liquidity adder to a remover. This 
is also similar to NYSE Arca's ALO Order which will also only trade 
with resting contra-side orders that include a Non-Display Remove 
Modifier.\44\
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    \43\ See NYSE Arca Rule 7.31-E(d)(3)(F) and (e)(2)(B)(iv) 
(stating that, unless the resting order includes a Non-Display 
Remove modifier which enable that order to switch from a liquidity 
adder to a remover, an ALO order will only trade with arriving 
contra-side interest).
    \44\ See NYSE Arca Rule 7.31-E(e)(2). The only time an ALO Order 
will execute upon entry is when the resting order includes the Non-
Display Remove Modifier.
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    Second, EDGA's MDO would perform a liquidity swap when executed 
within its Discretionary Range as set forth in EDGA Rule 11.6(d). The 
proposed EDGX MDO would not. However, not performing a liquidity swap 
within the discretionary range is identical to the operation of NYSE 
Arca's Discretionary Pegged Order.\45\ The proposed MDO would also not 
liquidity swap at its pegged price once resting on the EDGX Book. This 
is similar to NYSE Arca's ALO Order.\46\
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    \45\ See NYSE Arca Rule 7.31-E(h)(3) (the rule does not provide 
for a liquidity swap to occur within the order's discretionary 
range).
    \46\ See NYSE Arca Rule 7.31-E(e)(2) (stating that an ALO order 
will not remove liquidity from the NYSE Arca Book, and will be re-
priced to avoid a locked or crossed market). An ALO order will only 
act as a liquidity taker where it crosses an order resting on the 
NYSE Arca Book. Because it is pegged to the NBBO, the proposed MDO 
would never cross an order resting on the EDGX Book.
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    Order Priority. The Exchange also proposes to amend Exchange Rule 
11.9 to describe the execution priority of the proposed MDO when it is 
resting on the EDGX Book. The proposed priority of MDOs on EDGX would 
be identical to the priority of MDOs on EDGA.\47\ In general, where 
orders to buy (sell) are entered into the System at the same price, the 
order clearly established as the first entered into the System at such 
particular price shall have precedence at that price, up to the number 
of shares of stock specified in the order. Under paragraph (a)(2)(A) of 
Rule 11.9, the System currently ranks equally priced trading interest 
resting on the EDGX Book in time priority in the following order: The 
portion of a Limit Order with a Displayed instruction; Limit Orders 
with a Non-Displayed instruction; orders with a Pegged and Non-
Displayed instruction; the Reserve Quantity of Limit Orders; Limit 
Orders executed within their Discretionary Range; and Supplemental Peg 
Orders. For purposes of MDO priority, the Exchange proposes that the 
pegged price of an MDO, whether displayed or non-displayed, be treated 
like a Limit Order that is resting on the EDGX Book. Accordingly, the 
pegged prices of MDOs displayed on the EDGX Book will have the same 
priority as displayed Limit Orders. Likewise, the pegged price of an 
MDO that is not displayed will have the same priority as Limit Orders 
with a Non-Displayed instruction, and therefore will not be treated for 
priority purposes like other orders with a Pegged and Non-Displayed 
instruction. As such, the Exchange proposes to amend paragraph 
(a)(2)(D)(i) of Rule 11.9 to specify that the pegged prices of an MDO 
will be treated as a Limit Order for purposes of order priority under 
Exchange Rule 11.9(a)(2)(A). The Exchange proposes to amend paragraph 
(a)(2)(A)(v) of Rule 11.9 to specify that MDOs executed within their 
Discretionary Range maintain the same priority as Limit Orders executed 
within their Discretionary Range. The above proposed priority sequence 
is consistent with the priority of MDOs on EDGA.\48\
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    \47\ See generally EDGA Rule 11.9(a).
    \48\ See EDGA Rule 11.9(a)(2)(A)(vi) and (a)(2)(C)(i).
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    Paragraph (a)(2)(B) of Rule 11.9 sets forth separate priority for 
orders executed at the midpoint of the NBBO. Where orders to buy (sell) 
are priced at the midpoint of the NBBO, the order clearly established 
as the first shall have precedence at the mid-point of the NBBO, up to 
the number of shares of stock specified in the order. Orders at the 
midpoint of the NBBO resting on the EDGX Book are executed in following 
order: Limit Orders to which the Display-Price Sliding instruction has 
been applied; Limit Orders with a Non-Displayed instruction; Orders 
with a Pegged instruction; MidPoint Peg Orders; the Reserve Quantity of 
Limit Orders; and Limit Orders executed within their Discretionary 
Range. Like proposed above for the general priority of orders, the 
Exchange proposes to amend paragraph (a)(2)(B)(vi) of Rule 11.9 to 
specify that MDOs executed within their Discretionary Range at the 
midpoint of the NBBO shall have the same priority as Limit Orders 
executed within their Discretionary Range.
    Examples. The following examples illustrate the operation of the 
proposed MDO when resting on the EDGX Book. Assume the NBBO is $10.00 
by $10.04. There is a displayed MDO to buy at $10.02 on the EDGX Book 
that is pegged to the NBB at $10.00 with discretion to execute to 
$10.02, the midpoint of the NBBO. A Limit Order to buy at $10.00 with a 
Displayed instruction is then entered. Next, a Limit Order to sell at 
$10.00 with a Non-Displayed instruction is entered. The Limit Order to 
sell would execute against the MDO to buy at $10.00, with the MDO 
exercising no discretion. The displayed MDO has time priority ahead of 
the displayed Limit order to buy. The pegged price of a displayed or 
non-displayed MDO has the same priority as displayed or non-displayed 
Limit Orders, respectively, that are resting on the EDGX Book at the 
same price.
    Assume the same facts as above but that the MDO instead included a 
Non-Displayed instruction. In that case, the Limit Order to sell would 
execute as a liquidity remover against the displayed Limit Order to buy 
at $10.00 because displayed orders always have priority over non-
displayed orders at the same price.
    The following example illustrates the operation of a resting MDO on 
the EDGX Book and an incoming Limit Order that also includes a Post 
Only instruction. Assume again the NBBO is $10.00 by $10.04 resulting 
in a midpoint of $10.02. There is a resting MDO to buy at $10.02 
displayed on the EDGX Book that is pegged to the NBB at $10.00 with 
discretion to execute to $10.02, the midpoint of the NBBO. A Limit 
Order to sell at $10.01 with a Non-Displayed instruction and Post Only 
instruction is then entered. No execution occurs. The MDO to buy 
resting on the EDGX Book would only act as a liquidity provider and the 
incoming order to sell with Post Only instruction will not remove 
liquidity. Therefore, the MDO to buy resting on the EDGX Book would 
have its discretionary range shortened from $10.02 to $10.01, which is 
the price of the incoming Limit Order to sell. The Limit Order with a 
Non-Displayed instruction to sell will be posted to the EDGX Book at 
$10.01, its limit price.
    The MDO's discretionary range is shortened to avoid the following 
priority issue that may result from an

[[Page 50420]]

internally crossed market issue. Assume a Limit Order to sell at $10.02 
with a Non-Displayed instruction is subsequently entered. Absent the 
shortening of the buy MDO's discretionary range to $10.01, the sell 
Limit Order at $10.02 would have executed against the resting buy MDO 
with discretion to $10.02, creating a priority issue for the first sell 
Limit Order that is ranked at $10.01.
    Assume the same facts as the preceding example, but that the first 
sell Limit Order with a Post Only instruction to sell was priced at 
$9.99. In that case, the Limit Order to sell would execute against the 
resting MDO to buy at $10.00 in accordance with Exchange Rule 
11.6(n)(4), receiving one cent of price improvement. The MDO would 
remain the liquidity provider and the Limit Order to sell would act as 
the liquidity remover.
    The following examples illustrate the operation of the proposed MDO 
upon entry. Assume again the NBBO is $10.00 by $10.04 resulting in a 
midpoint of $10.02. There is a non-displayed order with an NDS 
instruction to sell at $10.00 resting on the EDGX Book. An MDO to buy 
with a Displayed instruction is entered that, if posted to the EDGX 
Book, would be pegged to the NBB at $10.00 with discretion to execute 
to $10.02, the midpoint of the NBBO. In such case, the MDO to buy would 
execute against the resting order with an NDS instruction to sell at 
$10.00 because the MDO's pegged price equals the limit price of the 
order with an NDS instruction. The incoming MDO would act as the 
liquidity adder and the order with an NDS instruction would act as the 
liquidity remover. The same result would occur if the order to sell 
resting on the EDGX Book included a Super Aggressive instruction rather 
than an NDS instruction. However, if the order to sell resting on the 
EDGX book did not include either a Super Aggressive instruction or NDS 
instruction, no execution would occur and the MDO order to buy would be 
posted to the EDGX Book at $10.00 with its discretionary range 
shortened from $10.02 to $10.00, which is the price of the resting non-
displayed order to sell.
    Assume the same facts as the preceding example but that the non-
displayed order with an NDS instruction to sell resting on the EDGX 
Book is priced at $10.01 rather than $10.00. The resting order with an 
NDS instruction to sell is priced within the discretionary range of the 
incoming MDO to buy. The MDO to buy would execute against the resting 
order with an NDS instruction to sell at $10.01 because the MDO's 
discretionary range includes a price equal to the limit price of the 
order with an NDS instruction. The incoming MDO would act as the 
liquidity adder and the order with an NDS instruction would act as the 
liquidity remover.
    Assume instead that the non-displayed order to sell resting on the 
EDGX Book did not include an NDS instruction. No execution would occur 
and the order to sell would remain on the EDGX Book. The incoming MDO 
to buy would be posted to the EDGX Book at $10.00 with its 
discretionary range shortened from $10.02 to $10.01, which is the price 
of the resting non-displayed order to sell. Like in an above example, 
the MDO's discretionary range is shortened to avoid the following 
priority issue that may result from an internally crossed market issue. 
Assume a Limit Order to sell at $10.02 with a Non-Displayed instruction 
is subsequently entered. Absent the shortening of the buy MDO's 
discretionary range to $10.01, the sell Limit Order at $10.02 would 
have executed against the resting buy MDO with discretion to $10.02, 
creating a priority issue for the first sell Limit Order that is ranked 
at $10.01.
    Assume instead that the order to sell at $10.01 resting on the EDGX 
Book included a Super Aggressive instruction rather than an NDS 
instruction. No execution would occur because the order with a Super 
Aggressive instruction is priced within the discretionary range of the 
incoming MDO. The order with a Super Aggressive instruction would 
remain on the EDGX Book until it is eligible to be routed away or 
executed. The incoming MDO would be posted to the EDGX Book at $10.00 
with its discretionary range shortened from $10.02 to $10.01, which is 
the price of the resting non-displayed order to sell with a Super 
Aggressive instruction.
Proposed Amendment to Super Aggressive Instruction
    In addition to the adoption of MDOs, the Exchange proposes to amend 
Rule 11.6(n)(2), which defines the Super Aggressive instruction. 
Specifically, the current definition states that when any order with a 
Super Aggressive instruction is locked by an incoming order with a Post 
Only instruction and a Displayed instruction that does not remove 
liquidity pursuant to Rule 11.6(n)(4), the order with a Super 
Aggressive instruction is converted to an executable order and will 
remove liquidity against such incoming order. Consistent with the 
proposed operation of MDOs, the Exchange proposes to add reference to 
MDOs with a Displayed instruction as another order against which a 
resting order with a Super Aggressive instruction will interact, 
converting to an executable order and removing liquidity against such 
order.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \49\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \50\ 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.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78f(b).
    \50\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed MDO would remove impediments to and promote just and 
equitable principles of trade because it would provide Users with an 
optional order type that is designed to exercise discretion to execute 
to the midpoint of the NBBO, enhancing order execution opportunities at 
the Exchange that provide price improvement opportunities over the 
NBBO. The proposed rule change would also remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system by potentially increasing liquidity at the NBBO and to midpoint 
of the NBBO on the Exchange, thereby improving execution opportunities 
for market participants at these price points and enhancing the quality 
of the EDGX Book. The Exchange designed the proposed order type to 
include functionality that is included as part of similar order types 
offered by other exchanges to provide Users with increased control over 
which price points their order may execute upon entry as well as when 
the order would act as a liquidity provider or remover once resting on 
the EDGX Book.
    As proposed, MDOs on the Exchange would operate similarly to NYSE 
Arca's Discretionary Pegged Orders and IEX's Discretionary Peg Order, 
except that both of the IEX and NYSE Arca order types include 
``crumbling quote'' functionality and neither order type is able to be 
displayed on the applicable exchange's order book.\51\
---------------------------------------------------------------------------

    \51\ See supra note 6.
---------------------------------------------------------------------------

    The EDGX proposed MDO also operates identically to EDGA's MDO,\52\ 
except in two scenarios. These differences are: (i) The proposed EDGX

[[Page 50421]]

MDO would only execute upon entry against resting orders that include a 
Super Aggressive instruction priced at the MDO's pegged price if the 
MDO also contains a Displayed instruction and against orders with an 
NDS instruction priced at the MDO's pegged price or within its 
discretionary range; and (ii) the proposed EDGX MDO would not engage in 
liquidity swapping behavior as other orders with a Discretionary Range 
instruction may do, including the EDGA MDO. Ensuring that an EDGX MDO 
will act as a liquidity adder even upon entry promotes just and 
equitable principles of trade because Users of the proposed EDGX MDO 
would have greater control over their orders in exchange for providing 
enhanced execution opportunities at prices more aggressive than the 
midpoint of the NBBO to incoming contra-side orders when the MDO is 
posted to the EDGX Book. The proposed MDO would share the same core 
functionality as EDGA's MDO, NYSE Arca's Discretionary Pegged Order and 
IEX's Discretionary Peg Order--executable at the NBB for an order to 
buy or the NBO for an order to sell, with discretion to execute at 
prices to and including the midpoint of the NBBO.
---------------------------------------------------------------------------

    \52\ See EDGA Rule 11.8(e).
---------------------------------------------------------------------------

    The proposed differences with the EDGA MDO are based on NYSE Arca's 
ALO Order, MPL-ALO order and Discretionary Pegged order as well as 
IEX's Discretionary Peg Order and are designed to provide Users with 
additional control over their order upon entry as well as certainty 
that their order would act as a liquidity provider. Specifically, the 
proposed behavior is similar to the operation of NYSE Arca's MPL-ALO 
order which will also not act as a liquidity remover upon entry.\53\ 
NYSE Arca's MPL-ALO order will only execute upon entry against a 
resting order that includes a Non-Display Remove modifier which, like 
the NDS and Super Aggressive instructions, enables that order to switch 
from a liquidity adder to a remover. This is also similar to NYSE 
Arca's ALO Order which will only execute upon entry when the resting 
order includes the Non-Display Remove Modifier.\54\
---------------------------------------------------------------------------

    \53\ See NYSE Arca Rule 7.31-E(d)(3)(F) and (e)(2)(B)(iv) 
(stating that, unless the resting order includes a Non-Display 
Remove modifier which enables that order to switch from a liquidity 
adder to a remover, an ALO order will only trade with arriving 
contra-side interest).
    \54\ See NYSE Arca Rule 7.31-E(e)(2).
---------------------------------------------------------------------------

    The proposed operation of the EDGX MDO enables it to act as a 
liquidity provider while increasing its opportunities to rest on the 
EDGX Book and seek to execute against incoming orders at prices equal 
to or more aggressive than the midpoint of the NBBO. Therefore, the 
EDGX MDO promotes just and equitable principles of trade by increasing 
the potential price improvement opportunities for incoming orders that 
may execute against a resting MDO within its discretionary range. The 
proposed rule change would facilitate transactions in securities and 
improve trading within the national market system.
    The Exchange believes it is reasonable to execute resting orders 
with an NDS instruction within the incoming MDO's discretionary range 
but not execute orders with a Super Aggressive instruction within the 
incoming MDO's discretionary range due to the different purposes of 
each order instruction. As stated above, Users of the Super Aggressive 
instruction tend to use it for best execution purposes because the 
order instruction enables the order to be routed away or executed 
locally when an order is displayed at a price equal to or better than 
the order's limit price. Conversely, an order with an NDS instruction 
is not routable and only executes against an incoming order that would 
lock it. The User of the NDS instruction is generally agnostic to 
whether the order is displayed on an away Trading Center or priced at 
the NBBO. It simply seeks to execute against an order that is priced at 
its limit price and engages in a liquidity swap to do so, even if the 
contra-side interest contains a Non-Displayed instruction.
    Under the proposal and in accordance with Exchange Rule 
11.9(a)(2)(A), when MDOs execute at their pegged displayed price, they 
would have the same priority as that of displayed Limit Orders. 
Similarly, when MDOs execute at their non-displayed pegged price, they 
would have the same priority as that of non-displayed Limit Orders. 
When MDOs execute within their Discretionary Range in general or at the 
midpoint of the NBBO, the Exchange proposes that they maintain the same 
priority as a Limit Order executed within its Discretionary Range. The 
Exchange believes the proposed priority is consistent with the Act 
because it continues to provide priority to displayed orders on the 
Exchange and to orders that are designed to provide liquidity at a set 
price level, such as the mid-point of the NBBO. Lastly, the Exchange 
notes that the proposed priority is identical to the priority for MDOs 
on EDGA.\55\
---------------------------------------------------------------------------

    \55\ See EDGA Rule 11.9(a)(2).
---------------------------------------------------------------------------

    The Exchange's proposed modification to the Super Aggressive 
instruction will ensure that the definition of such instruction is 
consistent with the proposed functionality of the MDO order type, as 
described above.
    For the reasons set forth above, the Exchange believes the proposal 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system, and, in general, protects 
investors and the public interest.

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 MDO promotes inter-
market competition because it will enable the Exchange to offer 
functionality similar to that offered by NYSE Arca and IEX.\56\ The 
proposed EDGX MDO will improve competition because it provides enhanced 
execution opportunities at prices equal to or more aggressive than the 
midpoint of the NBBO to incoming contra-side orders, improving the 
overall competiveness of the Exchange. The Exchange also believes the 
proposed rule change will not impact intra-market competition because 
it will be available to all Users. Therefore, the Exchange does not 
believe 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.
---------------------------------------------------------------------------

    \56\ See supra note 6.
---------------------------------------------------------------------------

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) of the Act \57\ and Rule 19b-
4(f)(6) thereunder.\58\
---------------------------------------------------------------------------

    \57\ 15 U.S.C. 78s(b)(3)(A).
    \58\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.

---------------------------------------------------------------------------

[[Page 50422]]

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \59\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \60\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing, noting 
that use of MDOs on the Exchange is optional, similar functionality is 
already offered by other market centers, and operative delay waiver 
would allow the Exchange to make the proposed functionality available 
to Exchange Users more promptly. The Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the operative delay and designates the proposed rule change 
operative upon filing.\61\
---------------------------------------------------------------------------

    \59\ 17 CFR 240.19b-4(f)(6).
    \60\ 17 CFR 240.19b-4(f)(6)(iii).
    \61\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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 change 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 Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGX-2018-041 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-CboeEDGX-2018-041. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeEDGX-2018-041, and should be 
submitted on or before October 26, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\62\
---------------------------------------------------------------------------

    \62\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21680 Filed 10-4-18; 8:45 am]
 BILLING CODE 8011-01-P



                                               50416                              Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices

                                               inspection and copying at the principal                  I. Self-Regulatory Organization’s                      of the proposed MDO, EDGA’s MDO,
                                               office of the Exchange. All comments                     Statement of the Terms of Substance of                 NYSE Arca’s Discretionary Pegged
                                               received will be posted without change.                  the Proposed Rule Change                               Order, and IEX’s Discretionary Peg
                                               Persons submitting comments are                             The Exchange is proposing to adopt a                Order would be the same—being pegged
                                               cautioned that we do not redact or edit                  new order type called the MidPoint                     to the NBBO, as applicable, with
                                               personal identifying information from                    Discretionary Order (‘‘MDO’’) under                    discretion to execute to the midpoint of
                                               comment submissions. You should                                                                                 the NBBO.
                                                                                                        paragraph (g) of Exchange Rule 11.8 and
                                               submit only information that you wish                                                                              Proposed Operation. An MDO would
                                                                                                        to amend the definition of the Super
                                               to make available publicly. All                                                                                 be defined as a Limit Order 7 that is
                                                                                                        Aggressive instruction under paragraph                 executable at the National Best Bid
                                               submissions should refer to File                         (n)(2) of Exchange Rule 11.6.
                                               Number SR–BX–2018–046 and should                                                                                (‘‘NBB’’) for an order to buy or the
                                                                                                           The text of the proposed rule change                National Best Offer (‘‘NBO’’) for an
                                               be submitted on or before October 26,                    is available at the Exchange’s website at
                                               2018.                                                                                                           order to sell while resting on the EDGX
                                                                                                        www.markets.cboe.com, at the principal                 Book,8 with discretion to execute at
                                                 For the Commission, by the Division of                 office of the Exchange, and at the                     prices to and including the midpoint of
                                               Trading and Markets, pursuant to delegated               Commission’s Public Reference Room.                    the NBBO. Upon entry, an MDO will
                                               authority.14                                                                                                    only execute against resting orders that
                                                                                                        II. Self-Regulatory Organization’s
                                               Eduardo A. Aleman,                                       Statement of the Purpose of, and                       include a Super Aggressive instruction 9
                                               Assistant Secretary.                                     Statutory Basis for, the Proposed Rule                 priced at the MDO’s pegged price if the
                                               [FR Doc. 2018–21681 Filed 10–4–18; 8:45 am]              Change                                                 MDO also contains a Displayed
                                                                                                                                                               instruction 10 and against orders with a
                                               BILLING CODE 8011–01–P                                     In its filing with the Commission, the               Non-Displayed Swap (‘‘NDS’’)
                                                                                                        Exchange included statements                           instruction 11 priced at the MDO’s
                                                                                                        concerning the purpose of and basis for                pegged price or within its discretionary
                                               SECURITIES AND EXCHANGE                                  the proposed rule change and discussed
                                               COMMISSION                                                                                                      range. As a result, an MDO will not act
                                                                                                        any comments it received on the                        as a liquidity remover upon entry
                                                                                                        proposed rule change. The text of these                against resting orders at its pegged price
                                               [Release No. 34–84327; File No. SR–                      statements may be examined at the                      or at any price within its discretionary
                                               CboeEDGX–2018–041]                                       places specified in Item IV below. The                 range. Should a resting contra-side order
                                                                                                        Exchange has prepared summaries, set                   within the MDO’s discretionary range
                                               Self-Regulatory Organizations; Cboe                      forth in Sections A, B, and C below, of                not include an NDS instruction, the
                                               EDGX Exchange, Inc.; Notice of Filing                    the most significant parts of such                     incoming MDO will be placed on the
                                               and Immediate Effectiveness of a                         statements.                                            EDGX Book and its discretionary range
                                               Proposed Rule Change To Adopt a
                                                                                                        A. Self-Regulatory Organization’s                      shortened to equal the limit price of the
                                               New Order Type Called the MidPoint                                                                              contra-side resting order. Likewise,
                                               Discretionary Order (‘‘MDO’’) Under                      Statement of the Purpose of, and
                                                                                                        Statutory Basis for, the Proposed Rule                 where an incoming order with a Post
                                               Paragraph (g) of Exchange Rule 11.8                                                                             Only instruction 12 does not remove
                                               and To Amend the Definition of the                       Change
                                               Super Aggressive Instruction Under                       1. Purpose                                             may be pegged to the inside quote on the same side
                                               Paragraph (n)(2) of Exchange Rule 11.6                                                                          of the market with discretion to the midpoint of the
                                                                                                          The Exchange proposes to adopt a                     NBBO, i.e., Discretionary Peg orders). See also
                                               October 1, 2018.                                         new order type known as the MDO                        Securities Exchange Act Release No. 78101 (June
                                                                                                        under new paragraph (g) of Exchange                    17, 2016), 81 FR 41141 (June 23, 2016) (order
                                                  Pursuant to Section 19(b)(1) of the                   Rule 11.8 and to amend the definition                  approving the IEX exchange application, which
                                               Securities Exchange Act of 1934 (the                     of the Super Aggressive instruction
                                                                                                                                                               included IEX’s Discretionary Peg Orders and
                                                                                                                                                               Discretionary Peg Order).
                                               ‘‘Act’’),1 and Rule 19b–4 thereunder,2                   under paragraph (n)(2) of Exchange Rule                   7 See Exchange Rule 11.8(b). In sum, a Limit
                                               notice is hereby given that on                           11.6.                                                  Order is an order to buy or sell a stated amount of
                                               September 19, 2018, Cboe EDGX                                                                                   a security at a specified price or better.
                                               Exchange, Inc. (the ‘‘Exchange’’ or                      Proposed MDOs on EDGX                                     8 See Exchange Rule 1.5(d).
                                                                                                                                                                  9 See Exchange Rule 11.6(n)(2).
                                               ‘‘EDGX’’) filed with the Securities and                    MDOs are designed to exercise                           10 Pursuant to the terms of the Super Aggressive
                                               Exchange Commission (‘‘Commission’’)                     discretion to execute to the midpoint of               instruction, such orders execute against incoming
                                               the proposed rule change as described                    the NBBO and provide price                             orders with a Post Only instruction only when such
                                               in Items I and II below, which Items                     improvement to contra-side orders over                 orders also contain a Displayed instruction. See
                                               have been prepared by the Exchange.                                                                             Exchange Rule 11.6(n)(7). As noted below, the
                                                                                                        the NBBO. The proposed MDO would                       Exchange also proposes to amend the definition of
                                               The Exchange has designated this                         function similarly to the MDO offered                  the Super Aggressive instruction to reflect the
                                               proposal as a ‘‘non-controversial’’                      by EDGA,5 but would also include                       addition of the MDO order type. Further, although
                                               proposed rule change pursuant to                         certain aspects that mirror functionality              an order with a Super Aggressive instruction resting
                                               Section 19(b)(3)(A) of the Act 3 and Rule                                                                       at the pegged price of an MDO should be a rare
                                                                                                        currently available through the                        occurrence, because orders with a Super Aggressive
                                               19b–4(f)(6)(iii) thereunder,4 which                      Discretionary Pegged Order and MPL–                    instruction route to locking or crossing quotes at
                                               renders it effective upon filing with the                ALO Order offered by NYSE Arca, as                     away Trading Centers and an MDO is pegged to the
                                               Commission. The Commission is                            well as the Discretionary Peg Order                    NBBO (i.e., the locking price), it is possible to have
                                                                                                                                                               an order with a Super Aggressive instruction at
                                               publishing this notice to solicit                        offered by IEX.6 The core functionality                such price based on the Exchange’s matching and
                                               comments on the proposed rule change
daltland on DSKBBV9HB2PROD with NOTICES




                                                                                                                                                               routing logic as well as the Exchange’s calculation
                                               from interested persons.                                   5 See EDGA Rule 11.8(e).                             of the NBBO and processing of quote updates. See,
                                                                                                          6 See NYSE Arca Rule 7.31–E(h)(3) (defining the      e.g., Securities Exchange Act Release No. 74072
                                                                                                        Discretionary Pegged Order). See also Securities       (January 15, 2015), 80 FR 3282 (January 22, 2015)
                                                 14 17 CFR 200.30–3(a)(12).
                                                                                                        Exchange Act Release No. 78181 (June 28, 2016), 81     (SR–EDGX–2015–02) (describing the Exchange’s
                                                 1 15 U.S.C. 78s(b)(1).                                 FR 43297 (July 1, 2016) (order approving the           calculation of the NBBO, including router feedback
                                                 2 17 CFR 240.19b–4.                                                                                           and other details).
                                                                                                        Discretionary Pegged Order). See NYSE Arca Rule
                                                 3 15 U.S.C. 78s(b)(3)(A).                                                                                        11 See Exchange Rule 11.6(n)(7).
                                                                                                        7.31–E(d)(3)(F). See IEX Rule 11.190(a)(3) (defining
                                                 4 17 CFR 240.19b–4(f)(6)(iii).                         Pegged Orders and a non-displayed order which             12 See Exchange Rule 11.6(n)(4).




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                                                                              Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices                                                    50417

                                               liquidity on entry against a resting                    propose for MDOs executed within their                    Also like EDGA’s MDO,21 the
                                               MDO, the discretionary range of the                     discretionary range to engage in the                    proposed EDGX MDO may only contain
                                               resting MDO will be shortened to equal                  liquidity swapping scenarios set forth                  the following time-in-force terms: Day,
                                               the limit price of the incoming contra-                 under the description of the                            RHO, GTX, GTD, PRE, PTX, or PTD.22
                                               side order with a Post Only instruction.                Discretionary Range instruction under                   Proposed paragraph (2) of Rule 11.8(g)
                                               Shortening the MDO’s discretionary                      Exchange Rule 11.6(d), including where                  would state that MDOs may be entered
                                               range in such circumstances is intended                 an MDO’s displayed or non-displayed                     as a Round Lot or Mixed Lot.23 A User
                                               to avoid the discretionary range                        ranked price is equal to an incoming                    may include a Minimum Execution
                                               extending past the contra-side order’s                  order with a Post Only instruction that                 Quantity instruction on a MDO with a
                                               limit price, which could create a price                 does not remove liquidity on entry                      Non-Displayed instruction.24 Proposed
                                               priority issue should a later order be                  pursuant to Exchange Rule 11.6(n)(4).16                 paragraph (3) of Rule 11.8(g) would state
                                               entered and be eligible to execute                         While MDOs would function                            that MDOs may be executed during the
                                               against the resting MDO within its                      similarly to the MDO offered by                         Early Trading Session, Pre-Opening
                                               discretionary range but at a price that                 EDGA,17 it would also include certain                   Session, Regular Session, and Post-
                                               extends beyond the contra-side order                    aspects that mirror functionality                       Closing Session.25 An MDO would
                                               with a Post Only instruction. Once                      currently available through the                         default to a Displayed instruction unless
                                               resting on the EDGX Book, an MDO will                   Discretionary Pegged Order and MPL–                     the User 26 includes a Non-Displayed
                                               only act as a liquidity provider against                ALO Order offered by NYSE Arca, as                      instruction on the order.27 Proposed
                                               all incoming orders that are executable                 well as the Discretionary Peg Order                     paragraph (4) of Rule 11.8(g) would also
                                               at the resting MDO’s pegged price or at                 offered by IEX.18 The core functionality                specify that a User may elect for an
                                               any price within the resting MDO’s                      of the proposed MDO, EDGA’s MDO,                        MDO that is displayed on the EDGX
                                               discretionary range.13                                  NYSE Arca’s Discretionary Pegged                        Book to include the User’s market
                                                  An MDO’s pegged price and                            Order, and IEX’s Discretionary Peg                      participant identifier (‘‘MPID’’) by
                                               discretionary range would be bound by                   Order would be the same—being pegged                    selecting the Attributable instruction.28
                                               its limit price. For example, an MDO to                 to the NBBO, as applicable, with                        Otherwise, an MDO with a Displayed
                                               buy or sell with a limit price that is less             discretion to execute to the midpoint of                instruction will automatically default to
                                               than the prevailing NBB or higher than                  the NBBO. The similarities and                          a Non-Attributable 29 instruction. This is
                                               the prevailing NBO, respectively, would                 differences amongst these order types                   also consistent with the current
                                               be posted to the EDGX Book at its limit                 are explained below.                                    operation of orders that are to be
                                               price. The pegged prices of an MDO are                     Similarities to the EDGA MDO. The                    displayed on the EDGX Book.30 Under
                                               derived from the NBB or NBO, and                        following aspects of the proposed                       proposed paragraph (5) of Rule 11.8(g),
                                               cannot independently establish or                       MDO’s functionality are identical to                    MDOs would not be eligible for routing
                                               maintain the NBB or NBO. An MDO                         functionality of MDOs on EDGA.19 The                    pursuant to Exchange Rule 11.11,
                                               will exercise the least amount of price                 proposed EDGX MDO’s pegged price                        Routing to Away Trading Centers.31
                                               discretion necessary from its pegged                    and discretionary range would be bound                    Proposed paragraph (6) of Rule 11.8(g)
                                               price to its discretionary price. An MDO                by its limit price. An MDO to buy or sell               would describe the operation of MDOs
                                               in a stock priced at $1.00 or more can                  with a limit price that is less than the                under the Plan to Address Extraordinary
                                                                                                       prevailing NBB or higher than the                       Market Volatility Pursuant to Rule 608
                                               only be executed in sub-penny
                                                                                                       prevailing NBO, respectively, would be
                                               increments when it executes at the
                                                                                                       posted to the EDGX Book at its limit                    price or within its discretionary range. Such
                                               midpoint of the NBBO.                                                                                           execution will occur at the price of the contra-side
                                                  Notwithstanding that an MDO may be                   price. The pegged prices of an MDO
                                                                                                                                                               order and not at a sub-penny increment. See, e.g.,
                                               a Limit Order and include a                             would be derived from the NBB or NBO,                   Securities Exchange Act Release No. 82087
                                                                                                       and cannot independently establish or                   (November 15, 2017), 82 FR 55472 (November 21,
                                               discretionary range, its operation and
                                                                                                       maintain the NBB or NBO. An MDO in                      2017) (Notice of Filing and Immediate Effectiveness
                                               available modifiers would be limited to                                                                         of SR–BatsEDGA–2017–29) (describing, among
                                                                                                       a stock priced at $1.00 or more would
                                               its description under proposed Rule                                                                             other things, when an MDO on EDGA may execute
                                                                                                       only be executed in sub-penny
                                               11.8(g). Exchange rules describe                                                                                at a non-midpoint or sub-penny midpoint).
                                                                                                       increments when it executes at the                         21 See EDGA Rule 11.8(e)(1).
                                               Discretionary Range as an instruction
                                                                                                       midpoint of the NBBO.20                                    22 Each of these time-in-force instructions are
                                               the User may attach to an order to buy                                                                          defined in Exchange Rule 11.6(q).
                                               (sell) a stated amount of a security at a               are: (i) To the extent an order with a Discretionary       23 The terms Round Lot and Mixed Lot are
                                               specified, displayed or non-displayed                   Range instruction’s displayed or non-displayed          defined in Exchange Rule 11.6(s). However, unlike
                                               ranked price with discretion to execute                 ranked price is equal to an incoming order with a       on EDGA, MDOs may not be entered on EDGX as
                                               up (down) to another specified, non-                    Post Only instruction that does not remove liquidity    an Odd Lot. See EDGA Rule 11.8(e)(2). The term
                                                                                                       on entry pursuant to Exchange Rule 11.6(n)(4), the      Odd Lot is defined in Exchange Rule 11.6(s).
                                               displayed price.14 The discretionary                    order with a Discretionary Range instruction will          24 See Exchange Rule 11.6(h) for a description of
                                               range of an MDO would not operate like                  remove liquidity against such incoming order; and       the Minimum Execution Quantity instruction. The
                                               the Discretionary Range instruction in                  (ii) any contra-side order with a time-in-force other   Exchange understands that EDGA plans to submit
                                               certain respects. For instance, orders                  than Immediate-or-Cancel or Fill-or-Kill and a price    a proposed rule filing to allow non-displayed EDGA
                                                                                                       in the discretionary range but not at the displayed     MDOs to also include a Minimum Execution
                                               that include a Discretionary Range                      or non-displayed ranked price will be posted to the     Quantity instruction.
                                               instruction may become a liquidity                      EDGX Book and then the Discretionary Order will            25 The terms Early Trading Session, Pre-Opening

                                               remover for fee purposes despite being                  remove liquidity against such posted order.             Session, Regular Session, and Post-Closing Session
                                               posted to the EDGX Book (i.e., a                           16 Id.                                               are defined in Exchange Rule 1.5(ii), (s), (hh), and
                                                                                                          17 See EDGA Rule 11.8(e).                            (r), respectively. See also EDGA Rule 11.8(e)(3).
                                               ‘‘liquidity swap’’) in certain scenarios                                                                           26 See Exchange Rule 1.5(ee).
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                                                                                                          18 See supra note 6.
                                               that are outlined in Exchange Rule                         19 See EDGA Rule 11.8(e).
                                                                                                                                                                  27 The terms Displayed and Non-Displayed are
                                               11.6(d).15 The Exchange does not                           20 Unlike the EDGA MDO, the proposed EDGX            defined in Exchange Rule 11.6(e). See also EDGA
                                                                                                       MDO would not execute upon entry at sub-penny           Rule 11.8(e)(4).
                                                 13 See                                                                                                           28 See Exchange Rule 11.6(a). See also EDGA Rule
                                                        infra note 15 and accompanying text.           prices pursuant to Exchange Rule 11.10(a)(4)(D)
                                                 14 See Exchange Rule 11.6(d).                         because EDGX MDOs will only be eligible for             11.8(e)(4).
                                                  15 The scenarios under Exchange Rule 11.6(d) in                                                                 29 See Exchange Rule 11.6(a)(1).
                                                                                                       execution upon entry against orders with a Super
                                                                                                                                                                  30 See, e.g, Exchange Rule 11.8(b)(4).
                                               which an order with a Discretionary Range may           Aggressive instruction at its pegged price or against
                                               liquidity swap but the proposed MDO would not           orders with an NDS instruction priced at its pegged        31 See EDGA Rule 11.8(e)(5).




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                                               50418                          Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices

                                               of Regulation NMS under the Act (the                    as proposed, it will function differently               discretionary range. In both cases, the
                                               ‘‘Limit Up-Limit Down Plan’’).32                        in two areas. These differences are                     incoming MDO would act as the
                                               Pursuant to Exchange Rule 11.10(a)(3),                  based on functionality included as part                 liquidity adder and the resting order
                                               an MDO to buy would be re-priced to                     of NYSE Arca’s Discretionary Pegged                     with either a Super Aggressive or NDS
                                               the Upper Price Band 33 where the price                 Order and MPL–ALO Order as well as                      instruction would act as the liquidity
                                               of the Upper Price Band moves below                     IEX’s Discretionary Pegged Order 41 and                 remover. In contrast, on EDGA an
                                               an existing Protected Bid.34 An MDO to                  are designed to provide Users with                      incoming MDO with a Displayed
                                               sell will be re-priced to the Lower Price               increased control over which price                      instruction will also execute on entry
                                               Band 35 where the price of the Lower                    points their order may execute upon                     within its discretionary range against an
                                               Price Band moves above an existing                      entry as well as when the order would                   order with a Super Aggressive
                                               Protected Offer.36 MDOs will only                       act as a liquidity provider or remover                  instruction, not just at the price of the
                                               execute at their pegged prices and not                  once resting on the EDGX Book. These                    NBB (for a sell MDO) or NBO (for a buy
                                               within their Discretionary Ranges when:                 differences are: (i) The proposed EDGX                  MDO).
                                               (i) The price of the Upper Price Band                   MDO would only execute upon entry                          The Exchange believes it is reasonable
                                               equals or moves below an existing                       against resting orders that include a                   to execute resting orders with an NDS
                                               Protected Bid; or (ii) the price of the                 Super Aggressive instruction priced at                  instruction within the incoming MDO’s
                                               Lower Price Band equals or moves                        the MDO’s pegged price (if the MDO                      discretionary range but not execute
                                               above an existing Protected Offer. When                 also contained a Displayed instruction)                 orders with a Super Aggressive
                                               the conditions in (i) or (ii) of the                    and against orders with an NDS                          instruction within the incoming MDO’s
                                               preceding sentence no longer exist,                     instruction priced at the MDO’s pegged                  discretionary range due to the different
                                               MDOs will resume trading against other                  price or within its discretionary range;                purposes of each order instruction.
                                               orders in their Discretionary Range and                 and (ii) the proposed EDGX MDO would                    Orders including the Super Aggressive
                                               being pegged to the NBBO.                               not engage in liquidity swapping                        instruction will route to an away
                                                  Pursuant to proposed paragraph (7) of                behavior once resting on the EDGX Book                  Trading Center that displays an order
                                               Rule 11.8(g), any unexecuted portion of                 as other orders with a Discretionary                    that either locks or crosses the limit
                                               an MDO that is resting on the EDGX                      Range instruction may do, including the                 price of the Super Aggressive order.
                                               Book would receive a new time stamp                     EDGA MDO. As a preliminary note,
                                                                                                                                                               Pursuant to Rule 11.6(n)(2), orders with
                                               each time its pegged price is                           once posted to the EDGX Book, the
                                                                                                                                                               a Super Aggressive instruction will
                                               automatically adjusted in response to                   proposed MDO would share the same
                                               changes in the NBBO.37                                                                                          likewise execute against incoming
                                                                                                       core functionality as EDGA’s MDO,
                                                  Proposed paragraph (8) of Rule 11.8(g)                                                                       orders with a Post Only instruction and
                                                                                                       NYSE Arca’s Discretionary Pegged
                                               would describe the operation of MDOs                                                                            a Displayed instruction that are priced
                                                                                                       Order and IEX’s Discretionary Peg
                                               during a locked or crossed market.38                                                                            equal to its limit price. In general, Users
                                                                                                       Order—executable at the NBB for an
                                               With respect to an MDO with either a                                                                            of the Super Aggressive instruction tend
                                                                                                       order to buy or the NBO for an order to
                                               Displayed instruction or a Non-                                                                                 to use it for best execution purposes
                                                                                                       sell, with discretion to execute at prices
                                               Displayed instruction, when the EDGX                                                                            because the order instruction enables
                                                                                                       to and including the midpoint of the
                                               Book is crossed by another market, the                  NBBO. Additional similarities with                      the order to be routed away or executed
                                               MDO’s pegged price will be                              NYSE Arca’s Discretionary Pegged                        locally when an order is displayed at a
                                               automatically adjusted to the current                   Order and MPL–ALO Order as well as                      price equal to or better than the order’s
                                               NBO (for bids) or the current NBB (for                  IEX’s Discretionary Pegged Order are                    limit price. Furthermore, a User
                                               offers) with no discretion to the                       explained below.                                        submitting an order with a Super
                                               midpoint of the NBBO. If an MDO                            First, an EDGX MDO would only                        Aggressive instruction wishes to execute
                                               displayed on the Exchange would be a                    execute upon entry against resting                      against displayed liquidity either at its
                                               Locking Quotation or Crossing                           orders that include a Super Aggressive                  price or better, and if priced within the
                                               Quotation,39 the displayed price of the                 instruction priced at the MDO’s pegged                  discretionary range of an incoming
                                               order will be automatically adjusted by                 price if the MDO also contains a                        MDO order, that MDO would be
                                               the System to one Minimum Price                         Displayed instruction and against orders                displayed not at the price of the order
                                               Variation below the current NBO (for                    with an NDS instruction priced at the                   with a Super Aggressive instruction, but
                                               bids) or to one Minimum Price Variation                 MDO’s pegged price or within its                        rather the NBB/NBO to which it is
                                               above the current NBB (for offers) with                 discretionary range. This would allow                   pegged. For best execution, the
                                               no discretion to execute to the midpoint                the MDO to ensure it would act as a                     intention of a User submitting an order
                                               of the NBBO.                                            liquidity adder even when executing                     with a Super Aggressive instruction is to
                                                  Differences with the EDGA MDO. As                    upon entry. Orders with either a Super                  ensure an execution at the best available
                                               highlighted above, the proposed MDO                     Aggressive instruction or NDS                           price of a displayed order on another
                                               would operate identically to EDGA’s                     instruction are willing to engage in a                  Trading Center or against an incoming
                                               MDO 40 in nearly all respects, however,                 liquidity swap with an incoming order                   order that would have been displayed
                                                                                                       priced at its limit price.42 In such case,              on the EDGX Book but for the execution
                                                  32 See Securities Exchange Act Release No. 67091
                                                                                                       an incoming MDO to buy (sell) would                     and is willing to engage in a liquidity
                                               (May 31, 2012), 77 FR 33498 (June 6, 2012) (the                                                                 swap on the Exchange to ensure an
                                               ‘‘Limit Up-Limit Down Release’’). See also EDGA         execute against an order to sell (buy)
                                               Rule 11.8(e)(6).                                        with either a Super Aggressive                          execution. Conversely, an order with an
                                                  33 As defined in the Limit Up-Limit Down Plan.
                                                                                                       instruction or NDS instruction priced at                NDS instruction is not routable and
                                                  34 Id.
                                                                                                       the NBB (NBO). Similarly, an incoming                   engages in a liquidity swap only to
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                                                  35 Id.
                                                                                                       MDO to buy (sell) would execute against                 execute against an incoming order that
                                                  36 Id.
                                                                                                       an order to sell (buy) with an NDS                      would lock it. Orders with an NDS
                                                  37 See EDGA Rule 11.8(e)(7).
                                                                                                       instruction priced within its                           instruction and Super Aggressive
                                                  38 See EDGA Rule 11.8(e)(8).
                                                  39 The terms Locking Quotation or Crossing
                                                                                                                                                               instruction differ on how they interact
                                               Quotation are defined in Exchange Rule 11.6(g) and        41 See   supra note 6.                                with contra-side orders—orders with a
                                               (c), respectively.                                        42 See   paragraphs (n)(2) and (7) of Exchange Rule   Super Aggressive instruction execute
                                                  40 See EDGA Rule 11.8(e).                            11.6.                                                   against displayed liquidity only while


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                                                                              Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices                                         50419

                                               an order with an NDS instruction will                   entered into the System at the same                   proposed above for the general priority
                                               execute against an order that locks it,                 price, the order clearly established as               of orders, the Exchange proposes to
                                               regardless of whether the contra-side                   the first entered into the System at such             amend paragraph (a)(2)(B)(vi) of Rule
                                               order would have been displayed.                        particular price shall have precedence at             11.9 to specify that MDOs executed
                                               Therefore, the Exchange believes it is                  that price, up to the number of shares                within their Discretionary Range at the
                                               reasonable to execute an incoming MDO                   of stock specified in the order. Under                midpoint of the NBBO shall have the
                                               against a resting order with an NDS                     paragraph (a)(2)(A) of Rule 11.9, the                 same priority as Limit Orders executed
                                               instruction priced within its                           System currently ranks equally priced                 within their Discretionary Range.
                                               discretionary range as the NDS order is                 trading interest resting on the EDGX                     Examples. The following examples
                                               aggressively seeking to execute against                 Book in time priority in the following                illustrate the operation of the proposed
                                               incoming orders at its limit price and is               order: The portion of a Limit Order with              MDO when resting on the EDGX Book.
                                               willing to act as a liquidity remover to                a Displayed instruction; Limit Orders                 Assume the NBBO is $10.00 by $10.04.
                                               do so.                                                  with a Non-Displayed instruction;                     There is a displayed MDO to buy at
                                                  The above-proposed behavior is                       orders with a Pegged and Non-                         $10.02 on the EDGX Book that is pegged
                                               similar to the operation of NYSE Arca’s                 Displayed instruction; the Reserve                    to the NBB at $10.00 with discretion to
                                               MPL–ALO order, which also does not                      Quantity of Limit Orders; Limit Orders                execute to $10.02, the midpoint of the
                                               act as a liquidity remover upon entry.43                executed within their Discretionary                   NBBO. A Limit Order to buy at $10.00
                                               Specifically, NYSE Arca’s MPL–ALO                       Range; and Supplemental Peg Orders.                   with a Displayed instruction is then
                                               order will only execute upon entry                      For purposes of MDO priority, the                     entered. Next, a Limit Order to sell at
                                               against a resting order that includes a                 Exchange proposes that the pegged price               $10.00 with a Non-Displayed
                                               Non-Display Remove modifier which,                      of an MDO, whether displayed or non-                  instruction is entered. The Limit Order
                                               like the NDS and Super Aggressive                       displayed, be treated like a Limit Order              to sell would execute against the MDO
                                               instructions, enables that order to                     that is resting on the EDGX Book.                     to buy at $10.00, with the MDO
                                               switch from a liquidity adder to a                      Accordingly, the pegged prices of MDOs                exercising no discretion. The displayed
                                               remover. This is also similar to NYSE                   displayed on the EDGX Book will have                  MDO has time priority ahead of the
                                               Arca’s ALO Order which will also only                   the same priority as displayed Limit                  displayed Limit order to buy. The
                                               trade with resting contra-side orders                   Orders. Likewise, the pegged price of an              pegged price of a displayed or non-
                                               that include a Non-Display Remove                       MDO that is not displayed will have the               displayed MDO has the same priority as
                                               Modifier.44                                             same priority as Limit Orders with a                  displayed or non-displayed Limit
                                                  Second, EDGA’s MDO would perform                     Non-Displayed instruction, and                        Orders, respectively, that are resting on
                                               a liquidity swap when executed within                   therefore will not be treated for priority            the EDGX Book at the same price.
                                               its Discretionary Range as set forth in                 purposes like other orders with a Pegged                 Assume the same facts as above but
                                               EDGA Rule 11.6(d). The proposed EDGX                    and Non-Displayed instruction. As                     that the MDO instead included a Non-
                                               MDO would not. However, not                             such, the Exchange proposes to amend                  Displayed instruction. In that case, the
                                               performing a liquidity swap within the                  paragraph (a)(2)(D)(i) of Rule 11.9 to                Limit Order to sell would execute as a
                                               discretionary range is identical to the                 specify that the pegged prices of an                  liquidity remover against the displayed
                                               operation of NYSE Arca’s Discretionary                  MDO will be treated as a Limit Order for              Limit Order to buy at $10.00 because
                                               Pegged Order.45 The proposed MDO                        purposes of order priority under                      displayed orders always have priority
                                               would also not liquidity swap at its                    Exchange Rule 11.9(a)(2)(A). The                      over non-displayed orders at the same
                                               pegged price once resting on the EDGX                   Exchange proposes to amend paragraph                  price.
                                               Book. This is similar to NYSE Arca’s                    (a)(2)(A)(v) of Rule 11.9 to specify that                The following example illustrates the
                                               ALO Order.46                                            MDOs executed within their                            operation of a resting MDO on the EDGX
                                                  Order Priority. The Exchange also                    Discretionary Range maintain the same                 Book and an incoming Limit Order that
                                               proposes to amend Exchange Rule 11.9                    priority as Limit Orders executed within              also includes a Post Only instruction.
                                               to describe the execution priority of the               their Discretionary Range. The above                  Assume again the NBBO is $10.00 by
                                               proposed MDO when it is resting on the                  proposed priority sequence is consistent              $10.04 resulting in a midpoint of
                                               EDGX Book. The proposed priority of                     with the priority of MDOs on EDGA.48                  $10.02. There is a resting MDO to buy
                                               MDOs on EDGX would be identical to                         Paragraph (a)(2)(B) of Rule 11.9 sets              at $10.02 displayed on the EDGX Book
                                               the priority of MDOs on EDGA.47 In                      forth separate priority for orders                    that is pegged to the NBB at $10.00 with
                                               general, where orders to buy (sell) are                 executed at the midpoint of the NBBO.                 discretion to execute to $10.02, the
                                                                                                       Where orders to buy (sell) are priced at              midpoint of the NBBO. A Limit Order
                                                  43 See NYSE Arca Rule 7.31–E(d)(3)(F) and
                                                                                                       the midpoint of the NBBO, the order                   to sell at $10.01 with a Non-Displayed
                                               (e)(2)(B)(iv) (stating that, unless the resting order                                                         instruction and Post Only instruction is
                                               includes a Non-Display Remove modifier which
                                                                                                       clearly established as the first shall have
                                               enable that order to switch from a liquidity adder      precedence at the mid-point of the                    then entered. No execution occurs. The
                                               to a remover, an ALO order will only trade with         NBBO, up to the number of shares of                   MDO to buy resting on the EDGX Book
                                               arriving contra-side interest).                         stock specified in the order. Orders at               would only act as a liquidity provider
                                                  44 See NYSE Arca Rule 7.31–E(e)(2). The only
                                                                                                       the midpoint of the NBBO resting on the               and the incoming order to sell with Post
                                               time an ALO Order will execute upon entry is when
                                               the resting order includes the Non-Display Remove       EDGX Book are executed in following                   Only instruction will not remove
                                               Modifier.                                               order: Limit Orders to which the                      liquidity. Therefore, the MDO to buy
                                                  45 See NYSE Arca Rule 7.31–E(h)(3) (the rule does
                                                                                                       Display-Price Sliding instruction has                 resting on the EDGX Book would have
                                               not provide for a liquidity swap to occur within the                                                          its discretionary range shortened from
                                               order’s discretionary range).
                                                                                                       been applied; Limit Orders with a Non-
                                                                                                       Displayed instruction; Orders with a                  $10.02 to $10.01, which is the price of
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                                                  46 See NYSE Arca Rule 7.31–E(e)(2) (stating that

                                               an ALO order will not remove liquidity from the         Pegged instruction; MidPoint Peg                      the incoming Limit Order to sell. The
                                               NYSE Arca Book, and will be re-priced to avoid a        Orders; the Reserve Quantity of Limit                 Limit Order with a Non-Displayed
                                               locked or crossed market). An ALO order will only       Orders; and Limit Orders executed                     instruction to sell will be posted to the
                                               act as a liquidity taker where it crosses an order                                                            EDGX Book at $10.01, its limit price.
                                               resting on the NYSE Arca Book. Because it is            within their Discretionary Range. Like
                                               pegged to the NBBO, the proposed MDO would                                                                       The MDO’s discretionary range is
                                               never cross an order resting on the EDGX Book.             48 See EDGA Rule 11.9(a)(2)(A)(vi) and             shortened to avoid the following
                                                  47 See generally EDGA Rule 11.9(a).                  (a)(2)(C)(i).                                         priority issue that may result from an


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                                               50420                          Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices

                                               internally crossed market issue. Assume                 includes a price equal to the limit price             instruction as another order against
                                               a Limit Order to sell at $10.02 with a                  of the order with an NDS instruction.                 which a resting order with a Super
                                               Non-Displayed instruction is                            The incoming MDO would act as the                     Aggressive instruction will interact,
                                               subsequently entered. Absent the                        liquidity adder and the order with an                 converting to an executable order and
                                               shortening of the buy MDO’s                             NDS instruction would act as the                      removing liquidity against such order.
                                               discretionary range to $10.01, the sell                 liquidity remover.
                                                                                                          Assume instead that the non-                       2. Statutory Basis
                                               Limit Order at $10.02 would have
                                               executed against the resting buy MDO                    displayed order to sell resting on the                   The Exchange believes that its
                                               with discretion to $10.02, creating a                   EDGX Book did not include an NDS                      proposal is consistent with Section 6(b)
                                               priority issue for the first sell Limit                 instruction. No execution would occur                 of the Act 49 in general, and furthers the
                                               Order that is ranked at $10.01.                         and the order to sell would remain on                 objectives of Section 6(b)(5) of the Act 50
                                                  Assume the same facts as the                         the EDGX Book. The incoming MDO to                    in particular, in that it is designed to
                                               preceding example, but that the first sell              buy would be posted to the EDGX Book                  promote just and equitable principles of
                                               Limit Order with a Post Only                            at $10.00 with its discretionary range                trade, to foster cooperation and
                                               instruction to sell was priced at $9.99.                shortened from $10.02 to $10.01, which                coordination with persons engaged in
                                               In that case, the Limit Order to sell                   is the price of the resting non-displayed             facilitating transactions in securities, to
                                               would execute against the resting MDO                   order to sell. Like in an above example,              remove impediments to and perfect the
                                               to buy at $10.00 in accordance with                     the MDO’s discretionary range is                      mechanism of a free and open market
                                               Exchange Rule 11.6(n)(4), receiving one                 shortened to avoid the following                      and a national market system and, in
                                               cent of price improvement. The MDO                      priority issue that may result from an                general, to protect investors and the
                                               would remain the liquidity provider and                 internally crossed market issue. Assume               public interest.
                                               the Limit Order to sell would act as the                a Limit Order to sell at $10.02 with a                   The proposed MDO would remove
                                               liquidity remover.                                      Non-Displayed instruction is                          impediments to and promote just and
                                                  The following examples illustrate the                subsequently entered. Absent the                      equitable principles of trade because it
                                               operation of the proposed MDO upon                      shortening of the buy MDO’s                           would provide Users with an optional
                                               entry. Assume again the NBBO is $10.00                  discretionary range to $10.01, the sell               order type that is designed to exercise
                                               by $10.04 resulting in a midpoint of                    Limit Order at $10.02 would have                      discretion to execute to the midpoint of
                                               $10.02. There is a non-displayed order                  executed against the resting buy MDO                  the NBBO, enhancing order execution
                                               with an NDS instruction to sell at                      with discretion to $10.02, creating a                 opportunities at the Exchange that
                                               $10.00 resting on the EDGX Book. An                     priority issue for the first sell Limit               provide price improvement
                                               MDO to buy with a Displayed                             Order that is ranked at $10.01.                       opportunities over the NBBO. The
                                               instruction is entered that, if posted to                  Assume instead that the order to sell              proposed rule change would also
                                               the EDGX Book, would be pegged to the                   at $10.01 resting on the EDGX Book                    remove impediments to and perfect the
                                               NBB at $10.00 with discretion to                        included a Super Aggressive instruction               mechanism of a free and open market
                                               execute to $10.02, the midpoint of the                  rather than an NDS instruction. No                    and a national market system by
                                               NBBO. In such case, the MDO to buy                      execution would occur because the                     potentially increasing liquidity at the
                                               would execute against the resting order                 order with a Super Aggressive                         NBBO and to midpoint of the NBBO on
                                               with an NDS instruction to sell at                      instruction is priced within the                      the Exchange, thereby improving
                                               $10.00 because the MDO’s pegged price                   discretionary range of the incoming                   execution opportunities for market
                                               equals the limit price of the order with                MDO. The order with a Super                           participants at these price points and
                                               an NDS instruction. The incoming MDO                    Aggressive instruction would remain on                enhancing the quality of the EDGX
                                               would act as the liquidity adder and the                the EDGX Book until it is eligible to be              Book. The Exchange designed the
                                               order with an NDS instruction would                     routed away or executed. The incoming                 proposed order type to include
                                               act as the liquidity remover. The same                  MDO would be posted to the EDGX                       functionality that is included as part of
                                               result would occur if the order to sell                 Book at $10.00 with its discretionary                 similar order types offered by other
                                               resting on the EDGX Book included a                     range shortened from $10.02 to $10.01,                exchanges to provide Users with
                                               Super Aggressive instruction rather than                which is the price of the resting non-                increased control over which price
                                               an NDS instruction. However, if the                     displayed order to sell with a Super                  points their order may execute upon
                                               order to sell resting on the EDGX book                  Aggressive instruction.                               entry as well as when the order would
                                               did not include either a Super                                                                                act as a liquidity provider or remover
                                                                                                       Proposed Amendment to Super
                                               Aggressive instruction or NDS                                                                                 once resting on the EDGX Book.
                                                                                                       Aggressive Instruction
                                               instruction, no execution would occur                                                                            As proposed, MDOs on the Exchange
                                               and the MDO order to buy would be                          In addition to the adoption of MDOs,               would operate similarly to NYSE Arca’s
                                               posted to the EDGX Book at $10.00 with                  the Exchange proposes to amend Rule                   Discretionary Pegged Orders and IEX’s
                                               its discretionary range shortened from                  11.6(n)(2), which defines the Super                   Discretionary Peg Order, except that
                                               $10.02 to $10.00, which is the price of                 Aggressive instruction. Specifically, the             both of the IEX and NYSE Arca order
                                               the resting non-displayed order to sell.                current definition states that when any               types include ‘‘crumbling quote’’
                                                  Assume the same facts as the                         order with a Super Aggressive                         functionality and neither order type is
                                               preceding example but that the non-                     instruction is locked by an incoming                  able to be displayed on the applicable
                                               displayed order with an NDS                             order with a Post Only instruction and                exchange’s order book.51
                                               instruction to sell resting on the EDGX                 a Displayed instruction that does not                    The EDGX proposed MDO also
                                               Book is priced at $10.01 rather than                    remove liquidity pursuant to Rule                     operates identically to EDGA’s MDO,52
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                                               $10.00. The resting order with an NDS                   11.6(n)(4), the order with a Super                    except in two scenarios. These
                                               instruction to sell is priced within the                Aggressive instruction is converted to                differences are: (i) The proposed EDGX
                                               discretionary range of the incoming                     an executable order and will remove
                                               MDO to buy. The MDO to buy would                        liquidity against such incoming order.                  49 15 U.S.C. 78f(b).
                                               execute against the resting order with an               Consistent with the proposed operation                  50 15 U.S.C. 78f(b)(5).
                                               NDS instruction to sell at $10.01                       of MDOs, the Exchange proposes to add                   51 See supra note 6.

                                               because the MDO’s discretionary range                   reference to MDOs with a Displayed                      52 See EDGA Rule 11.8(e).




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                                                                               Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices                                                  50421

                                               MDO would only execute upon entry                        aggressive than the midpoint of the                   consistent with the proposed
                                               against resting orders that include a                    NBBO. Therefore, the EDGX MDO                         functionality of the MDO order type, as
                                               Super Aggressive instruction priced at                   promotes just and equitable principles                described above.
                                               the MDO’s pegged price if the MDO also                   of trade by increasing the potential price              For the reasons set forth above, the
                                               contains a Displayed instruction and                     improvement opportunities for                         Exchange believes the proposal removes
                                               against orders with an NDS instruction                   incoming orders that may execute                      impediments to and perfects the
                                               priced at the MDO’s pegged price or                      against a resting MDO within its                      mechanism of a free and open market
                                               within its discretionary range; and (ii)                 discretionary range. The proposed rule                and a national market system, and, in
                                               the proposed EDGX MDO would not                          change would facilitate transactions in               general, protects investors and the
                                               engage in liquidity swapping behavior                    securities and improve trading within                 public interest.
                                               as other orders with a Discretionary                     the national market system.
                                               Range instruction may do, including the                     The Exchange believes it is reasonable             B. Self-Regulatory Organization’s
                                               EDGA MDO. Ensuring that an EDGX                          to execute resting orders with an NDS                 Statement on Burden on Competition
                                               MDO will act as a liquidity adder even                   instruction within the incoming MDO’s                    The Exchange does not believe that
                                               upon entry promotes just and equitable                   discretionary range but not execute                   the proposed rule change will result in
                                               principles of trade because Users of the                 orders with a Super Aggressive                        any burden on competition that is not
                                               proposed EDGX MDO would have                             instruction within the incoming MDO’s                 necessary or appropriate in furtherance
                                               greater control over their orders in                     discretionary range due to the different              of the purposes of the Act, as amended.
                                               exchange for providing enhanced                          purposes of each order instruction. As                On the contrary, the Exchange believes
                                               execution opportunities at prices more                   stated above, Users of the Super                      the proposed MDO promotes inter-
                                               aggressive than the midpoint of the                      Aggressive instruction tend to use it for             market competition because it will
                                               NBBO to incoming contra-side orders                      best execution purposes because the                   enable the Exchange to offer
                                               when the MDO is posted to the EDGX                       order instruction enables the order to be             functionality similar to that offered by
                                               Book. The proposed MDO would share                       routed away or executed locally when                  NYSE Arca and IEX.56 The proposed
                                               the same core functionality as EDGA’s                    an order is displayed at a price equal to             EDGX MDO will improve competition
                                               MDO, NYSE Arca’s Discretionary                           or better than the order’s limit price.               because it provides enhanced execution
                                               Pegged Order and IEX’s Discretionary                     Conversely, an order with an NDS                      opportunities at prices equal to or more
                                               Peg Order—executable at the NBB for an                   instruction is not routable and only                  aggressive than the midpoint of the
                                               order to buy or the NBO for an order to                  executes against an incoming order that               NBBO to incoming contra-side orders,
                                               sell, with discretion to execute at prices               would lock it. The User of the NDS                    improving the overall competiveness of
                                               to and including the midpoint of the                     instruction is generally agnostic to                  the Exchange. The Exchange also
                                               NBBO.                                                    whether the order is displayed on an                  believes the proposed rule change will
                                                  The proposed differences with the                     away Trading Center or priced at the                  not impact intra-market competition
                                               EDGA MDO are based on NYSE Arca’s                        NBBO. It simply seeks to execute                      because it will be available to all Users.
                                               ALO Order, MPL–ALO order and                             against an order that is priced at its limit          Therefore, the Exchange does not
                                               Discretionary Pegged order as well as                    price and engages in a liquidity swap to              believe the proposed rule change will
                                               IEX’s Discretionary Peg Order and are                    do so, even if the contra-side interest               result in any burden on competition that
                                               designed to provide Users with                           contains a Non-Displayed instruction.                 is not necessary or appropriate in
                                               additional control over their order upon                    Under the proposal and in accordance               furtherance of the purposes of the Act.
                                               entry as well as certainty that their order              with Exchange Rule 11.9(a)(2)(A), when
                                               would act as a liquidity provider.                       MDOs execute at their pegged displayed                C. Self-Regulatory Organization’s
                                               Specifically, the proposed behavior is                   price, they would have the same priority              Statement on Comments on the
                                               similar to the operation of NYSE Arca’s                  as that of displayed Limit Orders.                    Proposed Rule Change Received From
                                               MPL–ALO order which will also not act                    Similarly, when MDOs execute at their                 Members, Participants, or Others
                                               as a liquidity remover upon entry.53                     non-displayed pegged price, they would                  No comments were solicited or
                                               NYSE Arca’s MPL–ALO order will only                      have the same priority as that of non-                received on the proposed rule change.
                                               execute upon entry against a resting                     displayed Limit Orders. When MDOs
                                               order that includes a Non-Display                        execute within their Discretionary                    III. Date of Effectiveness of the
                                               Remove modifier which, like the NDS                      Range in general or at the midpoint of                Proposed Rule Change and Timing for
                                               and Super Aggressive instructions,                       the NBBO, the Exchange proposes that                  Commission Action
                                               enables that order to switch from a                      they maintain the same priority as a                     Because the foregoing proposed rule
                                               liquidity adder to a remover. This is also               Limit Order executed within its                       change does not: (i) Significantly affect
                                               similar to NYSE Arca’s ALO Order                         Discretionary Range. The Exchange                     the protection of investors or the public
                                               which will only execute upon entry                       believes the proposed priority is                     interest; (ii) impose any significant
                                               when the resting order includes the                      consistent with the Act because it                    burden on competition; and (iii) become
                                               Non-Display Remove Modifier.54                           continues to provide priority to                      operative for 30 days from the date on
                                                  The proposed operation of the EDGX                    displayed orders on the Exchange and to               which it was filed, or such shorter time
                                               MDO enables it to act as a liquidity                     orders that are designed to provide                   as the Commission may designate, it has
                                               provider while increasing its                            liquidity at a set price level, such as the           become effective pursuant to Section
                                               opportunities to rest on the EDGX Book                   mid-point of the NBBO. Lastly, the                    19(b)(3)(A) of the Act 57 and Rule 19b–
                                               and seek to execute against incoming                     Exchange notes that the proposed                      4(f)(6) thereunder.58
                                               orders at prices equal to or more                        priority is identical to the priority for
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                                                                                                        MDOs on EDGA.55                                         56 See supra note 6.
                                                 53 See  NYSE Arca Rule 7.31–E(d)(3)(F) and                The Exchange’s proposed                              57 15 U.S.C. 78s(b)(3)(A).
                                               (e)(2)(B)(iv) (stating that, unless the resting order    modification to the Super Aggressive                    58 17 CFR 240.19b–4(f)(6). As required under Rule
                                               includes a Non-Display Remove modifier which                                                                   19b–4(f)(6)(iii), the Exchange provided the
                                               enables that order to switch from a liquidity adder
                                                                                                        instruction will ensure that the
                                                                                                                                                              Commission with written notice of its intent to file
                                               to a remover, an ALO order will only trade with          definition of such instruction is                     the proposed rule change, along with a brief
                                               arriving contra-side interest).                                                                                description and the text of the proposed rule
                                                  54 See NYSE Arca Rule 7.31–E(e)(2).                     55 See   EDGA Rule 11.9(a)(2).                                                                 Continued




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                                               50422                           Federal Register / Vol. 83, No. 194 / Friday, October 5, 2018 / Notices

                                                  A proposed rule change filed                          Paper Comments                                        SECURITIES AND EXCHANGE
                                               pursuant to Rule 19b–4(f)(6) under the                                                                         COMMISSION
                                               Act 59 normally does not become                            • Send paper comments in triplicate
                                                                                                        to Secretary, Securities and Exchange                 [Release No. 34–84323; File No. SR–BOX–
                                               operative for 30 days after the date of its                                                                    2018–33]
                                               filing. However, Rule 19b–4(f)(6)(iii) 60                Commission, 100 F Street NE,
                                               permits the Commission to designate a                    Washington, DC 20549–1090.                            Self-Regulatory Organizations; BOX
                                               shorter time if such action is consistent                All submissions should refer to File                  Exchange LLC; Notice of Filing and
                                               with the protection of investors and the                 Number SR–CboeEDGX–2018–041. This                     Immediate Effectiveness of a Proposed
                                               public interest. The Exchange has                        file number should be included on the                 Rule Change To Amend the Fee
                                               requested that the Commission waive                                                                            Schedule on the BOX Options Market
                                                                                                        subject line if email is used. To help the
                                               the 30-day operative delay so that the                                                                         LLC Facility To Revise Certain
                                                                                                        Commission process and review your
                                               proposed rule change may become                                                                                Qualification Thresholds and Fees in
                                               operative upon filing, noting that use of                comments more efficiently, please use
                                                                                                        only one method. The Commission will                  Sections I.B.1, Primary Improvement
                                               MDOs on the Exchange is optional,                                                                              Order, and I.B.2, BOX Volume Rebate
                                               similar functionality is already offered                 post all comments on the Commission’s
                                               by other market centers, and operative                   internet website (http://www.sec.gov/                 October 1, 2018.
                                               delay waiver would allow the Exchange                    rules/sro.shtml). Copies of the                          Pursuant to Section 19(b)(1) of the
                                               to make the proposed functionality                       submission, all subsequent                            Securities Exchange Act of 1934
                                               available to Exchange Users more                         amendments, all written statements                    (‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                               promptly. The Commission believes that                   with respect to the proposed rule                     notice is hereby given that on
                                               waiver of the 30-day operative delay is                  change that are filed with the                        September 20, 2018, BOX Exchange LLC
                                               consistent with the protection of                        Commission, and all written                           (the ‘‘Exchange’’) filed with the
                                               investors and the public interest.                       communications relating to the                        Securities and Exchange Commission
                                               Accordingly, the Commission hereby                       proposed rule change between the                      (‘‘Commission’’) the proposed rule
                                               waives the operative delay and                           Commission and any person, other than                 change as described in Items I, II, and
                                               designates the proposed rule change                      those that may be withheld from the                   III below, which Items have been
                                               operative upon filing.61                                 public in accordance with the                         prepared by the Exchange. The
                                                  At any time within 60 days of the                     provisions of 5 U.S.C. 552, will be                   Exchange filed the proposed rule change
                                               filing of the proposed rule change, the                  available for website viewing and                     pursuant to Section 19(b)(3)(A)(ii) of the
                                               Commission summarily may                                 printing in the Commission’s Public                   Act,3 and Rule 19b–4(f)(2) thereunder,4
                                               temporarily suspend such rule change if                  Reference Room, 100 F Street NE,                      which renders the proposal effective
                                               it appears to the Commission that such                                                                         upon filing with the Commission. The
                                                                                                        Washington, DC 20549 on official
                                               action is necessary or appropriate in the                                                                      Commission is publishing this notice to
                                                                                                        business days between the hours of
                                               public interest, for the protection of                                                                         solicit comments on the proposed rule
                                                                                                        10:00 a.m. and 3:00 p.m. Copies of the
                                               investors, or otherwise in furtherance of                                                                      change from interested persons.
                                                                                                        filing also will be available for
                                               the purposes of the Act. If the                                                                                I. Self-Regulatory Organization’s
                                                                                                        inspection and copying at the principal
                                               Commission takes such action, the                                                                              Statement of the Terms of the Substance
                                                                                                        office of the Exchange. All comments
                                               Commission shall institute proceedings                                                                         of the Proposed Rule Change
                                               to determine whether the proposed rule                   received will be posted without change.
                                               change should be approved or                             Persons submitting comments are                          The Exchange is filing with the
                                               disapproved.                                             cautioned that we do not redact or edit               Securities and Exchange Commission
                                                                                                        personal identifying information from                 (‘‘Commission’’) a proposed rule change
                                               IV. Solicitation of Comments                             comment submissions. You should                       to amend the Fee Schedule on the BOX
                                                 Interested persons are invited to                      submit only information that you wish                 Market LLC (‘‘BOX’’) options facility.
                                               submit written data, views, and                          to make available publicly. All                       Changes to the fee schedule pursuant to
                                               arguments concerning the foregoing,                      submissions should refer to File                      this proposal will be effective upon
                                               including whether the proposed rule                      Number SR–CboeEDGX–2018–041, and                      filing. The text of the proposed rule
                                               change is consistent with the Act.                       should be submitted on or before                      change is available from the principal
                                               Comments may be submitted by any of                      October 26, 2018.                                     office of the Exchange, at the
                                               the following methods:                                                                                         Commission’s Public Reference Room
                                                                                                          For the Commission, by the Division of              and also on the Exchange’s internet
                                               Electronic Comments                                      Trading and Markets, pursuant to delegated            website at http://boxexchange.com.
                                                                                                        authority.62
                                                  • Use the Commission’s internet                                                                             II. Self-Regulatory Organization’s
                                               comment form (http://www.sec.gov/                        Eduardo A. Aleman,
                                                                                                                                                              Statement of the Purpose of, and
                                               rules/sro.shtml); or                                     Assistant Secretary.
                                                                                                                                                              Statutory Basis for, the Proposed Rule
                                                  • Send an email to rule-comments@                     [FR Doc. 2018–21680 Filed 10–4–18; 8:45 am]
                                                                                                                                                              Change
                                               sec.gov. Please include File Number SR–                  BILLING CODE 8011–01–P
                                               CboeEDGX–2018–041 on the subject                                                                                  In its filing with the Commission, the
                                               line.                                                                                                          Exchange included statements
                                                                                                                                                              concerning the purpose of and basis for
                                               change, at least five business days prior to the date                                                          the proposed rule change and discussed
                                               of filing of the proposed rule change, or such                                                                 any comments it received on the
daltland on DSKBBV9HB2PROD with NOTICES




                                               shorter time as designated by the Commission.                                                                  proposed rule change. The text of these
                                                  59 17 CFR 240.19b–4(f)(6).
                                                  60 17 CFR 240.19b–4(f)(6)(iii).
                                                                                                                                                              statements may be examined at the
                                                  61 For purposes only of waiving the 30-day
                                                                                                                                                                1 15 U.S.C. 78s(b)(1).
                                               operative delay, the Commission also has
                                                                                                                                                                2 17 CFR 240.19b–4.
                                               considered the proposed rule’s impact on
                                                                                                                                                                3 15 U.S.C. 78s(b)(3)(A)(ii).
                                               efficiency, competition, and capital formation. See
                                               15 U.S.C. 78c(f).                                          62 17   CFR 200.30–3(a)(12).                          4 17 CFR 240.19b–4(f)(2).




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Document Created: 2018-10-05 01:52:49
Document Modified: 2018-10-05 01:52:49
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 50416 

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