83 FR 60516 - Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Rules Regarding How the System Handles Market Orders in Series With No Bid or No Offer

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 227 (November 26, 2018)

Page Range		60516-60519
FR Document		2018-25739
Federal Register, Volume 83 Issue 227 (Monday, November 26, 2018)
[Federal Register Volume 83, Number 227 (Monday, November 26, 2018)]
[Notices]
[Pages 60516-60519]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-25739]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84637; File No. SR-C2-2018-023]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Its Rules Regarding How the System Handles Market Orders in 
Series With No Bid or No Offer

November 20, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 60517]]

notice is hereby given that on November 6, 2018, Cboe C2 Exchange, Inc. 
(the ``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the 
Exchange. The Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to 
amend its Rules regarding how the System handles market orders in 
series with no bid or no offer.
    (additions are italicized; deletions are [bracketed])
* * * * *
    Rules of Cboe C2 Exchange, Inc.
* * * * *
    Rule 6.14. Order and Quote Price Protection Mechanisms and Risk 
Controls
    The System's acceptance and execution of orders and quotes pursuant 
to the Rules, including Rules 6.11 through 6.13, are subject to the 
following price protection mechanisms and risk controls, as applicable.
    (a) Simple Orders.
    (1) Market Orders in No-Bid (Offer) Series. [If a User submits a 
sell (buy) market order to the System after a series is open when there 
is no NBB (NBO), the System cancels or rejects the market order.]
    (A) If the System receives a sell market order in a series after it 
is open for trading with an NBB of zero:
    (i) if the NBO in the series is less than or equal to $0.50, then 
the System converts the market order to a limit order with a limit 
price equal to the minimum trading increment applicable to the series 
and enters the order into the Book with a timestamp based on the time 
it enters the Book. If the order has a Time-in-Force of GTC or GTD that 
expires on a subsequent day, the order remains on the Book as a limit 
order until it executes, expires, or the User cancels it.
    (ii) if the NBO in the series is greater than $0.50, then the 
System cancels or rejects the market order.
    (B) If the System receives a buy market order in a series after it 
is open for trading with an NBO of zero, the System cancels or rejects 
the market order.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc. 
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also 
the parent company of Cboe Exchange, Inc. (``Cboe Options'') and Cboe 
C2 Exchange, Inc., acquired the Cboe EDGA Exchange, Inc. (``EDGA''), 
Cboe EDGX Exchange, Inc. (``EDGX or EDGX Options''), Cboe BZX Exchange, 
Inc. (``BZX'' or ``BZX Options''), and Cboe BYX Exchange, Inc. (``BYX'' 
and, together with C2, Cboe Options, EDGX, EDGA, and BZX, the ``Cboe 
Affiliated Exchanges''). The Cboe Affiliated Exchanges are working to 
align certain system functionality, retaining only intended differences 
between the Cboe Affiliated Exchanges, in the context of a technology 
migration. Thus, the proposals set forth below are intended to add 
certain functionality to the Exchange's System that is more similar to 
functionality offered by Cboe Options in order to ultimately provide a 
consistent technology offering for market participants who interact 
with the Cboe Affiliated Exchanges. Although the Exchange intentionally 
offers certain features that differ from those offered by its 
affiliates and will continue to do so, the Exchange believes that 
offering similar functionality to the extent practicable will reduce 
potential confusion for Users.
    The Exchange proposes to amend its Rules regarding how the System 
handles a sell market order when there is no bid against which the 
order may execute. A market order is an order to buy or sell at the 
best price available at the time of execution.\5\ Currently, pursuant 
to Rule 6.14(a)(1), if a User submits a sell market order to the System 
after a series is open when there is no national best bid (``NBB''), 
the System cancels or rejects the market order.\6\ The Exchange 
proposes to amend how the System handles sell market orders submitted 
in a series with no bid. Specifically, if the System receives a market 
order to sell in an option series with an NBB of zero:
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    \5\ See Rule 1.1, definition of order.
    \6\ Current Rule 6.14(a)(1) also provides that if a User submits 
a buy market order to the System after a series is open when there 
is no national best offer (``NBO''), the System cancels or rejects 
the market order. The proposed rule change does not modify this 
handling, and moves this provision (with nonsubstantive changes) to 
proposed Rule 6.14(a)(1)(B).
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    (1) if the NBO in the series is less than or equal to $0.50, then 
the System converts the market order to a limit order with a limit 
price equal to the minimum trading increment applicable to the series 
and enters the order into the Book with a timestamp based on the time 
it enters the Book. If the order has a Time-in-Force of GTC or GTD that 
expires on a subsequent day, the order remains on the Book as a Limit 
Order until it executes, expires, or the User cancels it.
    (2) if the NBO in the series is greater than $0.50, then the System 
cancels the market order.\7\
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    \7\ See proposed Rule 6.14(a)(1).
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    The proposed rule change serves as a protection feature for 
investors in certain situations, such as when a series is no-bid 
because the last bid traded just prior to entry of the sell market 
order. The purpose of this threshold is to limit the automatic booking 
of market orders to sell at minimum increments to only those for true 
zero-bid options, as options in no-bid series with an offer of greater 
than $0.50 are less likely to be worthless.
    For example, if the System receives a sell market order in a no-bid 
series with a minimum increment of $0.01 and the NBO is $0.01, the 
System will convert the order to a limit order with a price of $0.01 
and enter it on the Book. Because the order will have a timestamp based 
on that time of Book entry, it will have priority behind any other 
limit orders to sell at $0.01 that were already resting on the Book. At 
that point, even if the series is no-bid because, for

[[Page 60518]]

example, the last bid just traded and the limit order trades at $0.01, 
the next bid entered after the trade would not be higher than $0.01. If 
the order has a Time-in-Force of GTC or GTD that expires on a 
subsequent day, the order remains on the Book as a Limit Order until it 
executes, expires, or the User cancels it.\8\
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    \8\ This functionality is consistent with the purpose of a GTC 
or GTD that expires on a subsequent trading day, which is to remain 
on the Book and available for execution until the User cancels it or 
until the time specified by the User. The Exchange notes that market 
orders with any other Time-in-Force would no longer be on the Book 
if they did not execute during the trading day.
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    However, if the System receives a sell market order in a no-bid 
series with a minimum increment of $0.01 and the NBO is $1.20 (because, 
for example, the last bid of $1.00 just traded and a new bid has not 
yet populated the disseminated quote), the System will cancel or reject 
the order. Cancellation prevents an anomalous execution price, since 
the next bid entered in that series is likely to be much higher than 
$0.01. It would be unfair to the User to let is market order trade as a 
limit order for $0.01 because, for example, the firm submitted the 
order during the brief time when there were no disseminated bids in a 
series trading significantly higher than the minimum increment.
    The Exchange believes the threshold of $0.50 is reasonable. The 
Exchange notes that this threshold the same as the threshold in the 
Cboe Options rule,\9\ and is less than the current width for the market 
order NBBO width protection, pursuant to which the System will reject 
or cancel back to the User a market order submitted to the System when 
the NBBO width is greater than 100% of the midpoint of the NBBO, 
subject to a $5 minimum and $10 maximum.\10\ Notwithstanding this 
provision, the proposed rule change would allow for the potential 
execution of sell market orders in no-bid series with offers less than 
or equal to $0.50. If the threshold in the proposed rule change was 
higher, there would be increased risk of having a market order trade a 
minimum increment in a series that is not truly no-bid. The proposed 
rule change is substantially the same as Cboe Options Rule 6.13(b)(vi).
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    \9\ See Cboe Options Rule 6.13(b)(vi).
    \10\ See Rule 21.17(a); see also Exchange Notice, BZX and EDGX 
Options Exchanges Feature Pack 2--Update (December 14, 2017), 
available at http://markets.cboe.com/resources/release_notes/2017/Update-2-Cboe-BZX-and-EDGX-Options-Exchanges-Feature-Pack-2.pdf, for 
current settings. Pursuant to this protection, if the NBBO for a 
series was $0.00-$0.50, the width of the NBBO (0.50) is greater than 
100% of the midpoint (0.25); however, pursuant to the minimum, a 
market order would be accepted pursuant to this protection because 
the width is less than the 5.00 minimum. The proposed rule change 
provides additional price protection for market orders in no-bid 
series.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and 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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    In particular, the Exchange believes the proposed rule change 
regarding the handling of sell Market Orders in no-bid series assists 
with the maintenance of fair and orderly markets and protects investors 
and the public interest, because it provides for automated handling of 
orders in series that are likely truly no-bid, ultimately resulting in 
more efficient executions of these orders. Additionally, the proposed 
rule change prevents executions of sell market orders in no-bid series 
with higher offers at potentially extreme prices in series that are not 
truly no-bid. The Exchange believes this threshold appropriately 
reflects the interests of investors, as options in no-bid series with 
offers higher than $0.50 are less likely to be worthless than no-bid 
series with offers no higher than $0.50, and cancelling the orders will 
prevent execution of these orders at unfavorable prices. The Exchange 
also believes the $0.50 threshold promotes fair and orderly markets, 
because sell market orders in no-bid series with offers of $0.50 or 
less are likely to be individuals seeking to close out a worthless 
position, for which the proposed automatic handling is appropriate. The 
proposed change is also substantially the same as Cboe Options Rule 
6.13(b)(vi).
    When Cboe Options migrates to the same technology as that of the 
Exchange and other Cboe Affiliated Exchanges, Users of the Exchange and 
other Cboe Affiliated Exchanges will have access to similar 
functionality on all Cboe Affiliated Exchanges and similar language can 
be incorporated into the rules of all Cboe Affiliated Exchanges. As 
such, the proposed rule change would foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities and would remove impediments to and perfect the mechanism of 
a free and open market and a national market system.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe the proposed rule changes will impose any burden on intramarket 
competition, because it will apply in the same manner to all sell 
market orders submitted in no-offer or no-bid series, respectively. 
Additionally, the proposed rule change has no impact on sell market 
orders submitted in no-bid series with an offer of more than $0.50, 
which orders will continue to be handled in the same manner as they are 
today (i.e. they will be cancelled or rejected). The Exchange does not 
believe the proposed rule change will impose any burden on intermarket 
competition, as it will provide sell market orders in true no-bid 
series with additional execution opportunities (either on the Exchange 
or at away markets pursuant to linkage rules) while providing an 
additional protection measure for sell market orders in no-bid series 
that may not be truly no-bid. The Exchange believes this price 
protection will allow Trading Permit Holders to submit sell market 
orders with reduced fear of inadvertent exposure to excessive risk, 
which will benefit investors through increased liquidity for the 
execution of their orders.
    The proposed rule change is substantially the same as Cboe Options 
Rule 6.13(b)(vi).\14\
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    \14\ The Exchange notes other options exchanges have similar 
rules that convert sell market orders in no-bid series to limit 
orders with a price of a minimum increment if the offer in the 
series is below a certain threshold (the thresholds differ in those 
rules). See, e.g., Miami International Securities Exchange, LLC 
(``MIAX'') Rule 519(a)(1); and NASDAQ ISE, LLC (``ISE'') Rule 
713(b).

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[[Page 60519]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the 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 \15\ and Rule 19b-4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \18\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become effective and operative on November 29, 2018. 
The Exchange states that waiver of the operative delay will provide 
Users with additional flexibility to manage and display their orders 
and provide additional control over their executions on the Exchange as 
soon as possible. The Exchange further states that waiver of the 
operative delay will allow the Exchange to continue to strive towards a 
complete technology integration of the Cboe Affiliated Exchanges, with 
gradual roll-outs of new functionality to ensure the stability of the 
System. The Exchange notes that the proposed rule change is generally 
intended to codify and to add certain system functionality to the 
Exchange's System in order to provide a consistent technology offering 
for the Cboe Affiliated Exchanges. The Exchange further notes that a 
consistent technology offering will simplify the technology 
implementation changes and maintenance by Trading Permit Holders of the 
Exchange that are also participants on Cboe Affiliated Exchanges. The 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposed rule change as operative on November 29, 
2018.\19\
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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-C2-2018-023 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-C2-2018-023. 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. All submissions should refer to 
File Number SR-C2-2018-023 and should be submitted on or before 
December 17, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25739 Filed 11-23-18; 8:45 am]
 BILLING CODE 8011-01-P
60516 Federal Register / Vol. 83, No. 227 / Monday, November 26, 2018 / Notices

will make Midpoint Trade Now C. Self-Regulatory Organization’s file number should be included on the
available for these Order Types as a port Statement on Comments on the subject line if email is used. To help the
setting to provide blanket coverage. Proposed Rule Change Received From Commission process and review your
Nasdaq believes that the proposed Members, Participants, or Others comments more efficiently, please use
No written comments were either only one method. The Commission will
clarifying changes and revised rule text
solicited or received. post all comments on the Commission’s
under Rule 4702(b)(5)(A) are consistent
internet website (http://www.sec.gov/
with the Act because they will help III. Date of Effectiveness of the rules/sro.shtml). Copies of the
avoid investor confusion that may be Proposed Rule Change and Timing for submission, all subsequent
caused by not making it clear that a Commission Action amendments, all written statements
Midpoint Peg Post-Only Order in the Because the foregoing proposed rule with respect to the proposed rule
Rule’s example is an Order to buy, and change does not: (i) Significantly affect change that are filed with the
by having text that refers to the protection of investors or the public Commission, and all written
functionality that will no longer apply. interest; (ii) impose any significant communications relating to the
As noted above, Nasdaq is revising burden on competition; and (iii) become proposed rule change between the
language in Rule 4702(b)(5)(A) that once operative for 30 days from the date on Commission and any person, other than
applied to both displayed and non- which it was filed, or such shorter time those that may be withheld from the
displayed orders to now only apply to as the Commission may designate, it has public in accordance with the
displayed orders. become effective pursuant to Section provisions of 5 U.S.C. 552, will be
19(b)(3)(A) of the Act 18 and Rule 19b– available for website viewing and
B. Self-Regulatory Organization’s 4(f)(6) thereunder.19 printing in the Commission’s Public
Statement on Burden on Competition At any time within 60 days of the Reference Room, 100 F Street NE,
filing of the proposed rule change, the Washington, DC 20549, on official
The Exchange does not believe that
Commission summarily may business days between the hours of
the proposed rule change will impose 10:00 a.m. and 3:00 p.m. Copies of the
temporarily suspend such rule change if
any burden on competition not filing also will be available for
it appears to the Commission that such
necessary or appropriate in furtherance action is necessary or appropriate in the inspection and copying at the principal
of the purposes of the Act. This is an public interest, for the protection of office of the Exchange. All comments
optional functionality that is being investors, or otherwise in furtherance of received will be posted without change.
offered at no charge, and which may be the purposes of the Act. If the Persons submitting comments are
used equally by similarly-situated Commission takes such action, the cautioned that we do not redact or edit
participants. Moreover, the functionality Commission shall institute proceedings personal identifying information from
may be replicated by other markets if to determine whether the proposed rule comment submissions. You should
deemed to be appropriate for their change should be approved or submit only information that you wish
markets. disapproved. to make available publicly. All
As noted above, Nasdaq will offer the submissions should refer to File
IV. Solicitation of Comments Number SR–NASDAQ–2018–090 and
Midpoint Trade Now functionality Interested persons are invited to should be submitted on or before
through the OUCH, RASH, FLITE, and submit written data, views, and December 17, 2018.
FIX protocols. Nasdaq will not offer the arguments concerning the foregoing,
Midpoint Trade Now functionality For the Commission, by the Division of
including whether the proposed rule Trading and Markets, pursuant to delegated
through the QIX protocol.16 Nasdaq change is consistent with the Act. authority.20
notes that, although the QIX protocol Comments may be submitted by any of Eduardo A. Aleman,
can support the removing of liquidity, the following methods: Assistant Secretary.
QIX is designed to provide two-sided
Electronic Comments [FR Doc. 2018–25598 Filed 11–23–18; 8:45 am]
quote messages to the trading system,
unlike the OUCH, RASH, FLITE and FIX • Use the Commission’s internet BILLING CODE 8011–01–P

protocols, which are designed to comment form (http://www.sec.gov/
facilitate Order submission. Nasdaq also rules/sro.shtml); or
• Send an email to rule-comments@ SECURITIES AND EXCHANGE
notes that QIX is an infrequently-used COMMISSION
protocol,17 and that this protocol cannot sec.gov. Please include File Number SR–
NASDAQ–2018–090 on the subject line. [Release No. 34–84637; File No. SR–C2–
support the expansion of fields that
2018–023]
adopting the Midpoint Trade Now Paper Comments
instruction would require. Nasdaq • Send paper comments in triplicate Self-Regulatory Organizations; Cboe
therefore believes that its decision to to Secretary, Securities and Exchange C2 Exchange, Inc.; Notice of Filing and
offer the Midpoint Trade Now Commission, 100 F Street NE, Immediate Effectiveness of a Proposed
instruction through the OUCH, RASH, Washington, DC 20549–1090. Rule Change Relating To Amend Its
FLITE, and FIX protocols will not All submissions should refer to File Rules Regarding How the System
impose any burden on competition that Number SR–NASDAQ–2018–090. This Handles Market Orders in Series With
is not necessary or appropriate. No Bid or No Offer
18 15 U.S.C. 78s(b)(3)(A).
19 17
November 20, 2018.
16 Although participants may use other protocols, CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to Pursuant to Section 19(b)(1) of the
such as DROP, those protocols are not related to
Order entry, and so the Midpoint Trade Now give the Commission written notice of its intent to Securities Exchange Act of 1934 (the
file the proposed rule change, along with a brief ‘‘Act’’),1 and Rule 19b–4 thereunder,2
functionality is not being offered for those
description and text of the proposed rule change,
protocols. at least five business days prior to the date of filing
17 As of September 12, 2018, of the 4,855 20 17 CFR 200.30–3(a)(12).
of the proposed rule change, or such shorter time
customer ports for the various Nasdaq protocols, 1 15 U.S.C. 78s(b)(1).
as designated by the Commission. The Exchange
only 134 of those ports are QIX protocol. has satisfied this requirement. 2 17 CFR 240.19b–4.

VerDate Sep<11>2014 17:28 Nov 23, 2018 Jkt 247001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 E:\FR\FM\26NON1.SGM 26NON1
Federal Register / Vol. 83, No. 227 / Monday, November 26, 2018 / Notices 60517

notice is hereby given that on November for trading with an NBO of zero, the practicable will reduce potential
6, 2018, Cboe C2 Exchange, Inc. (the System cancels or rejects the market confusion for Users.
‘‘Exchange’’ or ‘‘C2’’) filed with the order. The Exchange proposes to amend its
Securities and Exchange Commission * * * * * Rules regarding how the System handles
(the ‘‘Commission’’) the proposed rule The text of the proposed rule change a sell market order when there is no bid
change as described in Items I and II is also available on the Exchange’s against which the order may execute. A
below, which Items have been prepared website (http://www.cboe.com/ market order is an order to buy or sell
by the Exchange. The Exchange filed the AboutCBOE/ at the best price available at the time of
proposal as a ‘‘non-controversial’’ CBOELegalRegulatoryHome.aspx), at execution.5 Currently, pursuant to Rule
proposed rule change pursuant to the Exchange’s Office of the Secretary, 6.14(a)(1), if a User submits a sell
Section 19(b)(3)(A)(iii) of the Act 3 and and at the Commission’s Public market order to the System after a series
Rule 19b–4(f)(6) thereunder.4 The Reference Room. is open when there is no national best
Commission is publishing this notice to bid (‘‘NBB’’), the System cancels or
solicit comments on the proposed rule II. Self-Regulatory Organization’s rejects the market order.6 The Exchange
change from interested persons. Statement of the Purpose of, and proposes to amend how the System
Statutory Basis for, the Proposed Rule handles sell market orders submitted in
I. Self-Regulatory Organization’s Change a series with no bid. Specifically, if the
Statement of the Terms of Substance of In its filing with the Commission, the System receives a market order to sell in
the Proposed Rule Change Exchange included statements an option series with an NBB of zero:
Cboe C2 Exchange, Inc. (the concerning the purpose of and basis for (1) if the NBO in the series is less than
‘‘Exchange’’ or ‘‘C2’’) proposes to amend the proposed rule change and discussed or equal to $0.50, then the System
its Rules regarding how the System any comments it received on the converts the market order to a limit
handles market orders in series with no proposed rule change. The text of these order with a limit price equal to the
bid or no offer. statements may be examined at the minimum trading increment applicable
(additions are italicized; deletions are places specified in Item IV below. The to the series and enters the order into
[bracketed]) Exchange has prepared summaries, set the Book with a timestamp based on the
* * * * * forth in sections A, B, and C below, of time it enters the Book. If the order has
Rules of Cboe C2 Exchange, Inc. the most significant aspects of such a Time-in-Force of GTC or GTD that
* * * * * statements. expires on a subsequent day, the order
Rule 6.14. Order and Quote Price remains on the Book as a Limit Order
A. Self-Regulatory Organization’s
Protection Mechanisms and Risk until it executes, expires, or the User
Statement of the Purpose of, and
Controls cancels it.
The System’s acceptance and Statutory Basis for, the Proposed Rule
(2) if the NBO in the series is greater
execution of orders and quotes pursuant Change
than $0.50, then the System cancels the
to the Rules, including Rules 6.11 1. Purpose market order.7
through 6.13, are subject to the In 2016, the Exchange’s parent The proposed rule change serves as a
following price protection mechanisms company, Cboe Global Markets, Inc. protection feature for investors in
and risk controls, as applicable. (formerly named CBOE Holdings, Inc.) certain situations, such as when a series
(a) Simple Orders. (‘‘Cboe Global’’), which is also the is no-bid because the last bid traded just
(1) Market Orders in No-Bid (Offer) prior to entry of the sell market order.
parent company of Cboe Exchange, Inc.
Series. [If a User submits a sell (buy) The purpose of this threshold is to limit
(‘‘Cboe Options’’) and Cboe C2
market order to the System after a series the automatic booking of market orders
Exchange, Inc., acquired the Cboe EDGA
is open when there is no NBB (NBO), to sell at minimum increments to only
Exchange, Inc. (‘‘EDGA’’), Cboe EDGX
the System cancels or rejects the market those for true zero-bid options, as
Exchange, Inc. (‘‘EDGX or EDGX
order.] options in no-bid series with an offer of
(A) If the System receives a sell Options’’), Cboe BZX Exchange, Inc.
(‘‘BZX’’ or ‘‘BZX Options’’), and Cboe greater than $0.50 are less likely to be
market order in a series after it is open worthless.
for trading with an NBB of zero: BYX Exchange, Inc. (‘‘BYX’’ and,
together with C2, Cboe Options, EDGX, For example, if the System receives a
(i) if the NBO in the series is less than sell market order in a no-bid series with
or equal to $0.50, then the System EDGA, and BZX, the ‘‘Cboe Affiliated
Exchanges’’). The Cboe Affiliated a minimum increment of $0.01 and the
converts the market order to a limit NBO is $0.01, the System will convert
order with a limit price equal to the Exchanges are working to align certain
system functionality, retaining only the order to a limit order with a price
minimum trading increment applicable of $0.01 and enter it on the Book.
to the series and enters the order into intended differences between the Cboe
Affiliated Exchanges, in the context of a Because the order will have a timestamp
the Book with a timestamp based on the based on that time of Book entry, it will
time it enters the Book. If the order has technology migration. Thus, the
proposals set forth below are intended have priority behind any other limit
a Time-in-Force of GTC or GTD that orders to sell at $0.01 that were already
expires on a subsequent day, the order to add certain functionality to the
Exchange’s System that is more similar resting on the Book. At that point, even
remains on the Book as a limit order if the series is no-bid because, for
until it executes, expires, or the User to functionality offered by Cboe Options
cancels it. in order to ultimately provide a 5 See Rule 1.1, definition of order.
(ii) if the NBO in the series is greater consistent technology offering for 6 Current Rule 6.14(a)(1) also provides that if a
than $0.50, then the System cancels or market participants who interact with User submits a buy market order to the System after
rejects the market order. the Cboe Affiliated Exchanges. Although a series is open when there is no national best offer
(B) If the System receives a buy the Exchange intentionally offers certain (‘‘NBO’’), the System cancels or rejects the market
features that differ from those offered by order. The proposed rule change does not modify
market order in a series after it is open this handling, and moves this provision (with
its affiliates and will continue to do so, nonsubstantive changes) to proposed Rule
3 15 U.S.C. 78s(b)(3)(A)(iii). the Exchange believes that offering 6.14(a)(1)(B).
4 17 CFR 240.19b–4(f)(6). similar functionality to the extent 7 See proposed Rule 6.14(a)(1).

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Federal Register / Vol. 83, No. 227 / Monday, November 26, 2018 / Notices 60519

C. Self-Regulatory Organization’s of the Exchange that are also Commission and any person, other than
Statement on Comments on the participants on Cboe Affiliated those that may be withheld from the
Proposed Rule Change Received From Exchanges. The Commission believes public in accordance with the
Members, Participants, or Others that waiver of the 30-day operative provisions of 5 U.S.C. 552, will be
The Exchange neither solicited nor delay is consistent with the protection available for website viewing and
received comments on the proposed of investors and the public interest. printing in the Commission’s Public
rule change. Therefore, the Commission hereby Reference Room, 100 F Street NE,
waives the 30-day operative delay and Washington, DC 20549 on official
III. Date of Effectiveness of the designates the proposed rule change as business days between the hours of
Proposed Rule Change and Timing for operative on November 29, 2018.19 10:00 a.m. and 3:00 p.m. Copies of the
Commission Action At any time within 60 days of the filing also will be available for
Because the proposed rule change filing of the proposed rule change, the inspection and copying at the principal
does not (i) significantly affect the Commission summarily may office of the Exchange. All comments
protection of investors or the public temporarily suspend such rule change if received will be posted without change.
interest; (ii) impose any significant it appears to the Commission that such Persons submitting comments are
burden on competition; and (iii) become action is necessary or appropriate in the cautioned that we do not redact or edit
operative for 30 days from the date on public interest, for the protection of personal identifying information from
which it was filed, or such shorter time investors, or otherwise in furtherance of comment submissions. All submissions
as the Commission may designate, it has the purposes of the Act. If the should refer to File Number SR–C2–
become effective pursuant to Section Commission takes such action, the 2018–023 and should be submitted on
19(b)(3)(A) of the Act 15 and Rule 19b– Commission shall institute proceedings
or before December 17, 2018.
4(f)(6) thereunder.16 to determine whether the proposed rule
A proposed rule change filed under change should be approved or For the Commission, by the Division of
Rule 19b–4(f)(6) 17 normally does not disapproved. Trading and Markets, pursuant to delegated
authority.20
become operative prior to 30 days after IV. Solicitation of Comments
the date of the filing. However, Rule Eduardo A. Aleman,
19b–4(f)(6)(iii) 18 permits the Interested persons are invited to Assistant Secretary.
submit written data, views, and
Commission to designate a shorter time [FR Doc. 2018–25739 Filed 11–23–18; 8:45 am]
arguments concerning the foregoing,
if such action is consistent with the BILLING CODE 8011–01–P
including whether the proposed rule
protection of investors and the public
change is consistent with the Act.
interest. The Exchange has asked the
Comments may be submitted by any of
Commission to waive the 30-day SECURITIES AND EXCHANGE
the following methods:
operative delay so that the proposed COMMISSION
rule change may become effective and Electronic Comments
operative on November 29, 2018. The • Use the Commission’s internet [Release No. 34–84616; File No. SR–
Exchange states that waiver of the comment form (http://www.sec.gov/ NYSEAMER–2018–39]
operative delay will provide Users with rules/sro.shtml); or
additional flexibility to manage and • Send an email to rule-comments@ Self-Regulatory Organizations; NYSE
display their orders and provide sec.gov. Please include File Number SR– American LLC; Notice of Designation
additional control over their executions C2–2018–023 on the subject line. of Longer Period for Commission
on the Exchange as soon as possible. Action on a Proposed Rule Change To
The Exchange further states that waiver Paper Comments
Allow Flexible Exchange Equity
of the operative delay will allow the • Send paper comments in triplicate Options Where the Underlying Security
Exchange to continue to strive towards to Secretary, Securities and Exchange Is an Exchange-Traded Fund That Is
a complete technology integration of the Commission, 100 F Street NE, Included in the Option Penny Pilot To
Cboe Affiliated Exchanges, with gradual Washington, DC 20549–1090. Be Settled in Cash
roll-outs of new functionality to ensure All submissions should refer to File
the stability of the System. The Number SR–C2–2018–023. This file November 19, 2018.
Exchange notes that the proposed rule number should be included on the On September 20, 2018, NYSE
change is generally intended to codify subject line if email is used. To help the American LLC (‘‘NYSE American’’ or
and to add certain system functionality Commission process and review your the ‘‘Exchange’’) filed with the
to the Exchange’s System in order to comments more efficiently, please use Securities and Exchange Commission
provide a consistent technology offering only one method. The Commission will (‘‘Commission’’), pursuant to Section
for the Cboe Affiliated Exchanges. The post all comments on the Commission’s 19(b)(1) of the Securities Exchange Act
Exchange further notes that a consistent internet website (http://www.sec.gov/ of 1934 (‘‘Act’’) 1 and Rule 19b–4
technology offering will simplify the rules/sro.shtml). Copies of the thereunder,2 a proposed rule change to
technology implementation changes and submission, all subsequent modify the rules related to Flexible
maintenance by Trading Permit Holders amendments, all written statements Exchange (‘‘FLEX’’) Options to allow
with respect to the proposed rule FLEX Equity Options where the
15 15 U.S.C. 78s(b)(3)(A). change that are filed with the underlying security is an Exchange-
16 17 CFR 240.19b–4(f)(6). As required under Rule Commission, and all written Traded Fund that is included in the
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file communications relating to the Option Penny Pilot to be settled in cash.
the proposed rule change, along with a brief proposed rule change between the The proposed rule change was
description and the text of the proposed rule published for comment in the Federal
change, at least five business days prior to the date 19 For purposes only of waiving the 30-day
of filing of the proposed rule change, or such operative delay, the Commission has also
shorter time as designated by the Commission. considered the proposed rule’s impact on
20 17 CFR 200.30–3(a)(12).
17 17 CFR 240.19b–4(f)(6). 1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
18 17 CFR 240.19b–4(f)(6)(iii). 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4.

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Document Created: 2018-11-24 00:51:34
Document Modified: 2018-11-24 00:51:34
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		83 FR 60516