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<title>Federal Register, Volume 91 Issue 2 (Monday, January 5, 2026)</title>
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[Federal Register Volume 91, Number 2 (Monday, January 5, 2026)]
[Notices]
[Pages 303-306]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-24225]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104525; File No. SR-CBOE-2025-095]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rules Related to Processing of Auction Responses and Length of Auction
Timers
December 30, 2025.
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 December 23, 2025, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') 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
The Exchange proposes to extend the sunset date for certain
functionality relating to the processing of auction responses to June
30, 20256 [sic] and reduce the maximum length of auction periods for
certain auction mechanisms to 1000 milliseconds. The text of the
proposed rule change is available on the Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>), and at the
principal office of the Exchange.
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
The Exchange currently offers a variety of auction mechanisms which
provide price improvement opportunities for eligible orders.
Particularly, the Exchange offers the following auction mechanisms:
Complex Order Auction (``COA''),\5\ Step Up Mechanism (``SUM''),\6\
Automated Improvement Mechanism (``AIM''),\7\ Complex AIM (``C-
AIM''),\8\ Solicitation Auction Mechanism (``SAM''),\9\ and Complex SAM
(``C-SAM'').\10\ The Exchange notes that eligible orders (``auctioned
orders'') are electronically exposed for an Exchange-determined period
(collectively referred to herein as ``auction response period'') in
accordance with the applicable Exchange Rule, during which time Users
may submit responses (collectively referred to herein as ``auction
responses'' or ``auction response messages'') to an auction message.
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\5\ See Rule 5.33(d).
\6\ See Rule 5.35.
\7\ See Rule 5.37.
\8\ See Rule 5.38.
\9\ See Rule 5.39.
\10\ See Rule 5.40.
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In June 2023, in order to provide responses to these auctions with
increased opportunities to participate in the auction, even during
periods of high message traffic, and thus potentially provide customers
with additional opportunities for price improvement, the Exchange
adopted new functionality that applies across all of its auction
mechanisms to increase the likelihood that timely submitted auction
responses may participate in the applicable auction, even during
periods of high message traffic.\11\ Under this functionality, at the
time an auction response period ends, the System continues to process
its inbound queue for any messages that were received by the System
before the end of the auction period (including auction responses) for
up to an Exchange-determined period of time, not to exceed 100
milliseconds (which the Exchange may determine on a class-by-class
basis which would apply to all auction mechanisms and which would be
announced with reasonable advanced notice via Exchange Notice).\12\
That is, any auction responses that were in the queue before the
conclusion of the auction (as identified by the Network Interface Card
(``NIC'') timestamp on the message) would be processed as long as the
Exchange-determined time on a class-
[[Page 304]]
by-class basis (not to exceed 100 milliseconds) is not exceeded. Only
auction responses received prior to the execution of the applicable
auction are eligible to be processed for that auction. The applicable
auction will execute once all messages, including auction responses,
received before the end time of the auction response period have been
processed or the Exchange-determined maximum time limit of up to 100
milliseconds has elapsed, whichever occurs first. This continuation of
processing the queue for an additional amount of time for messages that
were received before the end of the auction allows for auction
responses that would otherwise have been canceled due to the conclusion
of the auction response period to still have an opportunity to
participate in the auction.
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\11\ See Rule 5.25(c); see also Securities Exchange Act Release
No. 97738 (June 15, 2023), 88 FR 40878 (June 22, 2023) (SR-CBOE-
2022-051). This functionality applies to COA, SUM, AIM, SAM, C-AIM,
and C-SAM.
\12\ The auction response processing time is currently set to
100 milliseconds for all classes, except S&P 500 Index options
(``SPX options''), for which the time is currently set to 900
milliseconds. See Cboe Exchange Notice C2024111903, available at
<a href="https://www.cboe.com/notices/content/?id=51420">https://www.cboe.com/notices/content/?id=51420</a>.
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In April 2025, the Exchange proposed to increase the permissible
maximum length of this Exchange-determined time period with respect to
SPX options.\13\ Specifically, the Exchange amended Rule 5.25(c) to
provide that with respect to SPX options, this Exchange-determined
period of time for this continuation of auction response processing
plus the length of the auction response or exposure period, as
applicable,\14\ may not exceed 1000 milliseconds (which the Exchange
will continue to announce with reasonable advance notice via Exchange
Notice). For example, Rule 5.37(c)(3) permits the Exchange to determine
the length of the AIM auction period, which may be no less than 100
milliseconds and currently no more than three seconds (i.e., 3000
milliseconds).\15\ Currently, the Exchange has set the length of the
AIM auction period as 100 milliseconds for SPX options and the length
of the auction response processing time as 900 milliseconds.
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\13\ See Securities Exchange Act Release No. 102966 (May 1,
2025), 90 FR 19330 (May 7, 2025) (SR-CBOE-2025-031). The Exchange
currently lists SPX options on a group basis pursuant to Rule
4.13(f), with a.m.-settled SPX options trading under symbol SPX and
p.m.-settled SPX options trading under symbol SPXW. Pursuant to Rule
1.5(c), this rule applies to both groups.
\14\ Current lengths of auction response and exposure periods
are available at cboe_options_product_configurations.xlsx. The COA
and AIM/C-AIM auction response periods are currently set to 100
milliseconds for SPX options (other auctions are not currently
activated for SPX).
\15\ As discussed below, the Exchange proposes to reduce the
maximum length of the AIM auction period to one second (i.e., 1000
milliseconds).
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The Rules currently provide that after December 31, 2025, the
maximum length of this Exchange-determined period of time for this
continuation of auction response processing for SPX will revert back to
100 milliseconds. The Exchange proposes to extend the sunset date to
June 30, 2026. The Exchange believes extension of the sunset date for
the maximum amount of additional time for processing will continue to
result in more auction responses being executed in auctions for SPX
options, particularly in times of high message traffic.
The Exchange also proposes to amend Rules 5.33(d)(3), 5.37(c)(3),
and 5.38(c)(3) to reduce the maximum length of the COA response time
interval, AIM auction period, and C-AIM Auction period, respectively,
to one second from three seconds. This is consistent with the maximum
time period for SPX options set forth in Rule 5.25(c) described above.
Specifically, with respect to SPX options, the longest an auction
period could be under Rule 5.25(c) is 1000 milliseconds if the auction
response processing time is zero.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\16\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \17\ 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) \18\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
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In particular, the Exchange believes the proposed rule change will
remove impediments to a free and open market, as it will allow the
Exchange's System to continue to process nearly all timely submitted
auction responses for SPX options auctions, particularly in times of
volatility and high message traffic. The sunset period permitted the
Exchange to evaluate whether a longer auction response processing time
would continue to be appropriate in times of high volatility. The
Exchange believes that to be the case, as it has proposed to make this
longer auction response processing time permanent (and applicable to
all classes rather than just SPX options).\19\ In support of this
proposal to extend the sunset date, in 2025 prior to May 12, 2025 (the
date on which the Exchange implemented the longer auction processing
response time for SPX options), the percentage of auction responses in
SPX that were received by the System before the end of the auction
period (i.e., had received a NIC timestamp) but were rejected because
the Exchange could not process them before the end of the auction
response or exposure period, as applicable, plus shorter buffer time,
reached over 20% on several occasions and averaged approximately 7.64%.
Between May 12 and December 4, 2025, this percentage was nearly 0 (the
maximum percentage of rejected auction responses on a trading day
during this timeframe was 0.03%). Therefore, the data demonstrates that
the longer auction response processing time has resulted in the
System's ability to process nearly all timely submitted auction
responses for SPX options.
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\19\ See Securities Exchange Act Release No. 104159 (September
30, 2025), 90 FR 48094 (October 3, 2025) (SR-CBOE-2025-074).
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Despite the maximum auction response processing time being 900
milliseconds, the daily average length of the auction response
processing time used between May 12 and December 4, 2025, has been
below 100 milliseconds on all but four trading days. However, the
maximum 900 millisecond buffer has been necessary for auctions on all
but 15 trading days (approximately 90% of trading days) during that
time period.\20\ Therefore, as expected, in the vast majority of cases,
the additional time needed after the conclusion of an auction response
period, if any, to process all pending auction responses is
significantly shorter than the proposed maximum, but the longer maximum
time has been beneficial during times of high message traffic and
volatility. This is a further benefit of being able to increase the
length of the auction response processing time rather than the length
of an auction response period. Unlike an auction response period, which
must run in its entirety, the auction response processing is adaptable.
For example, if the System is ``caught up'' and processes all auction
responses received prior to the completion of a 100 millisecond auction
[[Page 305]]
response period within 50 milliseconds after the end of the auction
period, the total processing time would be 150 milliseconds. The System
only uses the portion of the auction response processing time it needs
to process responses with timestamps prior to the end of the auction
period (and uses no part of that time if unnecessary to do so).\21\
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\20\ The shortest amount of the maximum buffer used on a trading
day was nearly 700 milliseconds since May 12, 2025.
\21\ To the extent the Exchange determines a lesser amount of
time would be sufficient for SPX options, the Exchange could
implement an additional amount of time for processing auction
responses that is less than the combined time of 1000 milliseconds,
which time would be announced with reasonable advance notice to
market participants via Exchange Notice. The Exchange generally
gives notice one to two weeks in advance of implementation for
changes such as this; however, shorter notice may be provided if the
Exchange believes it is necessary to maintain fair and orderly
markets.
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Given the significantly reduced number of auction responses that
have been rejected during the time period since the 900 millisecond
auction processing time was implemented, and thus the significant
number of auction responses that have been able to participate in
auctions rather than be rejected, the Exchange believes the proposed
rule change will permit the Exchange to leave this functionality in
place without disruption to market participants to the benefit of
investors. The Exchange believes the longer auction response processing
time for SPX options continues to appropriately balance providing
investors with timely processing of their SPX options quote and order
messages and providing investors who submit SPX orders that are
auctioned with additional liquidity. The extension of the sunset date
will allow more investors additional opportunities to receive price
improvement through an auction mechanism for their SPX orders. Further,
the Exchange believes the extension of the sunset date will result in
increased execution opportunities for liquidity providers that submit
auction responses and enhance the potential for price improvement for
SPX orders submitted to each mechanism to the benefit of investors and
public interest.\22\
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\22\ The Exchange has undertaken various steps to improve the
performance (including to reduce latency) of the matching engine on
which SPX trades. For example, the Exchange has made various
hardware and software upgrades. See, e.g., Exchange Notice
C2025112400, Cboe C1 Options Exchange Matching Engine Enhancements
(November 24, 2025), available at Cboe C1 Options Exchange Matching
Engine Enhancements. The Exchange continues to evaluate other
potential means that may improve performance and reduce latency for
SPX and all options. The extended sunset period will permit the
Exchange to continue to evaluate whether a longer auction response
processing time will continue to be appropriate in times of high
volatility and message traffic and continue to pursue permanent
approval of the longer auction response processing time for SPX and
all options.
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The Exchange believes the proposed rule change to reduce the
maximum length of the auction periods for COA, AIM, and C-AIM will
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, as it will bring consistency among
the Exchange's Rules. Specifically, as noted above, despite the Rules
providing that the Exchange could set the length of COA, AIM, and C-AIM
auctions as high as 3000 milliseconds, practically, under Rule 5.25(c),
for SPX options, those auctions could be no higher than 1000
milliseconds. Additionally, given the increased speeds of electronic
trading, a three-second auction is no longer practical. Each of these
three auctions is currently set to 100 milliseconds, and the Exchange
has no intention of needing to have an auction last more than one
second.
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 that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as the proposed extension of
the sunset date, and thus continuation of a permissible 900
milliseconds of additional auction response processing, would apply
equally to all Trading Permit Holders that submit auction responses in
SPX options. Additionally, the length of any COA, AIM, or C-AIM auction
(even with a reduced maximum length of one second from three seconds)
will apply in the same manner to all Trading Permit Holders. The
Exchange does not believe the proposed rule change will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act, as the proposed rule change
maintains functionality related to the processing of auction responses
that may only participate in auctions that occur on the Exchange. With
respect to the maximum length of auction timers, the proposed maximum
length is consistent with the maximum auction period for comparable
auction on other option exchanges.\23\
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\23\ See, e.g., MIAX Rules 5.15A(a)(2)(i)(C) (maximum auction
period of one second for MIAX Price Improvement Mechanism
(``PRIME'') (including PRIME for complex orders, pursuant to
Interpretation and Policy .12 of that rule), which is similar to
AIM); and 5.18(d)(3) (maximum auction period of 500 milliseconds for
the complex order auction).
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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 written comments 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 \24\ and Rule 19b-
4(f)(6) thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission
may 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 operative upon filing. Under current CBOE rules,
after December 31, 2025, the maximum length of the auction response
processing time for non-FLEX SPX options would revert back to 100
milliseconds from the current threshold of 1000 milliseconds. The
Exchange proposes to extend this sunset date to June 30, 2026 and,
according to the Exchange, waiver of the operative delay will benefit
investors because it will permit the Exchange to retain this
[[Page 306]]
functionality without interruption to the market.
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\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
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With respect to the proposed decrease the maximum length of COA,
AIM, and C-AIM auction periods, the Exchange stated that under the
proposed rule change, these auctions will continue to function as they
do today, as the length of the auction periods for each of these
auctions is currently 100 milliseconds, well below the proposed maximum
of 1000 milliseconds.\28\ The Exchange also observed that the proposed
maximum of 1000 milliseconds is consistent with the practical maximum
time imposed by Rule 5.25(c) for SPX options.
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\28\ See supra note 12.
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The proposed rule change provides a temporary extension of the
existing auction response processing time for non-FLEX SPX options
while the Exchange concurrently seeks to make the rule permitting the
longer auction response processing time for these options
permanent,\29\ decreases the maximum length of COA, AIM, and C-AIM
auction periods in a manner that allows these auctions to continue to
operate as they do today without disruption to market participants, and
raises no novel regulatory issues. Therefore, 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 proposal operative upon filing.\30\
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\29\ See Securities Exchange Act Release No. 104159 (September
30, 2025), 90 FR 48094 (October 3, 2025) (SR-CBOE-2025-074).
\30\ For purposes only of waiving the 30-day operative delay,
the Commission has 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 will 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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7301061f165e101c1e1e161d0700330016105d141c05"><span class="__cf_email__" data-cfemail="b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7">[email protected]</span></a>. Please include
file number SR-CBOE-2025-095 on the subject line.
Paper Comments
<bullet> 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-CBOE-2025-095. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-CBOE-2025-095 and should be submitted on
or before January 26, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-24225 Filed 1-2-26; 8:45 am]
BILLING CODE 8011-01-P
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Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules Related to Processing of Auction Responses and Length of Auction Timers
<html> <head> <title>Federal Register, Volume 91 Issue 2 (Monday, January 5, 2026)</title> </head> <body><pre> [Federal Register Volume 91, Number 2 (Monday, January 5, 2026)] [...
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“Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules Related to Processing of Auction Responses and Length of Auction Timers,” thefederalregister.org (January 5, 2026), https://thefederalregister.org/documents/2025-24225/self-regulatory-organizations-cboe-exchange-inc-notice-of-filing-and-immediate-effectiveness-of-a-proposed-rule-change-t.