Notice2021-17080
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Bulk Message Fat Finger Check
Primary source
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Published
August 11, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 152 (Wednesday, August 11, 2021)</title>
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[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44090-44092]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17080]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92575; File No. SR-CboeBZX-2021-054]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
the Bulk Message Fat Finger Check
August 5, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 28, 2021, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
proposes to modify the bulk message fat finger check. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), 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
[[Page 44091]]
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 proposes to modify the bulk message \5\ fat finger
check in Rule 21.17(a)(6). In accordance with the fat finger check, the
System cancels or rejects any bulk message bid (offer) above (below)
the national best offer (``NBO'') (national best bid (``NBB'')) by more
than a specified amount determined by the Exchange.\6\ The proposed
rule change indicates that the Exchange may also determine a minimum
and maximum dollar value for the bulk message fat finger check.\7\ The
Exchange believes Market-Makers may be willing to accept an execution
at a price beyond the NBBO at the time of order entry, but not too far
away. The purpose of the fat finger check is intended to reject bulk
message bids and offers that on their face are likely to be entered at
erroneous prices and thus prevent potentially erroneous executions. The
proposed rule change to permit the Exchange to set a minimum and
maximum value will provide the Exchange with the opportunity to set a
meaningful buffer that is not ``too close'' to the NBBO (in other
words, a de minimis buffer) but not ``too far'' from the NBBO (in other
words, a buffer that is more likely to accept erroneously priced bulk
messages). The proposed rule change also permits the Exchange to set
the relevant amounts for the bulk message fat finger check on a class-
by-class basis. Option classes have different characteristics and
trading models, and the proposed flexibility will permit the Exchange
to apply different parameters to address those differences.
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\5\ The term ``bulk message'' means a bid or offer included in a
single electronic message a User submits with an M Capacity to the
Exchange in which the User may enter, modify, or cancel up to an
Exchange-specified number of bids and offers (which number the
Exchange announces via Exchange notice or publicly available
technical specifications). A User may submit a bulk message through
a bulk port as set forth in Rule 21.1(j)(3). The System handles a
bulk message in the same manner as it handles an order or quote,
unless the Rules specify otherwise. See Rule 16.1.
\6\ This check does not apply to bulk messages submitted prior
to the conclusion of the opening process or when no NBBO is
available.
\7\ The proposed rule change also makes a nonsubstantive change
to say the System cancels or rejects any bulk message bid (offer)
more than a buffer amount above (below) the NBO (NBB) to align the
language with other rules.
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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.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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In particular, the proposed change to the bulk message fat finger
check will protect investors and the public interest as the check will
continue to mitigate potential risks associated with Market-Makers
submitting bulk message bids and offers at unintended prices, and risks
associated with orders and quotes trading at prices that are extreme
and potentially erroneous, which may likely have resulted from human or
operational error. The proposed enhancement that the Exchange will
apply a minimum and maximum to the fat finger check will permit the
Exchange to apply the fat finger check to bulk messages in a more
meaningful way. The Exchange believes class flexibility is appropriate
to permit the Exchange to apply reasonable buffers to classes, which
may exhibit different trading characteristics and have different market
models. The Exchange has other price checks and risk controls that
permit it to set a minimum and maximum, as well as apply parameters on
a class basis.\11\
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\11\ See, e.g., Rule 21.17(a)(1) (market order NBBO width
protection).
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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 change will impose any burden on intramarket
competition, as the proposed changes will apply in the same manner to
all bulk messages submitted through a bulk port. The Exchange does not
believe the proposed rule change will impose any burden on intermarket
competition, as the proposed rule change applies to functionality that
applies to incoming interest that may only rest or execute on the
Exchange's book.
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 foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. 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 \12\ and
Rule 19b-4(f)(6) \13\ thereunder. 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.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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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.
[[Page 44092]]
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#255750494008464a4848404b5156655640460b424a53"><span class="__cf_email__" data-cfemail="7705021b125a14181a1a121903043704121459101801">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2021-054 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-CboeBZX-2021-054. 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="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-CboeBZX-2021-054 and should be submitted
on or before September 1, 2021.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17080 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P
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