Notice2021-25476
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.34
Primary source
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Published
November 23, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 223 (Tuesday, November 23, 2021)</title>
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[Federal Register Volume 86, Number 223 (Tuesday, November 23, 2021)]
[Notices]
[Pages 66609-66611]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25476]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93598; File No. SR-CBOE-2021-066]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 5.34
November 17, 2021.
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 November 5, 2021, 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
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 5.34. 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://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</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
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 optional duplicate order
protection risk limit setting for Users in Rule 5.34(c)(9). Duplicate
order protection is voluntary functionality, which was designed to
protect Users against execution of multiple identical orders that may
have been erroneously entered. Specifically, pursuant to current Rule
5.34(c)(9), if a User enables this functionality for a port, then after
the System receives a specified number of duplicate orders with the
same EFID,\5\ side, price, quantity, and class within a specified time
period (the User determines the number and length of the time period),
the System will (A) reject additional duplicate orders until it
receives instructions from the User to reset this control or (B) reject
all incoming orders submitted through that port for that EFID until the
User contacts the Trade Desk to request it reset this control. The User
may continue to submit cancel requests prior to reset.
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\5\ The term ``EFID'' means an Executing Firm ID. The Exchange
assigns an EFID to a Trading Permit Holder, which the System uses to
identify the Trading Permit Holder and the clearing number for the
execution of orders and quotes submitted to the System with that
EFID.
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The Exchange proposes to amend this risk setting to eliminate the
time parameter. Particularly, as amended, the System will continue to
check for a specified number of duplicate orders (which will continue
to be determined by the User), but no longer check to see if any such
duplicative orders were received over a specified period of time.
Instead, the system will compare each submitted order against the
immediately preceding order that was submitted with respect to the
orders' EFID, side, price, quantity, and class. For example, suppose a
User sets the duplicative order count to 10 orders. When the System
receives an incoming order, the System checks if the immediately
preceding order it received had the same EFID, side, price, quantity
and class. If the order does not, then the System keeps the count at
``0'' (and performs the same process for the next incoming order). If
the order does, the System will count that order as ``1''. If the
following 9 incoming orders through that port are also duplicates
(i.e., same EFID, side, price, quantity and class), then regardless of
how long it takes for such orders to come into the System, the System
will (i) reject any additional duplicate orders until it receives a
reset instruction from the User or (ii) reject all incoming orders
submitted through that port for that EFID until the User contacts the
Trade Desk to request it reset this control, as it does today.
The Exchange has observed that the time parameter check under the
current duplicate order protection feature can potentially create a
(albeit minor) latency impact for Users who opt to use the
functionality. More specifically, minor latency can arise in connection
with the specified time parameter because the System must store and
conduct a check across all orders sent during the specified time period
when this risk check is enabled. The Exchange believes removing the
time parameter check will eliminate this latency for Users that opt to
use the duplicate order protection. The Exchange does not believe that
the proposed rule change will impact the effectiveness of the duplicate
order protection feature for those Users that opt to enable such
functionality. Also, as noted above, the use of the risk limit is
voluntary. The Exchange will continue to offer Users a full suite of
additional price protection mechanisms and risk controls which the
Exchange believes sufficiently mitigate risks associated with Users
entering orders and quotes at unintended prices, and risks associated
with orders and quotes trading at prices that are extreme and
potentially erroneous, as a likely result of human or operational
error.
Lastly, the Exchange proposes to correct an erroneous rule number.
Particularly, the Exchange proposes to update Rule 5.34(c)(12) to Rule
5.34(c)(11), which follows the immediately preceding subparagraph (10)
of Rule 5.34(c).
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the
[[Page 66610]]
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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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) \8\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
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In particular, the proposed rule change will remove impediments to
and perfect the mechanism of a free and open market and national market
system and benefit investors, because the Exchange believes it will
remove small latency that may currently be caused by use of the
duplicate order protection functionality. Moreover, the Exchange does
not believe that the proposed rule change will affect the protection of
investors or the public interest or the maintenance of a fair and
orderly market because Users still have the ability to enable such
control to protect against execution of multiple identical orders that
may have been erroneously entered, just in a different manner (i.e.,
without a specified time parameter check). As stated, the Exchange does
not believe that the proposed rule change will impact the effectiveness
of the duplicate order protection feature for those Users that opt to
enable such functionality. In addition to this, the Exchange notes that
the use of this risk control is voluntary, and the Exchange will
continue to offer a full suite of alternative price protection
mechanisms and risk controls.
The Exchange believes updating an erroneous subparagraph reference
in Rule 5.34 removes impediments to and perfects the mechanism of a
free and open market and national market system and benefits investors,
because it eliminates potential confusion and maintains clarity in the
rules.
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. In particular, the Exchange
does not believe that the proposed rule change would impose a burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because it will amend this risk
control in the same manner for all Users on the Exchange. In addition
to this, and as stated above, the use of the duplicative order
protection risk control is voluntary, and the Exchange will continue to
offer various other price protections and risk controls that
sufficiently mitigate risks associated with market participants
entering and/or trading orders and quotes at unintended or extreme
prices. 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 only updates an existing risk control applicable to ordered
submitted to the Exchange. The Exchange also notes that market
participants on other exchanges are welcome to become participants on
the Exchange if they determine that this proposed rule change has made
Cboe Options a more attractive or favorable venue.
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: (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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)
\10\ thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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 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="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#7200071e175f111d1f1f171c0601320117115c151d04"><span class="__cf_email__" data-cfemail="2654534a430b45494b4b434852556655434508414950">[email protected]</span></a>. Please include
File Number SR-CBOE-2021-066 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-2021-066. 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
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office of the Exchange. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-CBOE-2021-066 and should be submitted on or before December 14,
2021.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25476 Filed 11-22-21; 8:45 am]
BILLING CODE 8011-01-P
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