Notice2022-10417
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Codify Certain Practices and Requirements Related to the Exchange's Port Message Rate Thresholds
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 16, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 94 (Monday, May 16, 2022)</title>
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[Federal Register Volume 87, Number 94 (Monday, May 16, 2022)]
[Notices]
[Pages 29776-29777]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10417]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94883; File No. SR-CboeEDGX-2022-004]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Codify Certain Practices and Requirements
Related to the Exchange's Port Message Rate Thresholds
May 10, 2022.
I. Introduction
On January 21, 2022, Cboe EDGX Exchange, Inc. (``Exchange'') filed
with the Securities and Exchange Commission (``Commission''), pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
codify certain practices and requirements related to the Exchange's
port message rate thresholds. The proposed rule change was published
for comment in the Federal Register on February 9, 2022.\3\ On March
23, 2022, pursuant to Section 19(b)(2) of the Act,\4\ the Commission
designated a longer period within which to approve the proposed rule
change, disapprove the proposed rule change, or institute proceedings
to determine whether to disapprove the proposed rule change.\5\ The
Commission has received no comment letters on the proposed rule change.
This order institutes proceedings pursuant to Section 19(b)(2)(B) of
the Act \6\ to determine whether to approve or disapprove the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 94144 (February 3,
2022), 87 FR 7519 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 94496, 87 FR 18410
(March 30, 2022). The Commission designated May 10, 2022 as the date
by which the Commission shall approve or disapprove, or institute
proceedings to determine whether to disapprove, the proposed rule
change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change
The Exchange states that its System \7\ does not have unlimited
port capacity to consistently support an unlimited number of messages
throughout the trading day.\8\ The Exchange states that for this
reason, the Exchange limits each Member \9\ to a maximum number of
messages over a set amount of time, per port (``Port Order Rate
Threshold'').\10\ The Exchange states that historically, it has
provided Members with the Port Order Rate Threshold through its
publicly available technical specifications.\11\ The Exchange's current
Port Order Rate Threshold is 10,000 messages per second.\12\ The
Exchange further states that while Members may elect to establish a
lower Port Order Rate Threshold, each Member is subject to the same
maximum Port Order Rate Threshold.\13\
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\7\ ``System'' means the electronic communications and trading
facility designated by the Board through which securities orders of
Users are consolidated for ranking, execution and, when applicable,
routing away. See Exchange Rule 1.5(cc).
\8\ See Notice, supra note 3, at 7519.
\9\ ``Member'' means a registered broker or dealer that has been
admitted to membership in the Exchange. A Member will have the
status of a ``member'' of the Exchange as that term is defined in
Section 3(a)(3) of the Act. Membership may be granted to a sole
proprietor, partnership, corporation, limited liability company or
other organization which is a registered broker or dealer pursuant
to Section 15 of the Act, and which has been approved by the
Exchange. See Exchange Rule 1.5(n).
\10\ See Notice, supra note 3, at 7519.
\11\ See id. See also Cboe FIX Specifications at p. 72,
available at: <a href="https://cdn.cboe.com/resources/membership/Cboe_US_Equities_FIX_Specification.pdf">https://cdn.cboe.com/resources/membership/Cboe_US_Equities_FIX_Specification.pdf</a>; and Cboe BOE Specifications,
available at: <a href="https://cdn.cboe.com/resources/membership/Cboe_US_Equities_BOE_Specification.pdf">https://cdn.cboe.com/resources/membership/Cboe_US_Equities_BOE_Specification.pdf</a>.
\12\ See id. According to the Exchange, when the first non-
administrative message is received, a one second window begins.
During the second no more than 9,999 additional non-administrative
messages will be allowed within that one second window. If the rate
is exceeded, all new orders in the time window are rejected,
modifies are treated as cancels, and cancels are processed. See
Notice, supra note 3, at 7519 n. 6.
\13\ See Notice, supra note 3, at 7519.
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The Exchange now proposes to establish Rule 11.23, entitled Port
Order Rate Threshold, to state that all Members shall be subject to a
Port Order Rate Threshold, as determined by the Exchange in its
discretion. In support of its proposal, the Exchange cites to rules
that historically existed in the Cboe Options Exchange (``C1'') and the
Cboe C2 Options Exchange (``C2'') rulebooks.\14\ The Exchange further
states that proposed Rule 11.23 is based on MIAX and MIAX Emerald Rule
502.\15\ The Exchange states that the proposed amendment will promote
transparency and maintain clarity in its rules and help preserve its
operational resiliency.\16\
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\14\ See Notice, supra note 3, at 7519-20.
\15\ Id.
\16\ Id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeEDGX-2022-004 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \17\ to determine whether the proposed rule
change should be approved or disapproved. Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposal. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described below, the Commission seeks and
encourages interested persons to provide comments on the proposed rule
change.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\18\ the Commission is
providing notice of the grounds for disapproval under consideration. As
described above, the Exchange's proposed rule states that each Member
shall be subject to a maximum Port Order Rate Threshold, as determined
by the Exchange. As proposed, the rule provides the Exchange with
discretion to set the maximum Port Order Rate Threshold and does not
include a set maximum or range within which the maximum threshold would
be set. Further, although the Exchange describes how the current
maximum Port Order Rate Threshold is applied to new non-administrative
messages received once the threshold is reached,\19\ the Exchange does
not specify its application under the proposed rule change. The
Commission is instituting proceedings to allow for additional analysis
of the proposal's consistency with Section 6(b)(5) of the Act, which
requires that the rules of a national securities exchange be designed,
among other things, to promote just and equitable principles of trade,
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.\20\
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\18\ Id.
\19\ See supra note 12.
\20\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and
[[Page 29777]]
the rules and regulations issued thereunder . . . is on the [SRO] that
proposed the rule change.'' \21\ The description of a proposed rule
change, its purpose and operation, its effect, and a legal analysis of
its consistency with applicable requirements must all be sufficiently
detailed and specific to support an affirmative Commission finding,\22\
and any failure of an SRO to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\23\
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\21\ 17 CFR 201.700(b)(3).
\22\ See id.
\23\ See id.
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The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposal is consistent with the Act.
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with Section 6(b)(5) or any other provision of the Act,
or the rules and regulations thereunder. Although there do not appear
to be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of data, views, and arguments, the
Commission will consider, pursuant to Rule 19b-4 under the Act,\24\ any
request for an opportunity to make an oral presentation.\25\
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\24\ 17 CFR 240.19b-4.
\25\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by June 6, 2022. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
June 21, 2022.
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#5a282f363f77393537373f342e291a293f39743d352c"><span class="__cf_email__" data-cfemail="592b2c353c743a3634343c372d2a192a3c3a773e362f">[email protected]</span></a>. Please include
File No. SR-CboeEDGX-2022-004 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 No. SR-CboeEDGX-2022-004. The 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 No. SR-CboeEDGX-2022-004 and should be submitted
by June 6, 2022. Rebuttal comments should be submitted by June 21,
2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10417 Filed 5-13-22; 8:45 am]
BILLING CODE 8011-01-P
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