Notice2024-09472
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Amend Rule 11.9(c)(6) and Rule 11.13(a)(4)(D) To Permit the Use of BZX Post Only Orders at Prices Below $1.00
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 2, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 86 (Thursday, May 2, 2024)</title>
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[Federal Register Volume 89, Number 86 (Thursday, May 2, 2024)]
[Notices]
[Pages 35866-35868]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-09472]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100038; File No. SR-CboeBZX-2024-006]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove
Proposed Rule Change To Amend Rule 11.9(c)(6) and Rule 11.13(a)(4)(D)
To Permit the Use of BZX Post Only Orders at Prices Below $1.00
April 26, 2024.
I. Introduction
On January 8, 2024, Cboe BZX 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 permit the
use of BZX Post Only Orders at prices below $1.00. The proposed rule
change was published for comment in the Federal Register on January 29,
2024.\3\ On March 8, 2024, 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 did not receive any comments. The Commission
is instituting 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. 99414 (January 23,
2024), 89 FR 5596 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 99698, 89 FR 18694
(March 14, 2024) (designating April 26, 2024, as the date by which
the Commission shall either approve, 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 <SUP>7</SUP>
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\7\ For a more detailed description of the proposed rule change,
including examples, refer to the Notice, supra note 3.
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The Exchange proposes to amend Rule 11.9(c)(6) and Rule
11.13(a)(4)(D)
[[Page 35867]]
to modify the treatment of BZX Post Only Orders priced below a dollar
on the Exchange. BZX Post Only Orders priced at or above $1.00 will
only remove liquidity if the value of the execution when removing
liquidity equals or exceeds the value of such execution if the order
instead posted to the BZX Book and subsequently provided liquidity,
including the applicable fees charged or rebates provided. Currently,
all BZX Post Only Orders priced below $1.00 are automatically treated
as orders that remove liquidity. Under the proposed rule change, BZX
Post Only Orders priced below $1.00 will be treated in the same manner
as BZX Post Only Orders priced at or above $1.00 in that BZX Post Only
Orders priced below $1.00 will only remove liquidity if the value of
the overall execution (taking into account all applicable fees and
rebates) make it economically beneficial for the order to remove
liquidity.
The Exchange also proposes to amend Rule 11.13(a)(4)(D) to permit
Non-Displayed Orders \8\ and orders subject to display-price sliding
(collectively, ``Resting Orders'') which are not executable at their
most aggressive price due to the presence of a contra-side BZX Post
Only Order to be executed at one minimum price variation less
aggressive than the order's most aggressive price.\9\
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\8\ See Rule 11.9(c)(11). A ``Non-Displayed Order'' is a market
or limit order that is not displayed on the Exchange.
\9\ See Securities Exchange Act Release No. 64475 (May 12,
2011), 76 FR 28830 (May 18, 2011), SR-BATS-2011-015 (``Resting Order
Execution Filing''). The Resting Order Execution Filing introduced
an order handling change for certain Non-Displayed Orders and orders
subject to display-price sliding that are not executable at prices
equal to displayed orders on the opposite side of the market (the
``locking price''). The Resting Order Execution Filing permits
Resting Orders priced at or above $1.00 to be executed at one-half
minimum price variation less aggressive than the locking price (for
bids) and one-half minimum price variation more aggressive than the
locking price (for offers), under certain circumstances.
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Currently, Rule 11.13(a)(4)(D) states that, for securities priced
above $1.00, incoming orders that are market orders or limit orders
priced more aggressively than a displayed order on the same side of the
market, the Exchange will execute the incoming order at, in the case of
an incoming sell order, one-half minimum price variation less than the
price of the displayed order, and, in the case of an incoming buy
order, at one-half minimum price variation more than the price of the
displayed order. The Exchange proposes that for securities priced below
$1.00, incoming orders that are market orders or limit orders priced
more aggressively than a displayed order on the same side of the
market, the Exchange will execute the incoming order at, in the case of
an incoming sell order, one minimum price variation less than the price
of the displayed order, and, in the case of an incoming buy order, at
one minimum price variation more than the price of the displayed order.
III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2024-006, and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \10\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. 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
additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
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\10\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\11\ the Commission is
providing notice of the grounds for disapproval under consideration. As
described above, the Exchange proposes to permit the use of BZX Post
Only Orders at prices below $1.00. In addition, as described above, for
securities priced below $1.00, incoming orders that are market orders
or limit orders priced more aggressively than a displayed order on the
same side of the market, the Exchange will execute the incoming order
at one minimum price variation less (more) than the price of the
displayed order for sell (buy) orders.\12\ In contrast, under the
current rule for securities priced above $1.00, the incoming order
would execute at one-half minimum price variation less (more) than the
price of the displayed order for sell (buy) orders.\13\ The Commission
is instituting proceedings to allow for additional analysis of, and
input from commenters with respect to, the proposed rule change's
consistency with the Act, and in particular, Section 6(b)(5) of the
Act, which requires, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, 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.\14\ In addition, Sections 6(b)(5)
and 6(b)(8) of the Act, respectively, prohibit the rules of an exchange
from being designed to permit unfair discrimination between customers,
issuers, brokers, or dealers \15\ or imposing any burden on competition
not necessary or appropriate in furtherance of the purposes of the
Act.\16\
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\11\ Id.
\12\ According to the Exchange, executing an incoming order at
the same price as the price as that of a displayed order on the same
side of the market would violate the time priority of the displayed
order. See Notice supra note 3, 89 FR at 5599; see also Exchange
Rules 11.12(a) and 11.13(a)(4).
\13\ See Exchange Rule 11.13(a)(4)(D).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b)(8).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \17\ 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,\18\ and any failure of a self-
regulatory organization 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.\19\
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\17\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\18\ See id.
\19\ See id.
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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 Sections 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
[[Page 35868]]
Rule 19b-4 under the Act,\20\ any request for an opportunity to make an
oral presentation.\21\
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\20\ 17 CFR 240.19b-4.
\21\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (Jun. 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 May 23, 2024. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
June 6, 2024. The Commission asks that commenters address the
sufficiency of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
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#2b595e474e06484446464e455f586b584e48054c445d"><span class="__cf_email__" data-cfemail="2c5e594049014f4341414942585f6c5f494f024b435a">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-006 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-2024-006. 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 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
a.m. and 3 p.m. Copies of the filing also 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-CboeBZX-2024-006 and should
be submitted by May 23, 2024. Rebuttal comments should be submitted by
June 6, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-09472 Filed 5-1-24; 8:45 am]
BILLING CODE 8011-01-P
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