Notice2025-08114
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.23 Regarding the Closing Auction
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 9, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 89 (Friday, May 9, 2025)</title>
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[Federal Register Volume 90, Number 89 (Friday, May 9, 2025)]
[Notices]
[Pages 19764-19768]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-08114]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102990; File No. SR-CboeBZX-2025-058]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 11.23 Regarding the Closing Auction
May 5, 2025.
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 April 25, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
(i) amend Rule 11.23(c)(1)(A) to change the Market-On-Close time from
3:59 p.m. Eastern Time to 3:55 p.m. Eastern Time; (ii) amend Rule
11.23(c)(1)(B) to provide that Market-On-Close orders cannot be
modified after 3:55 p.m. Eastern Time, and that Limit-On-Close
(``LOC'') and Late-Limit-On-Close (``LLOC'') orders cannot be modified
after 3:59 p.m. Eastern Time; and (iii) amend Rule 11.23(c)(2)(A) to
change the frequency with which the Exchange publishes BZX Closing
Auction information. 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
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
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
(i) amend Rule 11.23(c)(1)(A) to change the Market-On-Close (``MOC'')
\5\ cutoff time from 3:59 p.m. Eastern Time to 3:55 p.m. Eastern Time
(``ET''); \6\ (ii) amend Rule 11.23(c)(1)(B) to provide that MOC orders
cannot be modified after 3:55 p.m., and that Limit-On-Close (``LOC'')
\7\ and Late-Limit-On-Close (``LLOC'') \8\ orders cannot be modified
after 3:59 p.m.; and (iii) amend Rule 11.23(c)(2)(A) to change the
frequency with which the Exchange publishes BZX Closing Auction \9\
information.
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\5\ The term ``Market-On-Close'' or ``MOC'' shall mean a BZX
market order that is designated for execution only in the Closing
Auction or Cboe Market Close. See Rule 11.23(a)(15).
\6\ Hereinafter, all times are in Eastern Time.
\7\ The term ``Limit-On-Close'' or ``LOC'' shall mean a BZX
limit order that is designated for execution only in the Closing
Auction. See Rule 11.23(a)(13).
\8\ The term ``Late-Limit-On-Close'' or ``LLOC'' shall mean a
BZX limit order that is designated for execution only in the Closing
Auction. To the extent a LLOC bid or offer received by the Exchange
has a limit price that is more aggressive than the NBB or NBO, the
price of such bid or offer is adjusted to be equal to the NBB or
NBO, respectively, at the time of receipt by the Exchange. Where the
NBB or NBO becomes more aggressive, the limit price of the LLOC bid
or offer will be adjusted to the more aggressive price, only to the
extent that the more aggressive price is not more aggressive than
the original User entered limit price. The limit price will not be
adjusted to a less aggressive price, unless otherwise provided by
Exchange Rules. If there is no NBB or NBO, the LLOC bid or offer,
respectively, will assume its entered limit price. See Rule
11.23(a)(11).
\9\ See Rule 11.23(c).
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Existing Closing Auction Process
Pursuant to Rule 11.23(c), Closing Auction, Users may submit orders
to the BZX Closing Auction as set forth in Rule 11.23(c)(1)(A)-(C).
Eligible Auction Orders,\10\ as defined in Rule 11.23(a)(8), designated
for the Closing Auction are queued until 4:00 p.m. at which time they
are eligible to be executed in the Closing Auction. Users may submit
LOC and MOC orders until 3:59 p.m., at which point any additional LOC
and MOC orders submitted will be rejected. Users may also submit
Continuous Book \11\ Regular Hours Only (``RHO'') \12\ orders until
immediately prior to the Closing Auction. Users may also submit LLOC
orders between 3:59 p.m. and 4:00 p.m. Eligible Auction Orders
designated for the Closing Auction may not be cancelled between 3:59
p.m. and 4:00 p.m. Orders eligible for execution
[[Page 19765]]
during Regular Trading Hours \13\ may be cancelled at any time prior to
execution, including immediately prior to the Closing Auction.
Additionally, publication of BZX Auction Information begins at 3:00
p.m. and updates every five seconds thereafter. BZX Auction Information
includes the Reference Price,\14\ Indicative Price,\15\ Auction Only
Price,\16\ Reference Buy Shares,\17\ and Reference Sell Shares \18\
associated with the Closing Auction, which is disseminated via
electronic means. The Closing Auction information is available to
subscribers of Cboe PITCH data feeds and Cboe Auction Feed and is also
made available to other market participants by various market data
vendors, maximizing transparency for all investors.
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\10\ The term ``Eligible Auction Order'' shall mean any MOO,
LOO, LLOO, MOC, LOC, or LLOC order that is entered in compliance
with its respective cutoff for an Opening or Closing Auction, any
RHO order prior to the Opening Auction, any limit or market order
not designated to exclusively participate in the Closing Auction
entered during the Quote-Only Period of an IPO Auction subject to
the below restrictions, and any limit or market order not designated
to exclusively participate in the Opening or Closing Auction entered
during the Quote-Only Period of a Halt Auction. See Rule
11.23(a)(8).
\11\ The term ``Continuous Book'' shall mean all orders on the
BZX Book that are not eligible Auction Orders. See Rule 11.23(a)(7).
\12\ Regular Hours Only (``RHO'') means a limit or market order
that is designated for execution only during Regular Trading Hours,
which includes the Opening Auction, the Closing Auction, and IPO/
Halt Auctions for BZX listed securities and the Opening Process for
non-BZX-listed securities (as such terms are defined in Rule 11.23
and 11.24). Any portion of a market RHO order will be cancelled
immediately following any auction in which it is not executed. See
Rule 11.9(b)(7).
\13\ The term ``Regular Trading Hours'' means the time between
9:30 a.m. and 4:00 p.m. Eastern Time. See Rule 1.5(w).
\14\ The term ``Reference Price'' shall mean the price within
the Reference Price Range that maximizes the number of Eligible
Auction Order shares associated with the lesser of the Reference Buy
Shares and the Reference Sell Shares as determined at each price
level within the Reference Price Range, that minimizes the absolute
difference between Reference Buy Shares and Reference Sell Shares,
and minimizes the distance from the Volume Based Tie Breaker. See
Rule 11.23(a)(19).
\15\ The term ``Indicative Price'' shall mean the price at which
the most shares from the Auction Book and the Continuous Book would
match. In the event of a volume based tie at multiple price levels,
the Indicative Price will be the price which results in the minimum
total imbalance. In the event of a volume based tie and a tie in
minimum total imbalance at multiple price levels, the Indicative
Price will be the price closest to the Volume Based Tie Breaker. See
Rule 11.23 (a)(10).
\16\ The term ``Auction Only Price'' shall mean the price at
which the most shares from the Auction Book would match. In the
event of a volume based tie at multiple price levels, the Auction
Only Price will be the price which results in the minimum total
imbalance. In the event of a volume based tie and a tie in minimum
total imbalance at multiple price levels, the Auction Only Price
will be the price closest to the Volume Based Tie Breaker. See Rule
11.23(a)(2).
\17\ The term ``Reference Buy Shares'' shall mean the total
number of shares associated with buy-side Eligible Auction Orders
that are priced equal to or greater than the Reference Price. See
Rule 11.23(a)(18).
\18\ The term ``Reference Sell Shares'' shall mean the total
number of shares associated with sell-side Eligible Auction Orders
that are priced equal to or less than the Reference Price. See Rule
11.23(a)(21).
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Per Rule 11.23(c)(1)(A), Users \19\ may submit LOC and MOC orders
onto the Exchange until 3:59 p.m., after which time any additional LOC
and MOC order submitted by a User will be rejected. Additionally, LLOC
orders may be submitted between 3:59 p.m. and 4:00 p.m. The current
3:59 p.m. MOC cutoff time was proposed \20\ by the Exchange in March
2021 (``2021 Proposal''). In that filing, the Exchange proposed to
extend the MOC and LOC cutoff times from 3:55 p.m. to 3:59 p.m., and
the LLOC cutoff time to 3:59 p.m. to 4:00 p.m. The Exchange reasoned
that ``[a]s the equities markets continue to evolve and become more
efficient and automated . . . the current Closing Auction Cutoff is
overly restrictive to market participants that wish to participate in
the Exchange's Closing Auction and that typically have to tie up on
close interest for five minutes or more at the end of the trading day
to participate in the Closing Auction.'' The Exchange further noted
that the proposed later MOC cutoff time ``would give [Users] greater
control over their on close orders while still leaving enough time at
the end of the trading day for market participants to react to and
offset balances.'' This proposal was approved by the Commission on May
18, 2021 (``Approval Order'').\21\
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\19\ The term ``User'' shall mean any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Rule 11.3. See Rule 1.5(cc).
\20\ Securities Exchange Act Release No. Release No. 34-91479
(April 5, 2021), 86 FR 18580 (April 9, 2021) (SR-CboeBZX-2021-023).
\21\ Securities Exchange Act Release No. Release No. 34-91921
(May 18, 2021), 86 FR 27905 (May 24, 2021) (SR-CboeBZX-2021-023).
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Proposed MOC Cutoff Time
As noted, the Exchange now seeks to move the MOC cutoff time from
3:59 p.m., back to BZX's original MOC cutoff time of 3:55 p.m., after
which time the entry of any new MOCs will be rejected, and MOCs may not
be modified or canceled (as opposed to existing Rule text, providing
only that MOCs may not be cancelled after 3:59 p.m.). In evaluating the
Closing Auction process, the Exchange's various Lead Market Makers
(``LMMs'') \22\ have indicated that moving the MOC cutoff time back
four minutes would provide them with additional time to react to and
offset imbalances created by the late entry (i.e., currently, one
minute before the close) of MOC orders by Users. At this time, the
Exchange does not propose to change the cutoff times for the entry of
LOC and LLOC orders,\23\ and Users will still be able to enter these
orders until 3:59 p.m. (LOC orders), and from 3:59 p.m. to 4:00 p.m.
(LLOC orders). However, in addition to the current rule text that
prohibits the cancelation of LOC and LLOC orders between 3:59 p.m. and
4:00 p.m., the Exchange now seeks to add rule text that also prohibits
Users from modifying LOC or LLOC orders between 3:59 and 4:00 p.m.
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\22\ The term ``LMM'' means a Market Maker registered with the
Exchange for a particular LMM Security that has committed to
maintain Minimum Performance Standards in the LMM Security. See Rule
11.8(e).
\23\ The Exchange notes that it plans to submit a proposal
amending the entry and handling of LOC and LLOC orders at a later
date.
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The difference in cutoff times between MOC and LOC/LLOC orders is
due to the fact that the Exchange's LMM in BZX's corporate listing
believes that a MOC cutoff time further away from market close would
enable both the LMM, and other BZX Users \24\ to better react to and
respond to closing auction imbalances created by the entry of MOC
orders in such close proximity to market close (i.e., 3:59 p.m.). In
contrast, various LMMs for BZX's listed exchange traded products
(``ETPs'') stated they prefer that a 3:59 p.m. cutoff time remain in
effect for at least one of the closing order types--i.e., MOC, LOC, or
LLOC orders. These LMMs noted that moving up the cutoff times for all
closing order types could lead to wider spreads going into market
close, particularly in ETPs where the LMM is performing creation \25\
or redemption \26\ transactions.
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\24\ The Exchange notes that while it did not confer with all
Users, BZX did consult with several of the Exchange's largest
Members, including large institutional trading firms and bulge-
bracket broker-dealers that typically trade heavily into the Closing
Auction and would be most impacted by the proposed changes.
Importantly, these Users confirmed that these proposed changes to
the MOC cutoff time would not cause them any technological,
operational, or risk issues.
\25\ In general, creation involves the buying of all the
underlying securities and wrapping them into the exchange traded
fund structure. See generally ``Investor Bulletin: Exchange-Traded
Funds (ETFs)'', available at: <a href="https://www.sec.gov/investor/alerts/etfs.pdf">https://www.sec.gov/investor/alerts/etfs.pdf</a>.
\26\ In general, redemption is the process whereby the ETF is
`unwrapped' back into the individual securities. See generally
``Investor Bulletin: Exchange-Traded Funds (ETFs)'', available at:
<a href="https://www.sec.gov/investor/alerts/etfs.pdf">https://www.sec.gov/investor/alerts/etfs.pdf</a>.
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As noted further above, the Exchange reasoned in its 2021 Proposal
that a 3:59 p.m. MOC cutoff time struck an appropriate balance of
providing Users with greater control over their Closing Auction orders
for a longer period of time, while also affording Users enough time to
react to and respond to any potential Closing Auction imbalances.
Importantly, the Exchange believes that the proposed 3:55 p.m. MOC
cutoff time is still consistent with the rationale expressed by the
Exchange in its 2021 Proposal. Based on feedback from LMMs and other
Exchange Users, as well as its four years of experience in operating
the Closing Auction process with a 3:59 p.m. MOC cutoff time, the
Exchange now believes that 3:55 p.m. MOC cutoff time is better suited
to strike the appropriate balance between enabling Users to control
their closing order flow for a longer period of time, and providing
Users with ample time to react to and respond to any potential
[[Page 19766]]
Closing Auction imbalances created by MOC orders. Specifically, LMMs in
BZX-listed ETPs and other BZX Users can still enter LOC orders until
3:59 p.m. and LLOC orders between 3:59 p.m. to 4:00 p.m., as well as
Continuous Book RHO orders, which will continue to be accepted
immediately prior to the Closing Auction.
Notably, the use of LOC and LLOC orders, rather than MOC orders,
may be more beneficial for LMMs and other Exchange Users, as LOC and
LLOC orders have a limit price and therefore have a greater impact on
price formation than unpriced MOC orders. Moreover, as previously
noted, the Exchange discussed these changes with its LMMs and other BZX
Users and confirmed that changing the MOC cutoff would not present them
with any issues with maintaining a market in their designated ETPs.
Furthermore, in today's marketplace each of BZX, the New York Stock
Exchange (``NYSE''), NYSE Arca, and Nasdaq Stock Market LLC
(``Nasdaq''), as well as various off-exchange venues, maintain
different MOC cutoff times. Therefore, the Exchange believes that
market participants are well-accustomed to such variation and should
not be unduly burdened by BZX's new MOC cutoff time. Indeed, BZX Users
are likely well accustomed to a 3:55 MOC cutoff time, as Nasdaq \27\
currently has in place a 3:55 MOC cutoff time, making it less likely
that the proposed amendment will provide Users with any new or novel
issues.
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\27\ Securities Exchange Act Release No. 34-84454 (October 19,
2018), 83 FR 53923 (October 25, 2018) (SR-Nasdaq-2018-068) (Order
Approving Proposed Rule Change, as Modified by Amendment No. 1, to
Extend the Cutoff Times for Accepting On Close Orders Entered for
Participation in the Nasdaq Closing Cross and to Make Related
Changes)(The Commission approved a rule change by Nasdaq to move the
cut-off times for the entry of MOC and LOC orders from 3:50 p.m. to
3:55 p.m.).
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From a technical perspective, the Exchange notes that the System
\28\ handles the cancellation or modification of MOC orders in the same
manner, treating the modification of an MOC order as a cancellation of
such order. The Exchange believes that adding language to the rule text
regarding modifications will make clearer to Members that even
modifications to their MOC orders past 3:55 p.m., or their LOC and LLOC
orders past 3:59 p.m., will also not be permitted. Notably, these
proposed amendments will not alter the manner in which Users modify
their MOC, LOC, or LLOC orders on the Exchange. As such, this amendment
will not raise any new or novel issues for BZX Users. Together, the
prohibition of the cancellation and modification of MOC, LOC, and LLOC
orders past 3:55 p.m. and 3:59 p.m., respectively, will help to
mitigate the potential for large imbalances being created near (for MOC
orders) or immediately prior to the Closing Auction (for LOC and LLOC
orders) due to the cancellation or modification of such orders.
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\28\ The term ``System'' shall mean 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 Rule 1.5(aa).
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Proposed Dissemination of BZX Auction Information
To increase transparency leading up to market close, the Exchange
proposes to amend Rule 11.23(c)(2)(A). The proposed amendment will
increase the frequency with which the Exchange disseminates Closing
Auction information. Specifically, the Exchange will continue to
disseminate Closing Auction information every five seconds from 3:00
p.m. to 3:59 p.m., but proposes to increase the frequency of
dissemination of Closing Auction information to every one second from
3:59 p.m. to 4:00 p.m.
While MOCs will be rejected after 3:55 p.m. and can no longer be
cancelled or modified after 3:55 p.m., the LOC cutoff will remain 3:59
p.m., and Users will still be able to enter LLOCs between 3:59 p.m. and
4:00 p.m., as well as enter/cancel Continuous Book \29\ orders
immediately prior to the close, each of which can impact the Closing
Auction price. In this regard, the proposed dissemination of Closing
Auction information will benefit LMMs and other Users that may be
entering LOC and LLOC orders, as well as Continuous Book orders just
prior to the Closing Auction, by providing them more imbalance
information heading into the close more frequently and enabling them to
better of assess what a potential imbalance may have on a security's
Indicative Price during the last minute of the trading day and allow
them to react accordingly. In this regard, the Exchange believes that
the increased frequency with which Closing Auction information is
disseminated will thereby lead to an even more efficient and orderly
Closing Auction process.
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\29\ The term ``Continuous Book'' shall mean all orders on the
BZX Book that are not Eligible Auction Orders. See Rule 11.23(a)(7).
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The Exchange also believes that the dissemination of Closing
Auction information every one second between 3:59 p.m. and 4:00 p.m.
will not present Users with any new or novel issues, as it is likely
that Users are already well accustomed to ingesting information with
such frequency, as Nasdaq \30\ currently disseminates its closing
auction information beginning at 3:55 p.m., every one second. Moreover,
given the high-speed technology \31\ utilized by most market
participants today, the updated frequency of the Closing Auction
information should not present Users with any technological issues or
constraints.
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\30\ See Nasdaq Rule 4754(b)(1)(B), Nasdaq Closing Cross
(``Beginning at 3:55 p.m., or five minutes prior to the early
closing time on a day when Nasdaq closes early, Nasdaq shall
disseminate by electronic means an Order Imbalance Indicator every
second until market close.''); see also Securities Exchange Act
Release No. 34-84454 (October 19, 2018), 83 FR 53923 (October 25,
2018) (SR-Nasdaq-2018-068) (Order Approving Proposed Rule Change, as
Modified by Amendment No. 1, to Extend the Cutoff Times for
Accepting On Close Orders Entered for Participation in the Nasdaq
Closing Cross and to Make Related Changes)(The Commission approved a
proposal by Nasdaq to beginning disseminating its Order Imbalance
Indicator every one second, beginning at 3:55 p.m.).
\31\ The Exchange notes that today's equities markets involve
the widespread use of automated trading algorithms and routing
solutions, as well as market connectivity options with speeds often
measured in microseconds. See generally ``Staff Report on
Algorithmic Trading in U.S. Capital Markets'' (August 5, 2020),
available at <a href="https://www.sec.gov/tm/reports-and-publications/special-studies/algo_t_report_2020">https://www.sec.gov/tm/reports-and-publications/special-studies/algo_t_report_2020</a> (``Algorithmic Trading Report'')
(``Over the past decade, the `manual handling of institutional
orders is increasingly rare and has been replaced by sophisticated
institutional order execution algorithms and smart order routing
systems.'') (``The secondary market for U.S.-listed equity
securities that has developed within this structure is now primarily
automated. The process of trading has changed dramatically primarily
as a result of developments in technologies for generating, routing,
and executing orders, as well as by the requirement imposed by law
and regulation.'') (``Modern equity markets are connected in part by
the data flowing between market centers. An enormous volume of data
is available to market participants. In recent years, there has been
an exponential growth in the amount of market data available, the
speed with which it is disseminated, and the computer power used to
analyze and react to price movements.'').
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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.\32\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \33\ 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
[[Page 19767]]
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) \34\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
\34\ Id.
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In particular, the Exchange believes that moving the MOC cutoff
time to 3:55 p.m. will help to facilitate transactions in securities,
and remove impediments to and perfect the mechanism of a free and open
market and a national market system, by providing the Exchange's
listing LMMs and other Users with additional time to react to and
respond to any potential closing auction imbalances resulting from the
entry of MOC orders. In turn, mitigating imbalances will help to ensure
a smoother Closing Auction process. While market participants today are
generally well equipped with high-speed trading technologies and can
enter orders in sub-second latencies, the addition of four extra
minutes to react to and respond to closing auction imbalances will only
make it more feasible for all market participants to do so.
Importantly, in speaking with the Exchange's listing LMMs and
various non-LMM Users \35\ they did not object to the amendment of the
MOC cutoff time, as they would still have the ability to enter LOC
orders until 3:59 p.m., LLOC orders between 3:59 p.m. and 4:00 p.m.,
and Continuous Book orders until immediately prior to the Closing
Auction. Together, these orders provide LMMs and other Users with
useful tools in helping them maintain markets in their securities.
Notably, the use of LOC and LLOC orders, rather than MOC orders, may be
more beneficial for LMMs and other Exchange Users, as LOC and LLOC
orders have a limit price and therefore have a greater impact on price
formation than unpriced MOC orders. Together, the cutoff times for MOCs
and LOC/LLOCs will contribute to a more efficient Closing Auction
process and more orderly price formation approaching the market close,
thereby protecting investors and the public interest. Furthermore, the
proposed MOC cutoff time is identical to that used by the Nasdaq for
its closing auction.\36\ In this regard, the proposed MOC cutoff time
should not present BZX Users with any new or novel issues, and make it
less likely that Users will need to make drastic system changes in
order to comply with the new MOC cutoff time. Moreover, as noted
further above, prior to extending the MOC cutoff time to 3:59 p.m., BZX
utilized a 3:55 p.m. MOC cutoff time. Therefore, the Exchange believes
Users are familiar with trading on BZX with a 3:55 MOC cutoff time and
should not encounter any new or novel issues upon approval of this
proposal.
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\35\ Supra note 24.
\36\ Supra note 29.
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From a technical perspective, the Exchange handles the cancellation
or modification of MOC orders in the same manner, treating the
modification of an MOC order as a cancellation of such order. The
Exchange believes that adding language to the rule text regarding
modifications will make clearer to Members that even modifications to
their MOC orders past 3:55 p.m., or their LOC and LLOC orders post 3:59
p.m., will also not be permitted. Importantly, this proposed amendment
will not alter how Users interact with the Exchange or how they modify
their MOC, LOC, LLOC, orders on the Exchange. As such, this amendment
will not raise any new or novel issues for BZX Users.
The Exchange also believes that updating the frequency of the
dissemination of Closing Auction information between 3:59 p.m. to 4:00
p.m., from every five seconds to every one second, will help to
facilitate transactions in securities, and remove impediments to and
perfect the mechanism of a free and open market and a national market
system, as well as contribute to the protection of investors and the
public interest. By providing both LMMs and other market participants
with more timely Closing Auction information--i.e., every one second
rather than every five seconds--market participants, including LMMs in
BZX-listed securities, will be better able to react to and respond to
imbalances heading into the close. While MOCs and LOCs will be cut off
at 3:55 p.m. and 3:59 p.m., respectively, market participants can still
enter or cancel Continuous Book orders, or enter LLOC orders, which may
impact the indicative price heading into market close. By having this
information with increased frequency, all Users can better react to and
respond to imbalances by entering additional Continuous Book orders or
LLOC orders in efforts to offset such imbalances, which should in turn,
lead to an even more efficient and orderly Closing Auction process
which benefits all Exchange Users.
In today's high-speed marketplace, receiving information every one
second is extremely valuable, and increases the likelihood that market
participants or an LMM can take action to address any closing auction
imbalances. The Exchange also notes that its proposed dissemination of
Closing Auction information is essentially identical to what Users are
accustomed to today. Specifically, Users are already familiar with
ingesting Closing Auction information, updated every five seconds,
between 3:00 p.m. and 4:00 p.m. Going forward, they will be provided
with more information between 3:59 p.m. and 4:00 p.m., which they can
choose to utilize or not. Given the technological capabilities of
today's market participants, this should not present Users with any new
or novel issues. Similarly, the technological capabilities of today's
market participants should also make ingesting Closing Auction
information every one second (instead of the previous five seconds)
from 3:59 p.m. to 4:00 p.m. quite feasible. Moreover, market
participants likely already possess this capability today, as Nasdaq
also disseminates its closing cross information in one second
intervals.\37\
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\37\ Supra note 29.
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Altogether, the Exchange is simply moving its MOC cutoff time from
3:59 p.m. to 3:55 p.m., and disseminating updated Closing Auction
information at the same duration at it does today, aside from 3:59 p.m.
to 4:00 p.m. where information will be provided more frequently. In all
other aspects, the Closing Auction will continue to operate identical
to how it does so today, but with a 3:55 p.m. MOC cutoff time. Users of
the BZX Closing Auction will not have to consider any other changes
aside from needing to send their MOC orders to BZX four minutes
earlier, and ingesting Closing Auction information more frequently
during the last minute of the trading day. Furthermore, as noted above,
Nasdaq's closing cross is similar in construct to the Exchange's
current proposal. Specifically, Nasdaq accepts MOC orders up until 3:55
p.m. MOC cutoff,\38\ accepts LOC orders up until 3:58 p.m., and accepts
Imbalance Orders only up until 4:00 p.m. As such, the Exchange believes
that its Users are well versed in trading into the close with a 3:55
p.m. MOC cutoff time.
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\38\ Supra note 27.
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The Exchange's proposals are also not unfairly discriminatory. The
proposed MOC cutoff time applies to all Users, regardless of their
size, type, or trading volume. Prior to submitting this proposal, the
Exchange talked with Exchange Members, LMMs, and issuers of BZX-listed
ETPs, and did not receive feedback that moving the MOC cutoff
[[Page 19768]]
time to 3:55 p.m. was undesirable or that doing so would cause them
undue burden. Market participants are still free to trade past 3:55
p.m. and into the close through the entry of regular Continuous Book
orders, LOC orders, or LLOC orders. MOC orders are not the singular
manner in which to participate in the BZX closing auction. Indeed, as
noted above, LOC and LLOC orders, and even some Continuous Book orders,
are entered with limit prices, which have a greater impact on price
formation than unpriced MOC orders, which are merely recipients of
price formation.
Furthermore, the proposal to update the frequency with which
Closing Auction data is disseminated between 3:59 p.m. and 4:00 p.m.,
also applies to all Users equally, regardless of their size, type, or
trading volume. Each User that wishes to ingest Closing Auction
information may do so, and all Users will receive the information in
the same frequency via electronic means. If a User chooses not to
receive the BZX Closing Auction information, the User will simply not
receive the information on an updated frequency.
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. Rather, the Exchange
believes that its proposed changes will help to foster competition by
further improving BZX's well-functioning Closing Auction process,
making BZX a more attractive venue for closing order types. By moving
up the time at which MOCs are no longer accepted, and by amending the
modification cutoff time for MOC, LOC, and LLOC orders, the Exchange
believes that the size of any potential Closing Auction imbalance will
be reduced as market participants will be unable to send in MOC orders
in such close proximity to 4:00 p.m. As such, market participants will
have more time to react to imbalances by entering contra-side orders,
thereby helping to contribute to a more efficient Closing Auction
process. Additionally, the proposed increase in frequency of the
dissemination of Closing Auction information from 3:59 to 4:00 p.m.
will better enable market participants to react to and respond to the
impact that any entry/cancellation of Continuous Book orders or the
entry of LOC or LLOC orders may have on a security's indicative price,
and related imbalances, and enable them to trade accordingly. In this
regard, this proposed change will help to foster competition by
incentivizing market participants to enter their closing orders onto
BZX.
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
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A) of the Act \39\ and Rule 19b-4(f)(6) \40\ thereunder.
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \41\ and Rule 19b-
4(f)(6) thereunder.\42\
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\39\ 15 U.S.C. 78s(b)(3)(A).
\40\ 17 CFR 240.19b-4(f)(6).
\41\ 15 U.S.C. 78s(b)(3)(A).
\42\ 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, 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.
See id. The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \43\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\43\ 15 U.S.C. 78s(b)(2)(B).
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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. 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#7604031a135b15191b1b131802053605131558111900"><span class="__cf_email__" data-cfemail="2f5d5a434a024c4042424a415b5c6f5c4a4c01484059">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-058 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-2025-058. 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-2025-058 and should
be submitted on or before May 30, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
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\44\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-08114 Filed 5-8-25; 8:45 am]
BILLING CODE 8011-01-P
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