Notice2025-15625
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Rules Related to the Submission of Bids and Offers for Certain Complex Strategies for Execution Using Bulk Message Functionality
Primary source
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Published
August 18, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 157 (Monday, August 18, 2025)</title>
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[Federal Register Volume 90, Number 157 (Monday, August 18, 2025)]
[Notices]
[Pages 40093-40099]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-15625]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103701; File No. SR-CBOE-2025-059]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Rules Related to the Submission of Bids and Offers for Certain
Complex Strategies for Execution Using Bulk Message Functionality
August 13, 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 August 12, 2025, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') 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
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.
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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 its Rules related to the submission of bids and offers for
certain complex strategies for execution using bulk message
functionality. 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>) and at the Exchange's Office of the
Secretary.
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 amend its Rules regarding the submission
of bids and offers for certain complex strategies using bulk message
functionality. The primary purpose of bulk message functionality is to
encourage market-maker quoting on the Exchange.\3\ The Exchange's bulk
message functionality permits Market-Makers to submit a single
electronic message to the Exchange, in which message the Market-Maker
may enter, modify, or cancel up to an Exchange-specified number of bids
and offers.\4\ Bulk messages are submitted through bulk ports, as set
forth in Rule 5.5(c)(3). The System handles a bid or offer submitted in
a bulk message in the same manner as it handles a bid or offer
submitted in an order message, unless the Rules
[[Page 40094]]
otherwise specify. While the definition in the rules for bulk messages
(i.e., quotes) applies to both simple and complex bids and offers, the
Exchange currently offers bulk message functionality only for simple
bids and offers. However, the Exchange plans to expand the use of this
functionality to complex bids and offers for Exchange-designated
strategies,\5\ and this filing amends certain rules in connection with
this planned expansion of functionality.
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\3\ See Securities Exchange Act Release No. 86374 (July 15,
2019), 84 FR 34963 (July 19, 2019) (SR-CBOE-2019-033). The Exchange
notes that a ``bulk message'' is often referred to as a ``quote'' or
``quote message,'' while an ``order'' and ``order message'' refer to
an order (even if submitted by a Market-Maker, which would be
classified as a quote pursuant to the definition of quote in Rule
1.1). This is relevant for purposes of the reporting exemption for
options market-maker quote in the CAT NMS Plan (``CAT''). See CAT
Section 6.4(d)(iii); see also CAT FAQ K10 (which provides that each
options exchange determines which messages submitted by options
market-makers are subject to the exemption) and Cboe Options
Regulatory Circular 20-044 (July 7, 2020) (which requires Market-
Maker bulk message quotes include quote sent time in accordance with
the exemption and notes that other messages, such as order and
auction response messages, sent by Market-Makers are not subject to
the exemption).
\4\ See Rule 1.1 (definition of bulk message). The proposed rule
change amends the definition of bulk message in Rule 1.1 to correct
a cross-reference. The proposed rule change amends Rule 5.5(c)(3)(A)
to clarify that bulk messages may be submitted by Market-Makers
only, which is consistent with the definition of bulk message that
states a bulk message must have an M Capacity (which, per the
definition of Capacity in Rule 1.1, is the code corresponding to the
account of a Market-Maker).
\5\ Pursuant to Rule 5.33(b)(2)(A), the Exchange may designate
complex strategies in which a complex order with Capacity M or N may
enter the COB. These designated complex strategies (which the
Exchange announces pursuant to Rule 1.5) are the complex strategies
in which Market-Makers may submit complex bulk messages.
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In 2024, the Exchange amended its Rules to encourage increased,
consolidated liquidity in complex strategies on the complex order book
(``COB'').\6\ Specifically, Rule 5.33(a) permits the Exchange to create
new complex strategies to allow for the consolidation of liquidity
within a single complex strategy that may otherwise be spread across
multiple customer-created complex strategies expressing similar
exposure profiles. Additionally Rule 5.33(b)(2)(A) permits complex
orders with a Market-Maker capacity (M or N) to enter complex orders to
rest in the COB in Exchange-designated complex strategies to support
this consolidation of liquidity. The proposed rule change enhances
current functionality to further support the consolidation of liquidity
within certain complex strategies rather than have liquidity spread
across complex strategies with the same or similar exposure risk
profiles. Specifically, it will permit Market-Makers to use the same
bulk message functionality they generally use to provide liquidity in
simple markets to do so in complex markets (rather than only be able to
use order message functionality) in the complex strategies designated
by the Exchange pursuant to Rule 5.33(b)(2)(A). As noted above, bulk
message functionality will permit Market-Makers to submit new or
updated bids and offers for multiple complex strategies in a single
message. This functionality is consistent with Market-Makers' quoting
systems that update quotes in response to market conditions and will
permit Market-Makers to update quotes in more complex strategies on a
regular basis. Currently, Market-Makers need to submit an individual
order for each complex strategy in which they want to submit a bid or
offer. The Exchange believes providing Market-Makers with this
functionality for Exchange-designated strategies will encourage Market-
Makers to add more liquidity into these strategies.\7\
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\6\ See Securities Exchange Act Release No. 100081 (May 8,
2024), 89 FR 42007 (May 14, 2024) (SR-CBOE-2024-015). The proposed
rule change adds to the definition of complex strategy in Rule
5.33(a) that Exchange-designated complex strategies are available
for trading during RTH only, as the Exchange does not publicize
which strategies will be available until prior to the RTH trading
session. If a User wanted to trade in that complex strategy during
other trading sessions, it may continue to do so by submitting that
complex instrument creation request as it would for any other
complex strategy during those trading sessions.
\7\ Proposed Rule 5.5(c)(3)(A)(ii) states that complex quotes
may be submitted on in Exchange-designated complex strategies.
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The proposed rule change first adopts Rule 5.5(c)(3)(A)(ii) to
impose similar requirements on bulk messages comprised of complex bids
and offers to the requirements imposed on quote messages comprised of
simple bids and offers.\8\ Specifically, proposed Rule 5.5(c)(3)(A)(ii)
provides that bulk messages comprised of complex bids and offers must
have a Time-in-Force of Day.\9\ This is consistent with the purpose of
bulk ports, including for Exchange-designated strategies, which are
intended to be used for liquidity provision on the Exchange
(particularly Market-Makers).\10\ In turn, the Exchange believes it is
unnecessary to allow orders entered via bulk ports to be able to last
beyond the trading day on which they were entered. This is consistent
with why bulk messages were initially limited to a Time-in-Force of Day
when Cboe migrated its prior quoting functionality to its new
technology in 2019. As noted when the Exchange adopted quote
functionality, the Exchange understands it to be common practice in the
industry for Market-Makers to enter new quotes at the beginning of a
trading day based on then-current market conditions.\11\
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\8\ The proposed rule change makes a nonsubstantive change to
add Rule 5.5(c)(3)(A)(i) to contain the current provisions related
to simple quotes (including adding introductory language to make
clear that provision applies to bulk messages comprised of simple
bids and offers changing current subparagraphs (i), (ii), and (iii)
to proposed subparagraphs (a), (b), and (c)).
\9\ Rule 5.6(d) defines a ``Day'' order as an order or quote
that, if not executed, expires at the Regular Trading Hours
(``RTH'') market close for all RTH Only orders and expires at the
Curb market close for all All Sessions and RTH and Curb orders. The
definition already provides that Market-Makers may designate bulk
messages as Day. The Exchange proposes to correct a cross-reference
in the introductory language in Rule 5.6(d), which currently points
to Rule 5.6(j) regarding bulk message Time-in-Force restrictions,
but such paragraph does not exist, as those restrictions are in Rule
5.5(c)(3).
\10\ The Exchange notes it currently has authority to determine
which Times-in-Force are available for complex orders under Rule
5.33(b)(1).
\11\ See Securities Exchange Act Release No. 86374 (July 15,
2019), 84 FR 34963, 34967 (July 19, 2019) (SR-CBOE-2019-033).
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Unlike simple bulk messages, the Exchange does not propose to
permit complex bulk messages to be designated as Immediate-or-Cancel
(``IOC'').\12\ The Exchange previously amended Rules 5.5(c) and 5.6(d)
to permit appointed Market-Makers to designate bulk messages as IOC, as
the Exchange understood that some appointed Market-Makers updated bulk
message bids and offers with the specific purpose of removing interest
in the simple book.\13\ As noted when the Exchange adopted that
functionality, in addition to providing liquidity via continuous quotes
in Market-Makers' appointed classes, a Market-Maker is also required to
maintain active markets in its appointed classes and update quotations
in response to changed market conditions in its appointed classes.\14\
The Exchange is initially expanding bulk message functionality for
complex strategies to encourage the provision of liquidity on the COB
for Exchange-designated strategies, including to provide competitive
markets to customers for these strategies, and thus initially does not
desire to make the IOC designation available to complex bulk messages,
the purpose of which is to remove liquidity.\15\ As there are no
appointments with respect to complex strategies and thus no quoting
obligations for Market-Makers with respect to complex strategies, the
Exchange does not believe it is necessary at this time to permit IOC
complex quotes, given that part of the
[[Page 40095]]
Exchange's purpose of providing that functionality for simple quotes to
Market-Makers was to assist them with satisfying their quoting
obligations.
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\12\ See proposed Rule 5.6(d) (definition of IOC).
\13\ See Securities Exchange Act Release No. 92988 (September
15, 2021), 86 FR 52521 (September 21, 2021) (SR-CBOE-2021-053). The
Exchange proposes to amend current Rule 5.5(c)(3)(A)(i) (proposed
Rule 5.5(c)(3)(A)(i)(a)) and the definition of IOC in Rule 5.6(d) to
clarify that the IOC designation on simple quotes is permissible
only for a Market-Maker with an appointment in a class. As noted
above, this is consistent with the rule filing in which that
proposed rule change was adopted. The Exchange inadvertently did not
make the distinction in the rule text.
\14\ Id. at 52521.
\15\ Permitting only appointed Market-Makers to submit IOC
simple quotes is also consistent with current Rule 5.5(c)(3)(B),
which requires Market-Makers to designate simple orders submitted
through bulk ports as Post Only or Book Only, while all other Users
may submit only Post Only orders through bulk ports (and thus may
not remove liquidity). As further discussed below, complex orders
submitted through bulk ports must be Post Only (as is the case for
Users other than appointed Market-Makers for simple orders), and
thus the proposed rule change is consistent with the current
restrictions on removing liquidity through bulk ports.
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Similarly, proposed Rule 5.5(c)(3)(A)(ii)(b) requires that a bulk
message comprised of bids and offers for complex strategies be
designated as Post Only.\16\ The purpose of a Post Only instruction is
to add displayed liquidity to the book. Therefore, restricting complex
bulk messages to Post Only is consistent with the purpose of the
proposed expansion of bulk message functionality to complex bids and
offers. This is consistent with current bulk message functionality for
simple bids and offers, which requires bulk messages submitted by non-
appointed Market-Makers to be Post Only. Market-Maker appointments, and
thus quoting obligations with respect to those appointments, do not
apply to complex strategies.\17\ Therefore, with respect to complex
bulk messages, the concept of appointed Market-Makers is not
applicable, and thus all Market-Makers are equivalent to non-appointed
Market-Makers with respect to complex bulk messages. One of the primary
reasons the Exchange provides appointed Market-Makers with the ability
to also designate bulk messages for simple bids and offers as Book Only
(which may remove liquidity) \18\ is to provide them with additional
tools to meet their quoting obligations in a manner they deem
appropriate. As noted above, quoting obligations do not apply to
complex strategies, so that purpose does not exist with respect to
complex bulk messages. As the Exchange's primary purpose of expanding
bulk message functionality to complex orders is to enhance liquidity
provision within Exchange-designated complex strategies and Market-
Makers will not be subject to quoting obligations with respect to these
strategies, the Exchange believes limiting complex bulk messages to
Post Only is appropriate. The Exchange notes users may continue submit
complex orders with the Book Only instruction, or any other instruction
the Exchange permits pursuant to Rule 5.33(b), through other ports in
the same manner as they do today.
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\16\ Rule 5.6(c) defines ``Post Only'' as an order the System
ranks and executes pursuant to Rule 5.32 (subject to the Price
Adjust process), as applicable, except the order or quote may not
remove liquidity from the book or route away to another exchange.
\17\ See Rule 5.33, Interpretation and Policy .01. The Exchange
proposes a clarifying change to Rule 5.33, Interpretation and Policy
.01 to note that Interpretation and Policy. 02 does include an
exception to the statement made in Interpretation and Policy .01
that the Exchange does not take into account a Market-Maker's
complex orders entered in its appointed classes when determining
whether a Market-Maker meets its quoting obligations pursuant to
Rule 5.52. While that is true, pursuant to Rule 5.33, Interpretation
and Policy .02, there is one exception to this, which is that the
Exchange does consider a Market-Maker's executions in complex
strategies within its appointed classes to determine whether the
Market-Maker exceeds electronic volume thresholds pursuant to Rule
5.52(d)(1) and (d)(2) (which in turn determines what that Market-
Maker's quoting obligations may be). This has no impact on a Market-
Maker's quoting obligations and is merely adding clarity to the
Rules. Additionally, the Exchange proposes to add the phrase ``and
quotes'' to Rule 5.33, Interpretation and Policy .02. This is a
nonsubstantive clarification. Given the interpretation and policy
relates specific to Market-Makers, and the term quote (with respect
to electronic trading) means a firm bid or offer a Market-Maker
submits electronically in an order or bulk message (see definition
of ``quote'' in Rule 1.1), this Interpretation and Policy already
applies to quotes, and the proposed rule change merely provides
additional transparency and clarity within the rules. Similarly, the
proposed rule change adds a nonsubstantive clarification to the
definition of ``complex order'' in Rule 1.1 to reference quotes in
addition to orders. Market-Makers may currently submit complex
orders, which by definition would be considered quotes.
\18\ See Rule 5.6(c) (definition of Book Only).
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Proposed Rule 5.5(c)(3)(A)(ii)(c) permits Market-Makers to apply
the same match trade prevention (``MTP'') modifiers to complex bulk
messages that are permitted for simple bulk messages. Specifically,
Market-Makers may establish a default MTP modifier of MTP Cancel Newest
(``MCN''), MTP Cancel Oldest (``MCO''), or MTP Cancel Both
(``MCB''),\19\ and a default value of attributable or non-attributable,
for a bulk port, each of which applies to all bulk messages submitted
to the Exchange through that bulk port.\20\ Allowing the same three MTP
modifiers for complex bulk messages that are available for simple bulk
messages will provide Market-Makers with additional control over the
circumstances in which their bulk message bids and offers (and resting
orders (including bulk message bids and offers)) will interact with
each other. The Exchange does not believe there is demand by Market-
Makers for the other MTP modifiers for bulk messages. The Exchange
notes all Market-Makers may continue to apply all MTP modifiers to
complex orders submitted through a bulk port or any other type of port.
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\19\ See Rule 5.6(c) for definitions of MTP modifiers.
\20\ See proposed Rule 5.5(c)(3)(A)(ii)(c).
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As is the case for simple orders, all Users \21\ (not just Market-
Makers, as is the case for quotes) may submit single complex orders
through a bulk port \22\ in the same manner as users may currently
submit complex orders to the Exchange through any other type of
port.\23\ Currently, with respect to simple orders submitted through
bulk ports, a Market-Maker with an appointment in a class must
designate an order for that class as Post Only or Book Only, and non-
appointed Market-Makers must designate a bulk message as Post Only
(both of which are consistent with the restrictions for simple quotes,
as discussed above). The Exchange believes it is appropriate for orders
submitted through bulk ports to be subject to the same restrictions on
adding and removing liquidity as bulk messages submitted through bulk
ports, so that orders submitted through bulk ports do not have an
advantage over bulk messages, and vice versa.\24\ To that end, the
proposed rule change amends current Rule 5.6(c)(3)(B) (proposed Rule
5.6(c)(3)(B)(i)) to provide that a User must designate an order as Day
or GTD (the date of which must be for the date on which the order was
entered) \25\ to be consistent with the requirement that a simple quote
must be designated as Day (except for appointed Market-Makers who may
also designate a simple quote as IOC). Such a GTD order is practically
equivalent to a Day order, as both would be available for execution on
that specific date only (and until a specific time with respect to a
GTD). Similarly, proposed Rule 5.6(c)(3)(B)(ii) requires a User to
designate a complex order submitted through a bulk port as Day or GTD
(the date of which must be for the date on which the order was
entered). This restriction is consistent with the purpose of bulk
ports, which, as discussed above, is to encourage liquidity provision,
which generally involves providing bids and offers reflecting then-
current market conditions. The Day and GTD (the date
[[Page 40096]]
of which must be for the date on which the order was entered)
restriction for orders submitted through bulk ports supports that and
reflects current industry practice in which liquidity providers submit
new bids and offers at the beginning of a trading day (as discussed
above).
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\21\ The term ``User'' means any Trading Permit Holder (``TPH'')
or Sponsored User (see Rule 3.60) authorized to obtain access to the
Exchange's trading system. See Rule 1.1 (definition of User).
\22\ The proposed rule change makes a conforming change to Rule
5.33(b)(4) to provide that Users may submit complex orders through
bulk ports, subject to the restrictions set forth in proposed Rule
5.5(c)(3) (as discussed above). Users may continue to submit complex
orders through any other port as they do today.
\23\ The Exchange proposes to delete the language ``in the same
manner as Users may submit orders to the Exchange through any other
type of port, including designated with any Order Instruction and
any Time-in-Force in Rule 5.30.'' This is not a substantive change,
as it is still true. However, the Exchange believes simplifying the
provision to solely reference the exceptions to the submission of
orders (as is done for quotes (bulk messages) in proposed Rule
5.5(c)(3)(A)) simplifies the rule text.
\24\ See Securities Exchange Act Release No. 86374 (July 15,
2019), 84 FR 34963, 34968 (July 19, 2019) (SR-CBOE-2019-033).
\25\ A ``Good-til-Date'' or ``GTD'' order is an order, if after
entry into the System is not fully executed, the order (or
unexecuted portion) remains available for potential display or
execution (with the same timestamp) until a date and time specified
by the entering User unless cancelled by that User. See Rule 5.6(d)
(definition of GTD).
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Additionally, the proposed rule change requires a complex order
submitted through a bulk port to be designated as Post Only, as is the
case for simple orders submitted by all Users other than appointed
Market-Makers.\26\ The Exchange believes this will encourage users that
may not have quoting systems to provide liquidity to the Exchange. This
is consistent with simple orders that users other than appointed
Market-Makers may submit through bulk ports (as discussed above, the
distinction for appointed Market-Makers is unnecessary for complex bulk
messages and orders submitted through bulk ports). Because there are no
time-in-force restrictions on orders submitted through bulk ports,
users may allow their liquidity to rest on the Exchange for multiple
trading days, if users so choose. This will also provide users with
additional control over the orders they use to provide liquidity to the
Exchange through bulk ports. The Exchange believes it is appropriate
for orders submitted through bulk ports to be subject to the same
restrictions on adding and removing liquidity as bulk messages
submitted through bulk ports, so that orders submitted through bulk
ports do not have an advantage over bulk messages, and vice versa. As
noted above, users may continue submit complex orders with the Book
Only, or any other instruction the Exchange permits pursuant to Rule
5.33(b), through other ports in the same manner as they do today. As
noted above, the requirements set forth in proposed Rule
5.5(c)(3)(B)(ii) impose the same restrictions on adding and removing
liquidity using complex orders submitted through bulk ports as complex
bulk messages, so that orders submitted through bulk ports do not have
an advantage over bulk messages, and vice versa.\27\
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\26\ See proposed Rule 5.5(c)(3)(B)(ii). The proposed rule
change creates subparagraphs (i) and (ii) within Rule 5.5(c)(3)(B)
to distinguish between simple and complex orders submitted through a
bulk port and adds introductory language to proposed subparagraph
(i) to indicate that subparagraph relates to simple orders.
\27\ See Securities Exchange Act Release No. 86374 (July 15,
2019), 84 FR 34963, 34968 (July 19, 2019) (SR-CBOE-2019-033).
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Users will also be able to submit auction responses for complex
order auctions (such as COAs) in the same manner as they may currently
submit auction responses to the Exchange through any other type of
port.\28\ The proposed rule change merely adds the ability for Users
that decide to obtain bulk ports to submit auction responses through
that port, rather than maintain a separate port for that purpose. This
is consistent with the purpose of bulk ports, as auction responses are
a form of liquidity provision given their purpose is to trade against
an exposed auction order at potentially improved prices (and auction
responses are currently permitted in bulk ports for simple auctions).
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\28\ See Rule 5.5(c)(3)(C).
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Current Rule 5.7(a) provides that a user may only enter one bid and
one offer for a series per EFID per bulk port. The proposed rule change
similarly provides that Users may only enter one bid and one offer for
a complex strategy per EFID per bulk port. The addition of ``complex
strategy'' to this rule provision conforms to the changes in this rule
filing that permit complex interest to be submitted through bulk ports.
The Exchange believes the proposed rule change, as was the case for
simple interest submitted through bulk ports, will encourage users that
use bulk port functionality to submit bids and offers for a complex
strategy to submit their best bids and offers in that strategy and thus
provide displayed liquidity to the market and contribute to price
discovery. Note firms may have multiple EFIDs and multiple bulk ports
and thus will have the ability through separate ports or EFIDs to
submit additional bids and offers using bulk messages in the same
strategy if they choose.
Generally, the System will handle bulk message bids and offers for
complex strategies in the same manner as it handles orders and quotes
with the same order instructions and times-in-force that will be
applied to bulk messages, including prioritizing, displaying, and
executing them pursuant to Rule 5.33. The proposed rule change makes
the following changes to Rule 5.33 with respect to complex bulk
messages:
<bullet> The proposed rule change amends Rule 5.33(b)(1) to add a
cross-reference to proposed Rule 5.5(c)(3) regarding the proposed
restriction on Time-in-Force applicable to complex bulk messages (which
as discussed above may only have a Time-in-Force of Day).
<bullet> The proposed rule change amends the definition of a COA-
eligible complex order in Rule 5.33(c)(5) to provide that a complex bid
or offer submitted in a bulk message is not COA-eligible. This is
consistent with the purpose of quote message functionality, which is to
provide liquidity to the book (COB in the case of complex quotes).\29\
The purpose of complex bulk messages will be to enter the COB to
execute against COA-d orders (users may also submit COA responses
through bulk ports, as discussed above).
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\29\ The purpose of an auction, such as COA, is to attempt to
find liquidity against which the auctioned order may execute upon
submission to the Exchange, including at potentially improved
prices.
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<bullet> Similarly, the proposed rule change adds Rule 5.33(g)(7)
to provide that a complex bid or offer submitted in a bulk message does
not leg into the simple book to execute against simple orders and
quotes resting in the simple book.\30\ As discussed above, given the
purpose of complex bids and offers submitted in bulk messages is to
provide displayed liquidity in the COB, such purpose would not be
achieved if these bids and offers legged into the simple book for
execution. Even though a bid or offer submitted in a complex order may
leg into the simple book (if not marked complex only or Post Only), but
the same bid or offer in a complex bulk message would not, the Exchange
believes this is consistent with all of the proposed complex quote
restrictions discussed above, which are to create resting liquidity in
the COB and not remove any liquidity. Legging into the simple book is a
type of removal, and that would be inconsistent with the proposed rule
change that bulk messages must be Post Only. Currently, a Post Only
complex order does not leg into the simple book.\31\ Additionally, a
simple bulk message must be Post Only and thus not may remove liquidity
from the simple book. Therefore, not having a complex bid or offer
submitted in a bulk message be able to remove liquidity from the simple
book is consistent with the restrictions currently applicable to simple
bulk messages that non-appointed Market-Makers may submit today, merely
extended to complex bulk messages. Market-Makers and other liquidity
providers separately may submit simple bids and offers for the purpose
of providing liquidity to simple orders resting in the simple book, or
submit complex orders through another port type that would have the
opportunity to leg into the simple book (depending on prices available
on that book).
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\30\ This is consistent with the ``Complex Only'' instruction
available to Market-Makers.
\31\ See Rule 5.33(g)(4).
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Finally, the proposed rule change moves the bulk message fat finger
check from current Rule 5.34(a)(5) to proposed
[[Page 40097]]
Rule 5.34(c)(12), as it will apply to bulk messages containing simple
or complex bids and offers. The proposed rule change amends the check
solely to include reference to the synthetic national best bid or offer
(``SNBBO''), which will be the reference point for complex bulk
messages (rather than the national best bid or offer which applies to
simple bulk messages). It will otherwise apply to complex bulk message
bids and offers in the same manner as it applies to simple bulk message
bids and offers.
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 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 the proposed rule change to
adopt complex bulk message functionality, as described above, will
remove impediments to and perfect the mechanism of a free and open
market and, in general, protect investors, by encouraging further
provision and consolidation of liquidity for complex strategies and
increasing execution opportunities for customers. The Exchange began
listing Exchange-designated complex strategies in June 2024 \35\ to
address fragmentation of liquidity across multiple customer-created
complex instruments expressing a similar exposure profile. The creation
of complex strategies, including commonly traded ones, has allowed for
the consolidation of liquidity within a single complex strategy that
was otherwise spread across multiple customer-created complex
instruments expressing the same or similar exposure profiles to
increase execution opportunities at more competitive prices, to the
benefit of investors. The Exchange understands from Market-Makers that
they would be able to enhance their liquidity provision for these
strategies if they could use the same quote functionality (bulk
messages) for these strategies as they do for individual series. The
proposed rule change accommodates the expansion of bulk message
functionality to be used for these Exchange-designated complex
strategies, which the Exchange believes will further increase liquidity
in these often commonly traded strategies. This may lead to more
interest with displayed prices on the COB to indicate to customers the
prices at which liquidity providers are willing to trade against their
complex strategies, which may lead to more competitive pricing and
additional execution opportunities, to the benefit of investors.
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\35\ See Exchange Notice C2024040200, available at Cboe Options
Exchange Announces Quoted Spread Book in Designated SPX/SPXW Complex
Instruments.
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As proposed, bulk port functionality for complex bids and offers
will be available to all Users (including all Market-Makers with
respect to complex bulk messages) in a substantially similar manner it
is currently available for simple orders and quotes for all Users other
than appointed Market-Makers. As discussed above, Market-Makers have no
quoting obligations for complex strategies, and thus it is reasonable
to impose the same restrictions on complex bulk messages and complex
orders submitted through bulk ports that apply to simple bulk messages
and simple orders submitted through bulk ports by all Users other than
appointed Market-Makers. Specifically, complex bulk messages and orders
must be designated as Post Only, which is consistent with requirements
for simple bulk messages and orders submitted through bulk ports for
users other than appointed Market-Makers. The Day and Post Only
requirements, as well as not permitting complex bulk messages to leg
into the simple markets or initiate COAs (which is the case today for
Post Only complex orders), are consistent with the ultimate purpose of
bulk port functionality, which is to provide consolidated liquidity to
the COB. The Exchange notes all Users may continue to submit complex
orders for any complex strategy with any Time-in-Force and Order
Instruction otherwise permissible under Rule 5.33 through any port as
they do today. The proposed rule change is accommodating an expansion
of current quoting functionality to Market-Makers to provide them with
more tools and flexibility to provide liquidity to the COB within
commonly traded complex strategies, which the Exchange believes may
further consolidate liquidity for these complex strategies, which may
ultimately lead to more competitive pricing for these strategies as
well as increased execution opportunities for customers within these
strategies. This may result in more efficient execution of complex
interest and will provide users with additional flexibility and
increased functionality on the Exchange's System, which may benefit all
investors.
The proposed rule change to apply the bulk message fat finger check
to complex quotes will protect investors and the public interest and
maintain fair and orderly markets by mitigating potential risks
associated with market participants entering complex quotes at
unintended prices, and risks associated with quotes trading at prices
that are extreme and potentially erroneous, which may likely have
resulted from human or operational error. The fat finger check will
apply to complex quotes in the same manner it does to simple quotes,
except it will use complex pricing (SNBBO) rather than simple pricing
(NBBO).
The proposed rule change to permit Market-Makers to enter complex
orders as GTD for the same day will protect investors and the public
interest, as a GTD for a specific day is functionally equivalent to a
Day Order, so it provides Users with additional flexibility regarding
the entry of orders through bulk ports. Users may achieve the same
result as a GTD for the same day to be available up to a specific time
by submitting an order with a Day instruction and then cancelling it at
that time. A GTD order to expire at the close of trading on a specific
day achieves the same result as a Day order.
The proposed rule change to clarify that the IOC designation on
simple quotes is available only to an appointed Market-Maker will
benefit investors by adding transparency and clarity to the Rules. As
discussed above, this language was inadvertently omitted when the
Exchange previously amended its rules to permit an IOC designation on
simple quotes. It is consistent with current Rule 5.5(c)(3)(A)(ii),
which permits appointed Market-Makers to remove liquidity (with a Book
Only instruction) while other Market-Makers may only add liquidity
(with a Post Only instruction). As discussed above, the Exchange
amended its Rules to permit
[[Page 40098]]
the IOC instruction on simple quotes because it understood that some
appointed Market-Makers updated quotes with the specific purpose of
removing interest in the simple book.\36\ As noted in that rule filing,
in addition to providing liquidity via continuous quotes in Market-
Makers' appointed classes, a Market-Maker is also required to maintain
active markets in its appointed classes and update quotations in
response to changed market conditions in its appointed classes.\37\
This proposed rule change merely codifies what is permissible today in
accordance with the Exchange's previous filing.
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\36\ See Securities Exchange Act Release No. 92988 (September
15, 2021), 86 FR 52521 (September 21, 2021) (SR-CBOE-2021-053). The
Exchange proposes to amend current Rule 5.5(c)(3)(A)(i) (proposed
Rule 5.5(c)(3)(A)(i)(a)) and the definition of IOC in Rule 5.6(d) to
clarify that the IOC designation on simple quotes is permissible
only for a Market-Maker with an appointment in a class. As noted
above, this is consistent with the rule filing in which that
proposed rule change as adopted. The Exchange inadvertently did not
make the distinction in the rule text.
\37\ Id. at 52521.
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The Exchange believes the various nonsubstantive proposed rule
changes (Rules 1.1, 5.5(c)(3), 5.6(d) (introductory paragraph and
definition of IOC), 5.33(a) (definition of complex strategy), (b)(1),
and Interpretations .01 and .02) will protect investors and the public
interest, as they add transparency and clarity to the Rules, which may
reduce potential confusion for investors. Because they are
nonsubstantive clarifications, they have no impact on investors or
trading on the Exchange.
The proposed rule change is consistent with the CAT NMS Plan (``CAT
Plan''), as complex quotes will be reported to the Consolidated Audit
Trail (``CAT'') in the same manner as simple quotes are currently
reported to the CAT. As set forth in Section 6.4(d)(iii) of the CAT
Plan and Exchange Rule 7.22(a)(3), an Options Market Maker (as defined
in the CAT Plan) is not required to report to CAT information regarding
quotes and instead must report the quote sent time to the applicable
options exchange, which time the exchange will then report to CAT in
lieu of reporting by the Options Market Maker. In connection with this
provision,\38\ the Exchange issued a regulatory circular stating which
types of messages submitted to the Exchange from Market-Makers were
subject to that exemption.\39\ Specifically, bulk messages (i.e., quote
messages) (which may only be submitted by Market-Makers as discussed
above) must include a quote sent time, and Market-Makers would not be
required to send the data regarding bulk messages to CAT, while Market-
Makers would be required to send data regarding order messages directly
to CAT. Currently, Market-Makers send data regarding complex order
messages to CAT in accordance with Exchange Rules and the CAT Plan. The
proposed complex bulk message (i.e., quote message) functionality would
be subject to the exemption in the same manner as simple quoting
functionality currently is. In other words, Market-Makers will need to
include a quote sent time on their complex bulk messages and would not
be required to send the data regarding those complex bulk messages to
CAT, but would need to continue sending data regarding complex order
messages directly to CAT. While this may result in complex interest
that is currently reported directly by Market-Makers to CAT no longer
being reported if Market-Makers instead use complex bulk messages
rather than complex order messages to submit interest to the Exchange,
it is consistent with the OMM Exemption Approval. Specifically, the
Commission stated ``[t]o the extent the options exchanges would report
the same data otherwise reported by Options Market Makers in an
efficient, accurate and reliable manner, then the ability of the
Commission and the SROs to access and use CAT Data should not be
adversely affected. Moreover, the potentially lower cost associated
with eliminating duplicative reporting and storage of such data
represents a possible benefit.'' \40\ The Exchange will report the same
data with respect to Market-Maker complex bulk messages in the same
manner it reports data with respect to Market-Maker simple bulk
message, and thus regulators will have access to sufficient information
for regulatory purposes. The fact that a bid or offer in a complex bulk
message represents strategies of two or more legs rather than a single
leg as is the case for a bid or offer in a simple bulk message has no
impact on this finding.
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\38\ Securities Exchange Act Release No. 77265 (March 1, 2016),
81 FR 11856 (March 7, 2016) (``OMM Exemption Approval'').
\39\ See Regulatory Circular 20-044 (July 7, 2020), available at
RC20-044 Options Market Maker Quote SendTime Requirements for CAT
Reporting.
\40\ OMM Exemption Approval at 11858.
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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 that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, because bulk port functionality
for complex strategies will be available to all users in the same
manner. It will work in the same manner as bulk port functionality
currently available for simple interest for all Users, including
Market-Makers (other than appointed Market-Makers, which is not
applicable in the complex market, as discussed above). Use of bulk port
functionality for complex interest is also voluntary, and all Users may
continue to submit complex interest through other ports in the same
manner they do today. The Exchange does not believe that 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,
because many exchanges offer quoting functionality similar to bulk
message functionality, at least one of which makes that quoting
functionality available for complex interest.\41\
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\41\ See, e.g., Miami International Securities Exchange, LLC
(``MIAX'') Rule 518, Interpretation and Policy .02 (which permits
complex bids and offers to be submitted as ``eQuotes,'' as defined
in MIAX Rule 517).
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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 written 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 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)(iii) of the Act \42\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\43\
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\42\ 15 U.S.C. 78s(b)(3)(A)(iii).
\43\ 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
[[Page 40099]]
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="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#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="e89a9d848dc58b8785858d869c9ba89b8d8bc68f879e">[email protected]</span></a>. Please include
file number SR-CBOE-2025-059 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-2025-059. 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 filing 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-CBOE-2025-059 and should be submitted on
or before September 8, 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. 2025-15625 Filed 8-15-25; 8:45 am]
BILLING CODE 8011-01-P
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