Notice2025-17248
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Approving a Proposed Rule Change To Amend Rule 11.23 Regarding the Closing Auction
Primary source
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Published
September 9, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 172 (Tuesday, September 9, 2025)</title>
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[Federal Register Volume 90, Number 172 (Tuesday, September 9, 2025)]
[Notices]
[Pages 43486-43487]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17248]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103869; File No. SR-CboeBZX-2025-086]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Approving a Proposed Rule Change To Amend Rule 11.23 Regarding the
Closing Auction
September 4, 2025.
I. Introduction
On July 10, 2025, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposal to amend BZX Rule 11.23 to revise the pricing of Late-Limit-
On-Close (``LLOC'') and Limit-On-Close (``LOC'') orders, and the entry,
modification, and cancellation times applicable to LLOC and LOC orders.
The proposed rule change was published for comment in the Federal
Register on July 22, 2025.\3\ The Commission received no comments on
the proposed rule change. This order grants approval of 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. 103492 (July 17,
2025), 90 FR 34542 (``Notice'').
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II. Description of the Proposed Rule Change
A. Background
Pursuant to BZX Rule 11.23(c), the Exchange conducts a Closing
Auction to establish the BZX Official Closing Price.\4\ The Exchange
offers three order types that are designated to participate in the
Closing Auction. A Market-On-Close (``MOC'') \5\ order is a BZX market
order that is designated for execution only in the Closing Auction or
Cboe Market Close.\6\ An LOC order is a BZX limit order that is
designated for execution only in the Closing Auction.\7\ An LLOC order
is a BZX limit order that is designated for execution only in the
Closing Auction, but if an LLOC bid or offer has a limit price that is
more aggressive than the NBB \8\ or NBO,\9\ 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.\10\ Each of the three aforementioned
order types is also defined as an Eligible Auction Order under Rule
11.23(a)(8). The Closing Auction occurs at approximately 4:00 p.m. ET
\11\ on each day that BZX is open for trading. The Exchange has set
forth detailed parameters around the ability of Users \12\ to submit,
modify, and cancel orders prior to conducting the Closing Auction and
arriving at the BZX Official Closing Price.\13\
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\4\ The term ``BZX Official Closing Price'' shall mean the price
disseminated to the consolidated tape as the market center closing
trade. See BZX Rule 11.23(a)(3).
\5\ See Exchange Rule 11.23(a)(15).
\6\ See BZX Rule 11.28. Cboe Market Close is a closing match
process for non-BZX-listed securities. See BZX Rule 11.28. The
proposed changes do not affect the operation of Cboe Market Close.
\7\ See BZX Rule 11.23(a)(13).
\8\ See BZX Rule 1.5(o).
\9\ Id.
\10\ See BZX Rule 11.23(a)(11). 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, provided that the more
aggressive price is not more aggressive than the original User
entered limit price. See id. The limit price of an LLOC order will
not be adjusted to a less aggressive price, unless otherwise
provided by Exchange Rules. See id. If there is no NBB or NBO, the
LLOC bid or offer will assume its entered limit price. See id.
\11\ Hereinafter, all times referenced shall be in Eastern Time
(ET).
\12\ The term ``User'' shall mean any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Rule 11.3. Id. at 34543 at n. 4.
\13\ For a detailed description of the BZX Closing Auction, see
Notice, supra note 3, at 34544-45.
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B. Proposed Changes to Closing Auction Orders
The Exchange proposes to amend BZX Rule 11.23(a)(11) and BZX Rule
11.23(a)(13) to revise how LLOC and LOC orders are priced.
Additionally, the Exchange proposes to amend BZX Rule 11.23(c)(1)(A)
and BZX Rule 11.23(c)(1)(B) to change the time by which market makers
and other Users must submit, modify, or cancel their LLOC and LOC
orders.\14\
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\14\ See Notice, supra note 3, at 34545.
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Late-Limit-On-Close Orders
An LLOC order currently has its price adjusted to the NBB or NBO if
the limit price of the LLOC order is more aggressive than the NBB or
NBO upon the Exchange's receipt of the LLOC order.\15\ If the NBB or
NBO becomes more aggressive, the price of the LLOC order will be
adjusted to the more aggressive price, so long as that price is not
more aggressive than the original limit price entered by the User.\16\
The limit price of an LLOC order will not be adjusted to a less
aggressive price unless otherwise provided by Exchange Rules.\17\ The
Exchange proposes to permit an LLOC order to have its limit price
adjusted to both more aggressive prices and less aggressive prices, so
long as the adjusted price is not priced higher (for buy orders) or
lower (for sell orders) than its User-entered limit price.\18\
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\15\ See id. (citing Exchange Rule 11.23(a)(11)).
\16\ Id.
\17\ Id.
\18\ Id.
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The Exchange also proposes to introduce language that it believes
better describes the behavior of LLOC orders when the NBB or NBO,
respectively, is not available.\19\ The Exchange proposes that if there
is no NBB or NBO available upon receipt of the LLOC bid or offer by the
Exchange, that LLOC bid or offer, respectively, will assume its entered
limit price. Additionally, if the NBB or NBO becomes unavailable after
the respective LLOC bid or offer has been adjusted to the NBB or NBO
before it becomes unavailable, the respective LLOC bid or offer will
maintain its most recent adjusted price and would not have its price
adjusted until the NBB or NBO, respectively, was available.\20\
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\19\ See Notice, supra note 3, at 34546.
\20\ Id.
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In addition to permitting LLOC orders to be re-priced to both
higher and lower prices as described above, the Exchange also proposes
to amend the time at which Users, including those serving as LMMs, may
begin to submit LLOC orders to the Exchange.\21\ Currently, LLOC orders
may not be submitted before 3:59 p.m. and any LLOC order submitted
prior to 3:59 p.m. will be rejected. Now, the Exchange proposes to
amend Rule 11.23(c)(1)(A) to permit LMMs and other Users to submit LLOC
orders to the Exchange beginning at 3:55 p.m.\22\ The Exchange also
proposes that once entered, Users may not modify or cancel an LLOC
order.\23\ LLOC orders will continue to be accepted until 4:00 p.m.
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\21\ Id.
\22\ Id.
\23\ Id.
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Limit-On-Close Orders
The Exchange proposes to amend Rule 11.23(c)(1)(A) to limit the
ability of LMMs and other Users to modify or cancel LOC orders between
3:55 p.m. and 3:59 p.m. While LMMs and other Users will retain the
ability to submit LOC orders until 3:59 p.m., the Exchange proposes
that LOC orders cannot be modified or cancelled between 3:55 p.m. and
3:59 p.m.,
[[Page 43487]]
regardless of when the LOC order was received by the Exchange.\24\
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\24\ See Notice, supra note 3, at 34547.
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In addition, the Exchange proposes to amend Rule 11.23(a)(13) to
introduce re-pricing behavior for LOC orders entered in BZX-listed
corporate securities (as described in Rule 14.8 and Rule 14.9).\25\ As
proposed, an LOC order in a BZX-listed corporate security entered
between 3:55 p.m. and 3:59 p.m. will be accepted at its limit price,
unless the limit price is higher (for buy orders) or lower (for sell
orders) than the 3:55 p.m. Reference Price.\26\ LOC orders in BZX-
listed corporate securities that have a limit price that is priced
higher (for buy orders) or lower (for sell orders) than the 3:55 p.m.
Reference Price will be re-priced to the 3:55 p.m. Reference Price.\27\
If there is no Reference Price available in a particular security due
to a lack of liquidity on the BZX Book, the LOC order will not be re-
priced and will maintain its original limit price. The Exchange does
not propose to amend the price of LOC orders entered in BZX-listed
ETPs. An LOC order entered in a BZX-listed ETP will be accepted at its
limit price and will not have its price adjusted by the System.
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\25\ Id. (citing Exchange Rule 14.8 (General Listing
Requirements--Tier I) and Exchange Rule 14.9 (General Listing
Requirements--Tier II)). A BZX-listed corporate security includes a
Company's Primary Equity Security as well as rights, warrants,
preferred and secondary classes of stock, and closed-end management
investment companies registered under the Investment Company Act of
1940 (``Closed-End Funds''). Id. at n. 50.
\26\ Id. (citing Exchange Rule 11.23(a)(19)). 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 less 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. Id. at n.
51.
\27\ See Notice, supra note 3, at 34547. The Exchange states
that if the System is not able to ingest the 3:55 p.m. Reference
Price due to a technical or systems issue at the Exchange, the LOC
order will be re-priced upon receipt of the first available
Reference Price after System recovery. If the Closing Auction cannot
be completed due to a technical or systems issue at the Exchange,
the LOC order will not be re-priced and will maintain its original,
User-entered limit price. Id. at n. 52.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\28\ Specifically, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\29\ which
requires that the rules of a national securities exchange be designed,
among other things, 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, and not be designed to permit unfair discrimination
between customers, issuers, brokers or dealers.
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\28\ In approving this proposed rule change the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\29\ 15 U.S.C. 78f(b)(5).
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The proposed changes limit price movement through the prohibition
of order modifications and cancellations during certain time periods
ahead of the Closing Auction,\30\ extend the time by which Users can
submit LLOC and LOC orders and amend how LOC orders and LLOC orders are
re-priced under certain circumstances. The proposed changes are
intended to provide LMMs and other Users with additional information
about the potential price at which an LOC or LLOC order designated for
execution in the Closing Auction may execute, which may provide a more
accurate BZX Official Closing Price. Further, the proposal potentially
reduces the level of price volatility ahead of the Closing Auction by
limiting activity at certain times, while continuing to allow LLMs and
other Users opportunities to submit imbalance offsetting orders, which
enable LMMs and other Users to control their LLOC and LOC price-forming
orders.
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\30\ The Exchange notes that the rules of other national
securities exchanges similarly prohibit modifications and
cancellations to MOC, LOC, and Imbalance-Only orders. See Notice,
supra note 3, at 34548 (citing Nasdaq Equity 4, Rule 4702(b)(11)(A)
(``Market On Close Order''); Nasdaq Equity 4, Rule 4702(b)(12)(A)
(``Limit On Close Order''); Nasdaq Equity 4, Rule 4702(13)(A)
(``Imbalance Only Order''); NYSE Arca Rule 7.35-E(d)(2)(A)-(B)).
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The proposal to limit the re-pricing of LOC orders submitted
between 3:55 p.m. and 3:59 p.m., to only those cases in which the limit
price is higher (for buy orders) or lower (for sell orders) than the
3:55 p.m. Reference Price of BZX-listed corporate securities is also
reasonably designed to minimize the amount of price volatility ahead of
the Closing Auction. While the Exchange proposes to introduce this re-
pricing behavior only for BZX-listed corporate securities rather than
all BZX-listed securities, the Exchange noted that segmentation between
corporate securities and all other securities already exists under BZX
Rule 11.23(c)(2)(B) in that securities other than BZX-listed corporate
securities have alternative methods in determining the BZX Official
Closing Price that are not available to BZX-listed corporate
securities.\31\ The Exchange further states its proposal seeks to
balance feedback from the LMMs and other Users who trade BZX-listed
corporate securities that desire less price volatility approaching the
Closing Auction with the needs of the LMMs responsible for submitting
price-forming LOC orders ahead of the Closing Auction in ETPs, some of
which tend to have volatile price swings that are anticipated based on
the underlying holdings and makeup of the product.\32\
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\31\ See Notice, supra note 3, at 34547 (citing Exchange Rule
11.23(c)(2)(B)(i), Exchange Rule 11.23(c)(2)(B)(ii)(a), and Exchange
Rule 11.23(c)(2)(B)(ii)(b)).
\32\ Id.
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IV. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange and, in particular, the requirements of Section
6(b)(5) of the Act.\33\
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\33\ 15 U.S.C. 78f(b)(5).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\34\ that the proposed rule change (SR-CboeBZX-2025-086) be, and
hereby is approved.
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\34\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12) and 17 CFR 200.30(a)(76).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-17248 Filed 9-8-25; 8:45 am]
BILLING CODE 8011-01-P
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