Notice2025-23529
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend a Wide Market Protection Mechanism Designed To Reduce the Risk of Orders Executing at Extreme or Adverse Prices When the National Best Bid and Offer is Determined To Be Wide
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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
December 22, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 243 (Monday, December 22, 2025)</title>
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[Federal Register Volume 90, Number 243 (Monday, December 22, 2025)]
[Notices]
[Pages 59890-59892]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23529]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104435; File No. SR-CBOE-2025-091]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend a
Wide Market Protection Mechanism Designed To Reduce the Risk of Orders
Executing at Extreme or Adverse Prices When the National Best Bid and
Offer is Determined To Be Wide
December 17, 2025
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 15, 2025, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``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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[[Page 59891]]
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 Rule 5.34 to adopt a wide market protection mechanism designed
to reduce the risk of orders executing at extreme or adverse prices
when the national best bid and offer (``NBBO'') is determined to be
wide. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
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 purpose of this rule filing is to amend Rule 5.34(a), Order and
Quote Price Protection Mechanisms and Risk Controls (Simple Orders).
Specifically, the Exchange proposes changes the wide market protection
mechanism set forth in Rule 5.34(a)(5).
By way of background, the wide market protection mechanism is
designed to reduce the risk of orders executing at extreme or adverse
prices when the NBBO is determined to be wide. The wide market
protection mechanism leverages the Exchange's iterative drill-through
protection mechanism for certain orders when the NBBO is wide and
initiates a drill-through pause on applicable inbound market or limit
orders or elected Stop (Stop-Loss) \3\ or Stop-Limit \4\ orders which
would either execute or post to the Book \5\ at potentially extreme
prices.
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\3\ A ``Stop (Stop-Loss)'' order is an order to buy (sell) that
becomes a market order when the consolidated last sale price
(excluding prices from complex order trades if outside of the NBBO)
or NBB (NBO) for a particular option contract is equal to or above
(below) the stop price specified by the User. Users may not
designate a Stop Order as All Sessions. Users may not designate bulk
messages as Stop Orders. A User may not designate a Stop order as
Direct to PAR. See Rule 5.6(c) (definition of ``Stop (Stop-Loss)''
order).
\4\ A ``Stop-Limit'' order is an order to buy (sell) that
becomes a limit order when the consolidated last sale price
(excluding prices from complex order trades if outside the NBBO) or
NBB (NBO) for a particular option contract is equal to or above
(below) the stop price specified by the User. A User may not
designate a Stop-Limit Order as All Sessions or RTH and Curb. Users
may not designate bulk messages as Stop-Limit Orders. A User may not
designate a Stop-Limit order as Direct to PAR. See Rule 5.6(c)
(definition of ``Stop-Limit'' order).
\5\ ``Book'' means the electronic book of simple orders and
quotes maintained by the System, which single book is used during
both the regular trading hours and global trading hours trading
sessions. See Rule 1.1 (definition of, ``Book'').
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Currently, pursuant to Rule 5.34(a)(5)(D), bulk messages,
Intermarket Sweep Orders (``ISOs''), Immediate-or-Cancel orders
(``IOCs''), and M and N capacity \6\ orders with a Time-in-Force of Day
\7\ are excluded from the wide market protection mechanism. The
Exchange proposes to amend Rule 5.34(a)(4)(D) to exclude all M and N
capacity orders from the wide market protection mechanism (regardless
of Time-in-Force).
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\6\ See Rule 1.1 (definition of ``Capacity'').
\7\ A ``Time-in-Force'' means the period of time the System
holds an order or quote. Time-in-Force may include Day, Fill-or-
Kill, Good-til-Cancelled, Good-til-Date, Immediate-or-Cancel, Limit-
on-Close, Market-on-Close, and At the Open. See Rule 5.6(d). The
Exchange notes that all Immediate-or-Cancel (``IOC'') orders are
excluded from wide market protection. See Rule 5.34(a)(4)(D).
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As noted, the current rules already exclude M and N capacity orders
with a Time-in-Force of Day, which encompasses the majority of Market-
Maker orders. In general, Market-Makers are positioned to observe and
subsequently address wide market scenarios, by tightening the NBBO with
an order or quote. The proposed change merely extends the current rules
to include any other potential type of Market-Maker order, thereby
ensuring consistency across all potential types of Market-Maker orders.
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.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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In particular, the Exchange believes the proposed rule change to
exclude all M and N capacity orders from the wide market protection
mechanism (regardless of Time-in-Force) will remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors. In its initial proposal,
the Exchange proposed to exclude only M and N capacity orders with
Time-in-Force of Day, as the majority of Market-Maker orders are
submitted with a Time-in-Force of Day. The proposed change to exclude
all M and N capacity orders, regardless of Time-in-Force, is designed
to ensure consistency across all potential types of Market-Maker
orders. The Exchange believes the proposed change is reasonable, as
Market-Makers are positioned to observe and subsequently address wide
market scenarios, by tightening the NBBO with an order or quote. The
Exchange believes the proposed change will support the operational
efficiency of the wide market protection mechanism and alleviate
potential confusion, by removing an unnecessary operational distinction
between types of Market-Maker orders, to the benefit of investors.
Finally, the Exchange believes the proposed change to exclude all M
and N capacity orders is not unfairly discriminatory, as the proposed
change will apply to all M and N capacity orders. The current rules
already exclude M and N capacity orders with a Time-in-Force of Day,
which encompasses the majority of Market-Maker orders. The proposed
change merely extends the current rules to include any other potential
type of
[[Page 59892]]
Market-Maker order. As noted above, Market-Makers are best positioned
to observe and address wide market scenarios.
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 the proposed change will
apply to all M and N capacity orders uniformly, regardless of Time-in-
Force. As noted above, the Exchange believes the proposed change is not
unfairly discriminatory, as Market-Makers are best positioned to
observe and address wide market scenarios.
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, as the proposed
rule change relates specifically to price protections offered on the
Exchange and which orders are subject to the price protection
mechanism.
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 \11\ and Rule 19b-4(f)(6) \12\ thereunder.
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) of the Act \13\ and Rule 19b-4(f)(6) \14\
thereunder.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. The Exchange
believes waiver of the operative delay is consistent with the
protection of investors and the public interest because it will allow
the Exchange to more expeditiously implement the proposed changes which
will support the operational efficiency of the wide market protection
mechanism and alleviate potential confusion, by removing an unnecessary
operational distinction between types of Market-Maker orders, to the
benefit of investors. For these reasons, and because the proposed rule
change does not raise any novel legal or regulatory issues, the
Commission finds that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the 30-day operative delay and
designates the proposed rule change to be operative upon filing.\17\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 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#5123243d347c323e3c3c343f2522112234327f363e27"><span class="__cf_email__" data-cfemail="3644435a531b55595b5b535842457645535518515940">[email protected]</span></a>. Please include
file number SR-CBOE-2025-091 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-2025-091. 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-2025-091 and should be submitted on
or before January 12, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23529 Filed 12-19-25; 8:45 am]
BILLING CODE 8011-01-P
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