Notice2025-24047
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Exchange Rule 11.23(d)(2)(B) (Extending the Quote-Only Period for Initial Public Offering (“IPO”) Auctions)
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
December 31, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 247 (Wednesday, December 31, 2025)</title>
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[Federal Register Volume 90, Number 247 (Wednesday, December 31, 2025)]
[Notices]
[Pages 61492-61496]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-24047]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104501; File No. SR-CboeBZX-2025-149]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Exchange Rule 11.23(d)(2)(B)
(Extending the Quote-Only Period for Initial Public Offering (``IPO'')
Auctions)
December 23, 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 December 17, 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
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 BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to amend Exchange Rule 11.23(d)(2)(B) (Extending
the Quote-Only Period for Initial Public Offering (``IPO'') Auctions)
to: (1) delineate between BZX-listed corporate securities and exchange-
traded product (``ETP'') IPO Securities; and (2) expand the
circumstances under which the Exchange may extend the Quote-Only Period
for IPO Auctions in an ETP IPO Security.
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/equities/regulation/rule_filings/bzx/">https://www.cboe.com/us/equities/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
Purpose
The Exchange proposes to amend Rule 11.23(d)(2)(B) (Extending the
Quote-Only Period \3\ for IPO Auctions) to: (1) delineate between BZX-
listed corporate securities and ETP IPO Securities in proposed Rules
11.23(d)(2)(B) and (C), respectively; \4\ and (2) expand the
circumstances under which the Exchange may extend the Quote-Only Period
for IPO Auctions in ETP IPO Securities. The Exchange also proposes to
update rule numbering and lettering to accommodate these changes and to
update cross-references throughout Rule 11.23 as necessary.
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\3\ The term ``Quote-Only Period'' shall mean a designated
period of time prior to a Halt Auction, a Volatility Closing
Auction, or an IPO Auction during which Users may submit orders to
the Exchange for participation in the auction. See Exchange Rule
11.23(a)(17).
\4\ The term ``ETP IPO Security'' means a Derivative Security
that is eligible to participate in an IPO Auction pursuant to Rule
11.23(d). See Exchange Rule 11.23(a)(24). See also Exchange Rule
1.5(dd) defining ``Derivative Security''.
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Background
Exchange Rule 11.23(d) governs IPO and halt auctions on the
Exchange. Under Rule 11.23(d)(1)(A), the Quote-Only Period for ETP IPO
Auctions commences at 8:00 a.m.\5\ and terminates at the conclusion of
the IPO Auction, which generally occurs shortly after 9:30 a.m. There
are no IPO Auction-specific order types. All Eligible Auction Orders
associated with an IPO Auction are queued until the end of the Quote-
Only Period, at which time they become eligible for execution in the
IPO Auction. Orders must be received prior to the end of the Quote-Only
Period to participate in the IPO Auction.
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\5\ All times referenced herein are Eastern Time.
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Exchange Rule 11.23(d)(2)(B) currently provides five circumstances
under which the Exchange may extend the Quote-Only Period for IPO
Auctions. These circumstances apply to both BZX-listed corporate
securities and ETP IPO Securities:
(i) there are unmatched market orders on the Auction Book
associated with the auction;
(ii) the underwriter requests an extension;
(iii) the Indicative Price moves the greater of 10% or fifty (50)
cents in the fifteen (15) seconds prior to the auction;
(iv) in the event of a technical or systems issue at the Exchange
that may impair the ability of Users to participate in the IPO Auction
or of the Exchange to complete the IPO Auction;
(v) a Derivative Security fails to meet the Exchange's listing
qualification requirements as set forth in Rule 14.11; or
(vi) there is a security that is the subject of an initial pricing
on the Exchange of a security that has not been listed on a national
securities exchange immediately prior to the initial pricing.
The duration of each Quote-Only Period extension depends on the
triggering circumstance. Provisions (ii), (iv), (v), and (vi) are
manual extensions without fixed durations. Provisions (i) and (iii) are
automatic extensions: provision (i) extends the Quote-Only Period for
as long as unmatched market orders remain on the Auction Book, while
provision (iii) extends the Quote-Only Period for five minutes.
Proposal
The Exchange now proposes to separately delineate the circumstances
under which it may extend the Quote-Only Period for IPO Auctions
applicable to BZX-listed corporate securities and ETP IPO Securities
under proposed Rules 11.23(d)(2)(B) and (C), respectively. The Exchange
also proposes to adopt an additional extension provision applicable to
ETP IPO Securities.
The Exchange proposes to modify the circumstances under which the
[[Page 61493]]
Exchange may extend the Quote-Only applicable to BZX-listed corporate
securities by eliminating existing Rules 11.23(d)(2)(B)(v) and (vi) as
these provisions are not applicable to BZX-listed corporate securities.
The Exchange also proposes to make a ministerial change to Rule
11.23(d)(2)(B)(iii) to remove the extraneous word ``where''.
The Exchange proposes to adopt Rule 11.23(d)(2)(C), which would
govern extensions of the Quote-Only Period for IPO Auctions in ETP IPO
Securities and set forth those circumstances under proposed Rules
11.23(d)(2)(C)(i) through (vi). The Exchange also proposes to use the
term ``ETP IPO Security'' throughout proposed Rule 11.23(d)(2)(C)
rather than ``Derivative Security.'' \6\ Because an ETP IPO Security is
a subset of Derivative Securities that are eligible to participate in
the IPO Auction, this change is ministerial but adds precision and
clarity to the Exchange's rulebook.
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\6\ The term ``Derivative Security'' means a security that meets
the definition of ``new derivative securities product'' in Rule 19b-
4(e) under the Exchange Act. See Exchange Rule 1.5(dd).
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Proposed Rule 11.23(d)(2)(C)(i) is identical to existing Rule
11.23(d)(2)(B)(i). The Exchange does not propose to include existing
Rule 11.23(d)(2)(B)(ii) that allows the Quote-Only Period to be
extended upon underwriter request in proposed Rule 11.23(d)(2)(C). ETP
IPO Securities do not have underwriters, making this provision
inapplicable.
Proposed Rules 11.23(d)(2)(C)(ii), (iii), (iv), and (v) are
substantively identical to Rules 11.23(d)(2)(B)(iii), (iv), (v), and
(vi), respectively, except that the proposed rules refer specifically
to an ETP IPO Security rather than a Derivative Security.
The Exchange proposes to adopt Rule 11.23(d)(2)(C)(vi), which would
establish a new circumstance under which the Exchange may extend the
Quote-Only Period for IPO Auctions in ETP IPO Securities.\7\
Specifically, the proposed rule would permit the Exchange to extend the
Quote-Only Period if the issuer of the ETP IPO Security does not opt
out of the ``price validation test'' described below and the ETP IPO
Security does not pass the price validation test.\8\
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\7\ The Exchange is not proposing to apply this additional
extension provision to BZX-listed corporate securities because
underwriters are involved in corporate IPOs and may request that the
Exchange extend the Quote-Only Period under existing Rule
11.23(d)(2)(B)(ii). ETP IPO Securities, by contrast, do not have an
underwriter. The proposed provision is designed to provide a
protection analogous to that offered by an underwriter in a
corporate security IPO; namely, ensuring that the IPO Auction occurs
at a price in line with the issuer's expectations.
\8\ If the issuer opts out of the price validation test, the
Quote-Only Period would only be extended for price volatility under
proposed Rule 11.23(d)(2)(C)(ii) (i.e., if the Indicative Price
moves the greater of 10% or $0.50 in the fifteen seconds prior to
the auction), which currently exists under Rule 11.23(d)(2)(B)(iii)
and is being relocated to proposed Rule 11.23(d)(2)(C)(ii) to
improve clarity and distinguish between BZX-listed corporate
securities and ETP IPO Securities. If the issuer does not opt out,
both the price volatility protections under proposed Rule
11.23(d)(2)(C)(ii) and the price validation test under proposed Rule
11.23(d)(2)(C)(vi) would apply.
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(a) Indicative Price and Expected Price Mechanism
Starting at 8:00 a.m. with the commencement of the Quote-Only
Period, the System will determine and display the live Indicative Price
of the IPO Auction to the lead market maker (``LMM'') through a tool
accessible via the Exchange's web portal. The LMM may approve or re-
approve an Indicative Price via the tool as often as necessary prior to
9:45 a.m. The last approved Indicative Price becomes the ``Expected
Price.''
The distinction between these terms is important: the Indicative
Price is a live price that changes continuously during the Quote-Only
Period as market participants enter and cancel orders, while the
Expected Price is an Indicative Price that the LMM has locked in (i.e.,
approved) at a specific point in time prior to 9:45 a.m.
(b) Price Band Selection
At any time prior to 9:45 a.m., the LMM may select price bands for
the purpose of applying the price validation test.\9\ The LMM may
select an upper price band (i.e., the maximum amount by which the
Indicative Price may exceed the Expected Price) and a lower price band
(i.e., the maximum amount by which the Indicative Price may fall below
the Expected Price).\10\ If the LMM does not select price bands, the
Exchange will automatically apply default upper and lower price bands
of $0.10.\11\
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\9\ As discussed above, the LMM may approve new Indicative
Prices (i.e., provide a new Expected Price) as often as necessary
prior to 9:45 a.m.
\10\ The upper price band and lower price band may be set at
different distances from the Expected Price.
\11\ The Exchange will automatically apply the upper and lower
price bands of $0.10 if the LMM has not selected price bands by 9:30
a.m. However, the LMM can select or change the price bands at any
time prior to 9:45 a.m.
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The price bands available for selection shall be in such increments
and at such price points as may be established from time to time by the
Exchange. The available price bands shall include $0 but shall not
exceed $0.50. Initially, available price bands will range from $0 to
$0.50 in increments of $0.01. Thus, the LMM may select price bands of
$0 (i.e., no deviation from the Expected Price would be permitted),
$0.01, $0.02, or any other $0.01 increment up to $0.50. The LMM may
select different price bands above and below the Expected Price.
The Exchange reserves the right to stipulate wider increments (such
as $0.05) or price bands that include certain price points but exclude
others (for example, increments of $0.01 up to $0.10, and increments of
$0.05 thereafter). However, the Exchange will not, absent a proposed
rule change, allow price bands wider than $0.50. The Exchange will
notify Members and the public of changes to available price bands or
increments through a notice widely disseminated at least one week in
advance of the change. In selecting available price bands and
increments, the Exchange will consider input from LMMs and other market
participants, as well as the results of past usage, to adopt price
bands and increments that promote efficient initiation of trading and
protect investors and the public interest.
(c) Price Validation Test Criteria
An ETP IPO Security does not pass the price validation test if the
Indicative Price differs from the Expected Price by an amount moves in
excess of the price bands set around the Expected Price or the LMM does
not provide an Expected Price. For example, assume that the Indicative
Price for the IPO Auction is displayed to the LMM at $32.00 per share,
and the LMM approves that Indicative Price, thereby establishing an
Expected Price of $32.00 per share. If the LMM selects an upper price
band of $0.10 and a lower price band of $0.05, the Indicative Price
calculated by the System for the IPO Auction could not be higher than
$32.10 nor lower than $31.95. If the LMM does not select price bands,
the Exchange will apply the default price bands of $0.10, and the
Indicative Price could not be higher than $32.10 nor lower than $31.90.
Similar to existing Rules 11.23(d)(2)(B)(i) through (vi), if the
price validation test fails during the IPO Auction process, the Quote-
Only Period will automatically extend, but in five-second increments.
The Quote-Only Period would continue seamlessly, with Members able to
continue entering or canceling orders. The ETP IPO Security would then
repeat the price validation test until the conditions of proposed Rule
11.23(d)(2)(C)(i) through (vi) are no
[[Page 61494]]
longer met, at which point the IPO Auction would occur.
If the ETP IPO Security does not pass the price validation test,
the LMM may, but is not required to, select different price bands or
approve a new Expected Price before recommencing the iterative process.
The System would automatically run the price validation checks by
comparing the Expected Price to the Indicative Price to ensure that the
Indicative Price falls within the price bands set around the Expected
Price.
This process can continue until 9:45 a.m., at which point the IPO
Auction would occur unless the conditions provided in proposed Rule
11.23(d)(2)(C)(i) through (v) are met. If an LMM does not approve an
Indicative Price (i.e., does not provide an Expected Price) prior to
9:45 a.m., the Quote-Only Period may extend until 9:45 a.m. The
Exchange believes that ending the price validation test at 9:45 a.m.
with no exceptions is appropriate because by that time, the LMM would
be expected to step in and respond to any excess demand, and any excess
volatility in the ETP IPO Security would be mitigated through the
proposed validation checks.
The LMM would be able, but not required, to select different price
bands or approve a new Indicative Price (i.e., provide a new Expected
Price) for each price validation check. For example, an LMM might
initially select upper and lower bands of $0, such that the IPO Auction
would not occur unless the Indicative Price exactly equaled the
Expected Price. If the security did not pass the validation check,
however, the LMM could subsequently widen the price bands to allow the
IPO Auction to proceed at a price that varies from the Expected Price,
or provide a new Expected Price that equals the current Indicative
Price. Such price deviations are possible because market participants
may continue to enter and cancel orders during the Quote-Only Period,
causing the Indicative Price to fluctuate.
In addition, the LMM may step in and begin providing markets in an
ETP IPO Security on its first day of trading, which could further
promote price stability. The Exchange may also determine at any point
during the Quote-Only Period to postpone and reschedule the IPO
Auction.\12\
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\12\ The Exchange's authority to postpone and reschedule the IPO
Auction is set forth in existing Rule 11.23(d)(1)(B)(vi).
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Proposed Rule 11.23(d)(2)(C)(vi) would generally extend the Quote-
Only Period unless an issuer opts out of the price validation test or
the Indicative Price falls within the price bands at 9:30 a.m. If an
LMM does not approve an Indicative Price (i.e., does not provide an
Expected Price) by 9:30 a.m., the Quote-Only Period will extend in
five-second intervals until 9:45 a.m. The extension will end earlier if
the LMM provides an Expected Price during that 15-minute period for
which the price validation test can be applied. The LMM may provide an
Expected Price at any time before 9:45 a.m.
If an issuer opts out of the price validation test, the Quote-Only
Period will generally only be extended for price volatility if the
Indicative Price moves the greater of 10% or fifty cents in the fifteen
seconds prior to the auction, as provided in existing Rule
11.23(d)(2)(B)(iii) and proposed Rule 11.23(d)(2)(C)(ii).
The Exchange notes that the LMM's involvement in timing the
commencement of trading in an IPO Auction for an ETP IPO Security is
consistent with an underwriter's involvement in the existing IPO
Auction process for BZX-listed corporate securities. Similar to an
underwriter in a corporate IPO, the LMM, with market knowledge of the
order book and an understanding of the security, is well positioned to
provide an Expected Price and applicable price bands that facilitate
the price validation check.
Accordingly, the Exchange believes it is in the best interest of
the market to give LMMs input into the timing of the IPO Auction to
help ensure the fair and orderly launch of trading in an ETP IPO
Security. The Exchange believes that additional time for price
formation in the IPO Auction will benefit investors by helping to
ensure the IPO Auction occurs at a price that generally aligns with the
LMM's expectations. Furthermore, delaying an IPO Auction in an ETP is
not novel, as Nasdaq currently begins its IPO auction process at 9:40
a.m.\13\
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\13\ See Securities Exchange Act No. 103085 (May 20, 2025) 90 FR
22424 (May 27, 2025) (SR-Nasdaq-2025-011) (Notice of Filing of
Amendment No. 1, and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Introduce
Functionality To Initiate a Trading Halt for Exchange-Traded
Products on Launch Day).
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Last, the Exchange proposes to re-letter existing Rules
11.23(d)(1)(C) through (F) as (D) through (G), respectively, and to
update cross-references to Rule 11.23 throughout the rule to account
for the re-lettered provisions.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\14\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \15\ 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) \16\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
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The Exchange believes that its proposal to offer optional
functionality to permit ETP issuers the ability to utilize a price
validation test during the Quote-Only Period would maximize the chances
of more efficient price discovery and remove impediments to and perfect
the mechanism of a free and open market and a national market system
and, in general, protect investors because the initial sale price would
be based on market interest and the matching of buy and sell orders in
an auction that would be open to all market participants. Today, an ETP
IPO Security would open for trading during the IPO Auction at an
initial price that is based on market interest at that time.
Accordingly, the Exchange believes that the proposed process would
provide safeguards for the opening price of the ETP that is based on
additional market information, thereby protecting investors and the
public interest.\17\
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\17\ The Exchange is not proposing to apply this additional
extension provision to BZX-listed corporate securities because
underwriters are involved in corporate IPOs and may request that the
Exchange extend the Quote-Only Period under existing Rule
11.23(d)(2)(B)(ii). ETP IPO Securities, by contrast, do not have an
underwriter. The proposed provision is designed to provide a
protection analogous to that offered by an underwriter in a
corporate security IPO; namely, ensuring that the IPO Auction occurs
at a price in line with the issuer's expectations.
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The Exchange believes that the proposed price validation test will
benefit investors by providing additional time for price formation in
the IPO Auction for ETP IPO Securities and will benefit investors by
helping to ensure the IPO Auction occurs at a price
[[Page 61495]]
that generally aligns with the LMM's expectations. In particular, the
Exchange believes that the change will facilitate the commencement of
orderly trading in ETPs on their first day of trading by providing the
LMM with flexibility throughout the initial launch process to allow the
development of price stability prior to opening. The Exchange believes
that the LMM's involvement in timing the commencement of trading in the
ETP is consistent with the Act as this will promote the fair and
orderly launch of trading in the ETP. The Exchange believes that the
LMM, with their market knowledge of the book and an understanding of
the ETP IPO Security, would be well placed to select appropriate price
bands for the price validation test and to approve the Indicative Price
(i.e., provide the Expected Price). However, if the LMM does not
provide price bands the Exchange will apply default price bands.
Accordingly, the Exchange believes it is in the best interest of the
market to give LMMs the opportunity to provide input into the price
validation test to help ensure the fair and orderly launch of trading
in the ETP.
The proposed language allowing the LMM to select price bands and
approve the Expected Price is designed to allow flexibility to promote
efficient price discovery while protecting against unexpected
volatility. The Exchange believes that limiting price bands to a
maximum of $0.50 is reasonable and appropriate to balance the need for
price stability with the need to allow the market to discover the
appropriate opening price. The Exchange will notify Members and the
public of any changes to available price bands or increments at least
one week in advance of the change, ensuring transparency and allowing
market participants to adjust their strategies accordingly.
Furthermore, the Exchange believes that requiring the IPO Auction
in an ETP IPO Security to generally occur by 9:45 a.m. at the latest is
reasonable and appropriate because by that time, the LMM would be
expected to step in and respond to any excess demand, and any excess
volatility in the ETP would be protected through the proposed
validation checks. However, the IPO Auction may be delayed past 9:45
a.m. if the criteria in proposed Rules 11.23(d)(2)(C)(i) through (v)
are met. This timing is also consistent with market practice, as Nasdaq
currently begins its IPO auction process at 9:40 a.m. for ETPs.
The Exchange also believes that making this functionality optional
promotes just and equitable principles of trade and does not unfairly
discriminate between issuers. ETP issuers, in consultation with the
LMM, are best situated to determine whether to utilize the price
validation test based on their understanding of the ETP and market
conditions. Each price discovery process, whether the current process
or the new proposed process, is designed to arrive at an IPO opening
price that will benefit investors by helping to ensure the IPO Auction
occurs at a price that generally aligns with the LMM's expectations.
Finally, the Exchange believes that the proposed amendments to
delineate between BZX-listed corporate securities and ETP IPO
Securities promote clarity and transparency in the Exchange's rules.
The proposed changes recognize the unique characteristics of ETPs,
including the absence of an underwriter, and tailor the Quote-Only
Period extension provisions accordingly. This promotes just and
equitable principles of trade by ensuring that the rules applicable to
each security type are appropriate for that security's characteristics.
Additionally, the proposed re-lettering of existing Rule 11.23(d)(1)(C)
through (F) to (D) through (G), and the corresponding updates to cross-
references throughout Rule 11.23, enhance the organizational structure
and usability of the rulebook, further promoting clarity and reducing
the potential for confusion.
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 the proposed rule change will impose any burden on intramarket
competition as it is designed to provide an optional price validation
test for ETP issuers and their LMMs to utilize during the IPO Auction
process. The functionality is entirely optional and ETP issuers may
elect to use the existing price volatility protections under Rule
11.23(d)(2)(B)(iii) (and proposed Rule 11.23(d)(2)(C)(ii)) or the new
proposed price validation test under Rule 11.23(d)(2)(C)(vi). Each
price discovery process is designed to arrive at an opening price that
generally aligns with the LMM's expectations.
The Exchange believes that making this functionality optional
promotes just and equitable principles of trade and does not unfairly
discriminate between issuers or market participants. ETP issuers, in
consultation with the LMM, are best situated to determine whether to
utilize the price validation test based on their understanding of the
ETP and market conditions. The proposed rule changes do not advantage
or disadvantage any particular category of market participant. All
market participants may participate in the IPO Auction process on equal
terms regardless of whether the issuer elects to use the price
validation test. Market participants will continue to have the ability
to enter orders during the Quote-Only Period and participate in the IPO
Auction under the same terms as they do today.
Furthermore, the Exchange believes the proposed price validation
test leverages the LMM's market knowledge and role in the opening
process. The LMM's involvement in selecting price bands and approving
the Indicative Price (i.e., providing the Expected Price) is designed
to promote fair and orderly trading in the ETP on its first day of
trading, which benefits all market participants by reducing unexpected
volatility and enhancing price discovery.
The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition. The proposed rule change is
designed to enhance the competitiveness of the Exchange's ETP listing
and trading services by providing an additional optional tool for price
discovery on launch day. This functionality is similar to processes
offered by another exchange \18\ and is designed to attract ETP
listings to the Exchange by offering issuers greater flexibility and
enhanced safeguards during the critical first moments of trading.
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\18\ See Nasdaq Rule 4120(c)(11) and Securities Exchange Act No.
103085 (May 20, 2025) 90 FR 22424 (May 27, 2025) (SR-Nasdaq-2025-
011) (Notice of Filing of Amendment No. 1, and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 1, To Introduce Functionality To Initiate a Trading
Halt for Exchange-Traded Products on Launch Day).
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The proposed rule change does not impose restrictions on trading or
order routing that would disadvantage market participants on other
exchanges. To the extent the proposed functionality makes the Exchange
a more attractive venue for ETP listings or trading, this reflects
legitimate competition among exchanges to offer superior services and
functionality. Market participants on other exchanges are welcome to
become Members and trade on BZX if they determine that this proposed
rule change has made BZX more attractive or favorable. Similarly, other
exchanges remain free to propose similar or alternative functionality
for their own ETP listings.
[[Page 61496]]
The Exchange notes that Nasdaq currently offers similar
functionality for ETP IPO openings, beginning its IPO auction process
at 9:40 a.m. Both the Exchange's proposal and the Nasdaq functionality
introduce optional functionality for ETP IPO auctions that allows
issuers to utilize a price validation test during the IPO opening
process. The key similarities include the optional nature of the
functionality, whereby ETP issuers may elect to opt into the price
validation process. Both proposals provide that the LMM (on BZX) or DLP
(on Nasdaq) may select upper and lower price bands for purposes of the
price validation test, with a maximum price band of $0.50. Under both
functionalities, the LMM/DLP must approve an Expected Price before the
validation test is applied, and if the security does not pass the price
validation test, the LMM/DLP may (but is not required to) select
different price bands before recommencing the process. Both exchanges
will notify members and the public of any changes to available price
bands or increments at least one week in advance. Additionally, both
functionalities require that the IPO auction occur by 9:45 a.m. ET at
the latest under the price validation test. Both proposals also
delineate between corporate IPO securities and ETP IPO Securities,
recognizing the unique characteristics of ETPs, including the absence
of an underwriter.
The Exchange's proposal differs from the Nasdaq Proposal in several
respects. First, the Exchange specifies default price bands of $0.10 if
the LMM does not select price bands, whereas the Nasdaq functionality
does not specify default bands and leaves the matter to DLP discretion.
Second, the Exchange integrates the ETP IPO Auction provisions into its
existing Rule 11.23 governing auctions and uses its existing Quote-Only
Period terminology and structure, whereas Nasdaq created a new halt
category under Rule 4120(a)(15) and introduced new terminology
including a ``Display Only Period'' followed by a ``Pre-Launch
Period.'' Third, the Exchange's rule text is more concise and
streamlined, reflecting the Exchange's approach of adapting its
existing auction framework for ETP IPO Securities rather than creating
an entirely new process. Fourth, while both proposals establish similar
timing requirements (auction by 9:45 a.m. ET). The Exchange believes
these differences reflect variations in existing rule structures,
terminology, and organizational approaches between the exchanges, but
do not represent material differences in the functionality or investor
protections provided. Both proposals are designed to facilitate orderly
price discovery for ETP IPO Securities by providing optional price
validation mechanisms that leverage the expertise of the LMM or DLP
while maintaining flexibility for issuers and protecting against
unexpected volatility.
The proposed rule change is designed to provide comparable
functionality to promote competitive equality among exchanges in the
ETP listing market. Accordingly, the Exchange believes the proposed
rule change will promote competition among exchanges while protecting
investors through enhanced price discovery mechanisms.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be 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#6b191e070e46080406060e051f182b180e08450c041d"><span class="__cf_email__" data-cfemail="5c2e293039713f3331313932282f1c2f393f723b332a">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-149 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-2025-149. 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-CboeBZX-2025-149 and
should be submitted on or before January 21, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-24047 Filed 12-30-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on December 31, 2025.
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