Notice2026-05659
Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Approving a Proposed Rule Change To Permit Orders for the Accounts of Market-Makers With an Appointment in the Applicable Class To Be Solicited as the Contra-Side Order Submitted Into Certain Exchange 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
March 24, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 56 (Tuesday, March 24, 2026)</title>
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[Federal Register Volume 91, Number 56 (Tuesday, March 24, 2026)]
[Notices]
[Pages 14057-14058]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05659]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105049; File No. SR-CBOE-2025-090]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Order
Approving a Proposed Rule Change To Permit Orders for the Accounts of
Market-Makers With an Appointment in the Applicable Class To Be
Solicited as the Contra-Side Order Submitted Into Certain Exchange
Auctions
March 19, 2026.
I. Introduction
On December 9, 2025, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to permit orders for the accounts of Market-Makers
with an appointment in the applicable class on the Exchange to be
solicited as the contra-side order submitted for execution against an
agency order into certain Exchange auctions. The proposed rule change
was published for comment in the Federal Register on December 22,
2025.\3\ On February 5, 2026, pursuant to Section 19(b)(2) of the
Act,\4\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ The Commission did not receive any comments on
the proposed rule change. This order approves 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. 104437 (December 17,
2025), 90 FR 59906 (December 22, 2025) (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 104768, 91 FR 5972
(February 10, 2026). The Commission designated March 22, 2026, as
the date by which the Commission shall approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change.
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II. Description of the Proposed Rule Change
The Automated Improvement Mechanism (``AIM'') is an electronic
auction intended to provide an order that a Trading Permit Holder \6\
represents as agent (``Agency Order'') with the opportunity to receive
price improvement over the National Best Bid or Offer (``NBBO'').\7\
The Solicitation Auction Mechanism (``SAM'') is an electronic auction
intended to provide a larger-sized Agency Order with the opportunity to
receive price improvement over the NBBO.\8\ AIM and SAM auctions are
also available for flexible exchange options (``FLEX Options'') (``FLEX
AIM'' and ``FLEX SAM,'' respectively).\9\ Upon submitting an Agency
Order into one of these auctions, the initiating Trading Permit Holder
(``Initiating TPH'') must also submit a contra-side second order (the
``Initiating Order'') for the same size as the Agency Order. The
Initiating Order guarantees that the Agency Order will receive an
execution at no worse than the auction start price. Upon commencement
of an auction, market participants submit responses to trade against
the Agency Order. At the conclusion of an AIM Auction, depending on the
contra-side interest (including auction responses) available, the
Initiating Order may be allocated a certain percentage of the Agency
Order.\10\ At the conclusion of a SAM Auction, depending on the contra-
side interest (including auction responses) available, the Initiating
Order may be allocated the entire Agency Order or none of the Agency
Order.\11\
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\6\ ``Trading Permit Holder'' has the meaning set forth in the
Cboe Bylaws. See Cboe Rule 1.1.
\7\ See Cboe Rule 5.38 (AIM).
\8\ See Cboe Rule 5.39 (SAM).
\9\ See Cboe Rules 5.73 (FLEX AIM) and 5.74 (FLEX SAM).
\10\ See Cboe Rule 5.37. Specifically, under Cboe Rule 5.37(e),
the AIM Initiating Order will receive an allocation of 50% of the
Agency Order if there is one other User at the same price or 40% of
the Agency Order if there are two or more other Users at the same
price. See also Cboe Rule 5.73(e) for rules concerning the execution
of an Agency Order in the FLEX AIM.
\11\ See Cboe Rule 5.39(e). See also Cboe Rule 5.74(e) for rules
concerning the execution of an Agency Order in the FLEX SAM.
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Currently, the introductory paragraphs of Rules 5.37 and 5.73
prohibit orders for the accounts of Market-Makers with an appointment
in the applicable class on the Exchange in all classes except S&P 500
Index options (``SPX'') to be solicited to execute against the Agency
Order in a simple AIM or FLEX AIM Auction. The introductory paragraphs
of Rules 5.39 and 5.73 prohibit orders for the accounts of Market-
Makers with an appointment in the applicable class on the Exchange to
be solicited to execute against the Agency Order in a simple SAM or
FLEX SAM Auction. The Exchange proposes to amend Rules 5.37, 5.39,
5.73, and 5.74 to permit orders for the accounts of Market-Makers with
an appointment in the applicable class on the Exchange, in all classes,
to be
[[Page 14058]]
solicited for the Initiating Order \12\ submitted for execution against
an Agency Order into a simple AIM Auction, a simple SAM Auction, a FLEX
AIM Auction, or a FLEX SAM Auction.
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\12\ The ``Initiating Order'' is the order comprised of
principal interest or a solicited order(s) submitted to trade
against the order the submitting Trading Permit Holder (the
``Initiating TPH'' or ``Initiating FLEX Trader,'' as applicable)
represents as agent (the ``Agency Order'').
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III. Discussion and Commission Findings
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.\13\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\14\ which requires, among
other things, that the rules of a national securities exchange be
designed 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. The Commission also finds that the proposed rule change is
consistent with Section 6(b)(8) of the Act,\15\ which requires that the
rules of a national securities exchange do not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act.
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\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(b)(8).
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Permitting brokers to solicit liquidity providers in a class for
electronic auctions could expand available liquidity for these
auctions, thus potentially allowing more auctions to take place, which
may create additional execution and price improvement opportunities for
customers to the ultimate benefit of investors if orders execute at
prices better than the NBBO or large-size block orders are executed
more efficiently.\16\ Furthermore, the Exchange believes increasing the
number of market participants available to be solicited for commencing
an auction may increase competition to provide Initiating Orders, which
may lead to an AIM Auction being initiated at a better price.\17\ In
the Notice, the Exchange provided data for the time period from January
to June 2025 indicating that a significant portion of smaller customer
orders (20 contracts or fewer) executed against Market-Makers.\18\
Allowing this pool of liquidity to be available to be solicited to be
contra orders could increase the number of AIM and SAM auctions
initiated on the Exchange. It also could promote competition among
executing brokers by enabling more members who are not able to commit
the capital to provide the Initiating Order that is necessary to
commence an auction to instead solicit Market-Makers for that necessary
liquidity.
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\16\ See, e.g., Notice, supra note 3, at 59908.
\17\ See id.
\18\ The Commission has also approved a proposal from Cboe to
permit the solicitation of Market-Makers for the SPX Initiating
Order in AIM and FLEX AIM. See Securities Exchange Act Release No.
91116 (February 11, 2021), 86 FR 10154 (February 18, 2021).
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The Exchange's rules do not restrict the group of participants that
may provide responses to AIM auctions, thus helping to assure that the
number of TPHs who can respond to AIM auctions remains competitive.\19\
While allowing a Market-Maker with an appointment in the class to be
solicited to be the contra order could reduce the number of responders
that currently respond to auctions, the commencement of more
competitive auctions, particularly AIM auctions, could attract more
competitive responders, including non-Market Makers, over time to the
potential benefit of investors though greater access to price
improvement opportunities. In addition, the Commission understands that
the Exchange already allows the same Market-Maker firm to act as both
contra (via an away Market-Maker affiliate) and auction responder (via
the appointed Market-Maker).\20\ Accordingly, the proposal could remove
impediments and increase efficient operations by allowing direct
participation from those firms without the need to involve affiliates.
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\19\ According to the Exchange, currently, there are 24 distinct
TPHs with appointments across multi-list classes and 18 TPHs with
VIX appointments, which represent a significant pool of liquidity
that would be available to participate in AIM Auctions through both
contra orders and auction responses. See Notice, supra note 3, at
59908.
\20\ See Notice, supra note 3, at 59007.
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In approving the proposed rule change, the Commission believes that
it is critical that the TPHs comply with, and the Exchange surveils for
violations of, Cboe Rule 8.10, which prohibits TPHs from misusing
material, nonpublic information (for example, advanced knowledge of
auctioned orders).\21\
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\21\ See Cboe Rule 8.10 (Prevention of the Misuse of Material
Nonpublic Information). In the Notice, the Exchange stated that the
protections in Cboe Rule 8.10 will remain in place under the
proposed rule change to address any potential information leakage
concerns. See Notice, supra note 3, at 59007.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-CBOE-2025-090) be, and
hereby is, approved.
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-05659 Filed 3-23-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 24, 2026.
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