Notice2026-05845
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Proposed Rule Change To Amend Certain of Its Rules Regarding Complex Orders and Complex Order Auctions To Accommodate Stop-Limit Complex Orders and Establish Stop Complex Order Auctions (“SCOA”) as a New Type of Auction Mechanism
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 26, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 58 (Thursday, March 26, 2026)</title>
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[Federal Register Volume 91, Number 58 (Thursday, March 26, 2026)]
[Notices]
[Pages 14736-14742]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05845]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105064; File No. SR-CBOE-2026-024]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Amend Certain of Its Rules Regarding
Complex Orders and Complex Order Auctions To Accommodate Stop-Limit
Complex Orders and Establish Stop Complex Order Auctions (``SCOA'') as
a New Type of Auction Mechanism
March 23, 2026.
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 March 9, 2026, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III, 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 14737]]
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 certain of its rules regarding complex orders and complex
order auctions to accommodate stop-limit complex orders and establish
Stop Complex Order Auctions (``SCOA'') as a new type of auction
mechanism. 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 Exchange proposes to amend certain Exchange rules regarding
complex orders and complex order auctions to establish stop-limit
complex orders as a type of complex order and SCOA as a type of auction
mechanism that will facilitate auctions for stop-limit complex orders.
Specifically, the Exchange proposes to amend Rule 5.33 to (1) define
stop-limit complex orders and SCOA, as well as additional terms needed
to support stop-limit complex orders and SCOA, (2) describe SCOA
processing as a new type of auction for complex orders, and (3) broaden
the existing naming convention for auction communications to include
SCOA while also updating certain auction references throughout to
include SCOA. Additionally, the Exchange proposed to amend Rule
5.21(b), Rule 5.25(c), and Rule 5.34(c) to include SCOA in certain
references with other types of auctions, thereby applying certain
existing safeguards to SCOA. The Exchange also proposes an
administrative change to Rule 5.33(b) to make a grammatical correction.
A ``complex order'' is an order or quote involving the concurrent
execution of two or more different series in the same underlying equity
security or index (the ``legs'' or ``components'' of the complex
order), for the same account, occurring at or near the same time and
for the purpose of executing a particular investment strategy with no
more than the applicable number of legs.\3\ A ``Stop-Limit'' order is
an order to buy (sell) that becomes a limit order \4\ 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 specified stop price.\5\
Currently, the Exchange offers stop-limit functionality for simple
orders only. The Exchange proposes to extend this functionality to
complex orders, thereby creating stop-limit complex orders for options.
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\3\ See Rule 1.1.
\4\ See Rule 1.1, which states that a ``limit order'' is an
order to buy or sell a stated number of option contracts at a
specified price or better.
\5\ See Rule 5.6(c).
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Taking into consideration the growth of daily expiring options, the
Exchange believes that market participants will use stop-limit complex
orders to more efficiently manage the short side of a complex order.
The Exchange understands market participants currently may enter a
stop-limit order on the short leg of a complex order while managing the
long leg separately. A stop-limit complex order will provide market
participants with the ability to manage both the long and short legs
simultaneously.
To establish stop-limit complex orders, the Exchange proposes to
add ``stop-limit complex order'' in Rule 5.33(b) as a new instruction
type that the System \6\ will accept as a complex order and ``Market-
Maker SBBO'' as a new term in Rule 5.33(a). As a new type of complex
order, a stop-limit complex order means a complex order to buy or sell,
as the case may be, two or more different series in the same underlying
equity security or index, which are the ``legs'' or ``components'' of
the complex order, for the same account, occurring at or near the same
time and for the purpose of executing a particular investment strategy
with no more than the applicable number of legs. Stop-limit complex
orders will become limit orders when certain trigger conditions are
met, one of which involves Market-Maker quotes in the individual legs
of a complex order. Therefore, the Exchange proposes to adopt the new
term ``Market-Maker SBBO'' to mean the best bid and offer on the
Exchange calculated using only appointed Market-Maker quotes in the
individual legs of a complex order. The Exchange believes that the use
of the Market-Maker SBBO is preferable because it insulates stop-limit
complex orders from inappropriate triggering events that could
otherwise be caused by including non-Market-Maker single-leg limit
orders into the SBBO. Specifically, using the Market-Maker SBBO will
help avoid cascading events where a customer enters a single-leg order
with a limit price that is higher than the current best Market-Maker
bid. Using the SBBO inclusive of single-leg customer orders could cause
resting complex stop limit orders to trigger on SBBOs that are not
reflective of liquidity provider price levels, which could harm complex
stop limit customers. Further, the execution of the first stop-limit
complex order(s) that are inappropriately triggered by inclusion of a
non-Market-Maker order into the SBBO may in turn trigger a second
investor's stop limit order with a more aggressive stop price, and so
on, thereby creating a cascading event of inappropriately-triggered
customer stop-limit orders. The Exchange believes that limiting the
trigger condition, as described below, to quotes from Market-Makers
will be more reflective of the market value and provide a more
authentic market valuation to determine if a stop-limit complex order
should be triggered.
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\6\ See Rule 1.1, which states that the term ``System'' means
the Exchange's hybrid trading platform that integrates electronic
and open outcry trading of option contracts on the Exchange, and
includes any connectivity to the foregoing trading platform that is
administered by or on behalf of the Exchange, such as a
communications hub.
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A stop-limit complex order will become a limit order when either
(i) the Market-Maker SBBO or a trade price for a trade that occurs in
the same complex strategy is equal to or higher (lower) than the stop-
limit price, or (ii) the same side bid (ask) of the underlying equity
security or the underlying index level, as the case may be, is equal to
or higher (lower) than the designated stop-limit price or if a complex
trade price is equal to or higher (lower) than the stop-limit price. In
other words, a complex-stop limit order is a conditional order that
becomes a limit order when triggered by one of two conditions. Only one
of the two possible trigger conditions can be designated for a stop-
limit complex order. Stop-limit complex orders may
[[Page 14738]]
not be designated for bulk messages or as orders Direct to PAR.\7\
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\7\ See Rule 5.6(b), which defines a ``Direct to PAR'' order as
an order a User designates to be routed directly to a specified PAR
workstation for manual handling. A PAR workstation is an Exchange-
provided order management tool for use on the Exchange's trading
floor.
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To facilitate order processing for stop-limit complex orders, the
Exchange proposes to establish SCOA as a new type of auction mechanism.
The Exchange currently offers a variety of auction mechanisms which
provide price improvement opportunities for eligible orders but only
one type of auction mechanism for complex orders, Complex Order Auction
(``COA'').\8\ The Exchange proposes SCOA as a second type of auction
mechanism for complex orders, specifically stop-limit complex orders,
that is similar to COA. Like COA, SCOA is intended to provide
opportunities for price improvements, but it is also designed to
maximize execution quantity, particularly given that one event may
trigger multiple complex stop-limit orders. SCOA is the auction
mechanism for stop-limit complex orders, and stop-limit complex orders
are only eligible for SCOA processing (in other words, all triggered
stop-limit complex orders will be processed in a SCOA). Consequently,
Rule 5.33(b)(5)(A) is amended to state that a stop-limit complex order
is not COA-eligible.
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\8\ See Rule 5.33.
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To add SCOA to Rule 5.33 as a new type of auction mechanism for
stop-limit complex orders, the Exchange proposes to add the term ``Stop
Complex Order Auction'' or ``SCOA'' as a new definition in Rule 5.33(a)
and detail SCOA and SCOA processing in Rule 5.33(d). Rule 5.33(d)
currently details COA and COA processing. Since both COA and SCOA are
auction mechanisms for complex orders, the Exchange proposes to rename
Rule 5.33(d) from ``Complex Order Auctions (COAs)'' to ``Auction Types
for Complex Orders'' and relocate all existing COA provisions currently
in Rule 5.33(d) to Rule 5.33(d)(1). Additionally, SCOA will utilize the
same system functionality for order entry and messaging as COA.
Consequently, the existing naming convention found in Rule 5.33 for
order entry, including transaction ID, and auction messaging that
currently reference COA (e.g., COA messages) is broadened by replacing
the existing ``COA'' designation with ``auction'' throughout Rule 5.33.
For example, instances of ``COA messages'' throughout Rule 5.33 are
replaced with ``auction messages'' so as to apply to both COA and SCOA
messages within Rule 5.33. Also, language in existing Rule 5.33(d)(3)--
Response Time Interval is updated to Rule 5.33(d)(1)(C)--Response Time
Interval for COA to clarify that occurrences of Response Time Interval
in that subparagraph are applicable to COA whereas occurrences of
Response Time Interval in new Rule 5.33(d)(2)(D) are applicable to
SCOA.
The Exchange proposes to further amend Rule 5.33(d) by adding
``Stop Complex Order Auction (SCOAs)'' as the second action [sic] type
of auction mechanism for complex orders, specifically (and solely) for
stop-limit complex orders, as new subparagraph (d)(2). New Rule
5.33(d)(2)(A) establishes that a SCOA is triggered when the trigger
condition designated for a stop-limit complex order has been met. There
are two possible trigger conditions for a stop-limit complex order: the
SBBO/trade price trigger condition and the underlying price trigger
condition. However, only one of the two possible types of trigger
conditions may apply to a stop-limit complex, and the trigger condition
type is determined when a stop-limit complex order is submitted by the
User.\9\ If no trigger condition type is designated when a stop-limit
complex order is submitted, the default trigger condition will be
applied, as described below.
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\9\ See Rule 1.1, which states that the term ``User'' means any
TPH or Sponsored User who is authorized to obtain access to the
System pursuant to Rule 5.5.
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For a stop-limit complex order with the SBBO/trade price trigger
condition, the trigger condition is met when either (i) the same side
Market-Maker SBBO is equal to or higher (lower) than the stop-limit
price or (ii) a trade occurs in the same complex instrument at a price
equal to or higher (lower) than the stop-limit price. The SBBO/trade
price trigger condition will be the trigger condition for a SCOA if the
SBBO/trade price trigger condition is designated as such when an order
is submitted or if no trigger condition is designated at the time of
order submission since the SBBO/trade price trigger condition functions
as the default trigger condition. Stop-limit complex orders comprised
of legs in different groups of series in a class that designate the
SBBO/Trade Price trigger condition will only trigger a SCOA if a trade
occurs at or better than the stop price. As an example, for stop-limit
complex orders with both SPX and SPXW leg components that have the
SBBO/Trade Price trigger condition, the SCOA will only trigger if a
trade occurs at or better than the stop price.
For a stop-limit complex order with an underlying price designated
as the trigger condition, the order must be submitted with instructions
that designate the price threshold of the underlying security or index
as either (i) at or above the underlying price or index level or (ii)
at or below the underlying price or index level. If the underlying
security is an equity, the SCOA is triggered when the same side bid
(ask) of the underlying security is equal to or higher (lower) than the
designated stop-limit price or if a last-sale eligible trade price is
equal to or higher (lower) than the stop-limit price. If the underlying
security is an index, the SCOA is triggered when the underlying index
level is equal to or higher (lower) than the designated threshold
price. The price threshold must be designated at a price that is higher
(lower) than the current value of the underlying security.
Once the trigger condition designated for a stop-limit complex
order is met, a SCOA will be initiated, and the System will send an
auction message to all subscribers that receive auction messages. An
auction message will identify the auction ID, instrument ID, quantity,
and side of the market of the stop-limit complex order. If a single
stop-limit complex order is triggered, the SCOA starting auction price
will be the less aggressive of the order's limit price or the opposite
side SBBO. In addition to addressing a single stop-limit complex order,
SCOA is an auction mechanism designed to effectively manage order
handling in the event that multiple stop-limit complex orders with the
same trigger event are elected simultaneously, which has been observed
for simple complex [sic] orders. If multiple stop-limit complex orders
in the same complex instrument are triggered by the same trigger event,
such orders are bundled into the same SCOA, as stated in new Rule
5.33(d)(2)(B). For multiple stop-limit complex orders in the same SCOA
with the same trigger event, the SCOA starting auction price will be
the less aggressive of either the most aggressive limit price of the
orders in the SCOA or the opposite side SBBO.
If multiple stop-limit complex orders are received for the same
complex strategy but with different trigger conditions, such orders
will not be bundled into the same SCOA. Instead, multiple stop-limit
complex orders in the same complex strategy but with different trigger
events will be processed as separate SCOAs. SCOAs may process
concurrently, and the System may initiate a SCOA in a complex strategy
[[Page 14739]]
even though another SCOA in that complex strategy is ongoing.
Proposed Rule 5.33(b)(2)(D) defines ``Response Time Interval'' for
SCOA as the period of time during which Users may submit responses to
the auction message. The Exchange will establish the Response Time
Intervals for SCOA on a class-by-class basis, and as provided in new
Rule, the duration of the response time interval may not exceed 1000
milliseconds. Auction Responses to SCOA will be substantially similar
to Auction Responses to COA, and consequently, the process of
submitting Auction Responses for SCOA in Rule 5.33(b)(2)(E) is
substantially similar to the process of submitting Auction Responses
for COA in Rule 5.33(b)(1)(D). As is the case for COA, the Exchange
will determine on a class-by-class basis if all Users are eligible to
submit Auction Response(s) or if only Marker-Makers with an appointment
in the class and TPHs acting as agent for orders resting at the top of
the COB \10\ in the relevant complex strategy may submit Auction
Response(s). An Auction Response must specify the price, size, side of
the market and auction ID for the SCOA that the Auction Response is in
response to. Auction Response(s) with a permissible Capacity in the
applicable minimum increment during the Response Time Interval will be
accepted by the System. Auction Responses may be for a quantity that is
more than the SCOA order. The System will aggregate the size of Auction
Responses submitted at the same price for an EFID \11\ and cap the size
of the aggregated Auction Responses at the size of the SCOA order.
During the Response Time Interval, Auction Responses are not firm and
can be modified or withdrawn at any time prior to the end of the
Response Time Interval. However, any modified Auction Response will be
given a new timestamp by the System, resulting in a loss of priority
unless the modification was to decrease the size in the Auction
Response. At the end of the Response Time Interval, Auction Responses
are firm, and their price and size are guaranteed. Auction Responses
are not displayed and may only execute against the SCOA order for which
an Auction Response is submitted. The System will cancel or reject any
unexecuted Auction Responses or unexecuted portions at the conclusion
of the SCOA. In certain circumstances, the System will terminate a SCOA
prior to end of the Response Time Interval.
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\10\ See Rule 5.33(a), which defines ``Complex Order Book'' or
``COB'' as the Exchange's electronic book of complex orders used for
all trading sessions.
\11\ See Rule 1.1, which state that the term ``EFID'' means an
Executing Firm ID.
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Similar to COA,\12\ a SCOA may be terminated early if orders are
received in a leg of the stop-limit complex order that would improve
the SBBO on the same side as the SCOA order to a price better than the
limit price of any of the orders in the SCOA. A SCOA may also be
terminated early if an order is received in a leg of the stop-limit
complex order that would join or improve the SBBO on the same side of
the SCOA order to a price equal to the limit price of any of the orders
in the SCOA and cause any component of the SBBO to be represented by a
Priority Customer.\13\ In either case of early termination, the SCOA
will be terminated by the System and any unexecuted orders resulting
from the termination will be entered into the COB, if eligible, in
accordance with new Rule 5.33(d)(2)(E)(iii).
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\12\ See existing Rule 5.33(d)(3)
\13\ See Rule 1.1 which states that the term ``Priority
Customer'' means a person or entity that is a Public Customer and is
not a Professional.
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Since other orders received in a leg of the complex order may
result in early termination of a SCOA as described above, the Exchange
recognizes it is possible that market activity may be used to interfere
with SCOA processing in a way that is contrary to just and equitable
principles of trade in the markets. Consequently, the Exchange proposes
to amend Interpretations and Policies .03 to Rule 5.33 to include SCOA
so that if the Exchange identifies a pattern or practice of order
submissions by a TPH that results in early termination of a SCOA(s)
because such orders cause one of the conditions for early SCOA
termination to be met, the actions of the TPH will be deemed conduct
inconsistent with just and equitable principles of trade and a
violation of Rule 8.1, as is currently the case for COA.
New Rule 5.33(d)(2)(F) establishes the processing of SCOA orders.
Once the Response Time Interval has ended, the System will execute a
SCOA order, in whole or in part, against complex contra-side interest
by using an allocation algorithm that will allocate Auction Responses
and unrelated orders resting in the COB to maximize executed volume.
The SCOA allocation algorithm maximizes execution quantity while
optimizing price-improvement opportunity for stop-limit complex order
customers. The Exchange notes that SCOA does not allow legging because
the SCOA allocation algorithm considers all available liquidity and has
multiple rounds. The complexity is compounded if legging is included
and is further compounded if any of the legging events trip risk
control limits for the single-leg book participants (particularly for
Market-Makers who rely heavily on risk controls). The Exchange notes if
the SCOA orders aren't filled in the auction, then they will be added
to the COB in sequence and individually eligible for legging at that
point (as they are ultimately just complex limit orders at that point).
If there are any unfilled order(s) in a SCOA after allocating Auction
Responses and unrelated orders resting in the COB, the System will use
an iteration process to attempt to fill the remaining orders of the
initial SCOA. Upon completion of the initial SCOA, unfilled order(s)
will iterate through additional SCOAs at incrementally more aggressive
starting prices, as stated in the Exchange's technical specifications,
until all orders are filled, their limit price has been reached, or the
current opposite side SBBO price has been used as the last auction
start price. The System enters any unexecuted portion of a SCOA order
that does not execute at the end of the SCOA iterations into the COB,
if eligible for entry, and applies a timestamp based on the time it
enters the COB. The System cancels or rejects any unexecuted portion of
a SCOA order that does not execute at the end of the SCOA iterations if
not eligible for entry into the COB, in accordance with the
instructions for the stop-limit complex order.
The Exchange proposes additional amendments to Rule 5.33 to apply
certain existing provisions of the rule to SCOA or add SCOA as an
auction mechanism applicable to existing rule provisions. Specifically,
the definition of ``Regular Trading'' in Rule 5.33(a) is amended to add
SCOA to the existing COA reference, thereby excluding complex orders
processed through COA or SCOA from the definition of regular trading
since complex orders processed during the COA or SCOA process are not
part of regular trading of complex orders. The Exchange also proposes
to amend Rule 5.33(b) to add SCOA to references of COA since SCOA is
treated in the same manner as COA regarding the Exchange's
determination of terms and Capacities.\14\ The instruction type of
Stock-Option Order as provided in Rule 5.33(b)(5) is amended to state
that, like COA and other auction mechanisms, a nonconforming stock-
option order is not eligible for SCOA
[[Page 14740]]
processing. SCOA is added to COA references in Rule 5.33(k) so that a
SCOA will end if any component or underlying security of a SCOA order
is halted.
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\14\ See Rule 1.1 which states that ``Capacity'' means the
capacity in which a User submits an order, such as an order for the
account of a Market-Maker or Public Customer.
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The Exchange also proposes to add SCOA to Rules 5.21, 5.25, and
5.34 to include SCOA with COA references regarding order handling,
message traffic mitigation, and protection mechanisms and risk controls
for complex orders. Specifically, the Exchange proposes to amend Rule
5.21(b)(3) to remove language limiting response auctions for complex
orders and add SCOA to electronic order handling during a limit up-
limit down state. The proposed amendment to Rule 5.25(c) adds SCOA to
the list of the Exchange's auction mechanisms, thereby applying the
message traffic mitigation requirements for auction response processing
to SCOA. The Exchange also proposes to amend Rule 5.34(b) and (c) to
include SCOA with existing references to COA to extend existing order
and quote price protection mechanisms and risk controls for complex
order to SCOA communications and processing. Under proposed
5.34(c)(4)(B)(i), a User may specify whether volume or executions in
SCOA, in addition to existing auction mechanisms named in the rule,
will count toward the User's class, EFID, or EFID Group limit. Option
volume resulting from SCOA processing may be excluded from certain risk
monitor mechanism risk parameters, namely the volume parameter in Rule
5.34(c)(4)(A)(i) and the count parameter in Rule 5.34(c)(4)(A)(iii).
Additionally, under proposed rule 5.34(c)(4)(F), SCOA is named as a
type of complex order within the rule so that individual trades
executed as part of a complex order response may be counted when
determining that the volume, notional, count, or risk trips limit as
well as percentage limit have been reached. Use of this functionality
is optional, and a User may continue to include executions resulting
from these exchange auctions in their risk parameters.
The Exchange also proposes to make a grammatical correction to Rule
5.33(d)(1)(D) to update ``appointed'' to ``appointment'' when
referencing the appointment of a Market-Maker.
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.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \16\ 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) \17\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ Id.
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In particular, the Exchange believes the proposed change would
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and protect investors and the
public interest by making available to investors a type of complex
order that incorporates the functionality of a stop-limit order. A
stop-limit complex order can effectively be used by a market
participant to replace manual monitoring and management a market
participant must currently engage in to gain the benefits of stop-limit
functionality. Market participants may choose to execute a transaction
once certain market conditions are met as a way to help manage and
reduce the risk of extreme loss. Stop-limit complex orders provide
investors an execution and risk management tool to execute transactions
without the manual monitoring needed today. The addition of a stop-
limit complex order gives market participants who wish to utilize this
order type an automated way of monitoring for conditions in which they
desire an execution to occur, thereby creating operational efficiencies
for the market. The Exchange believes the proposed rules are
appropriate in that complex orders are recognized by market
participants as useful, both as an investment and a risk management
strategy, and adding stop-limit order functionality to complex orders
provides even greater utility. The proposed rules will provide an
efficient mechanism for carrying out investor strategies.
The Exchange also believes auctioning triggered stop-limit complex
orders through a SCOA will provide those orders with additional
opportunities for price improvement and executions, particularly given
that multiple stop-limit complex orders may be triggered by the same
event. SCOA is necessary as a new auction mechanism to accommodate
stop-limit complex order auctions because SCOA functionality that
bundles multiple orders is unique to the SCOA auction mechanism. The
Exchange believes that when multiple stop-limit complex orders are
triggered by the same event, bundling into a single SCOA will have
better execution outcomes than processing multiple individual orders in
separate auctions. Pursuant to the proposed trigger process, the System
will initiate the SCOA process for all stop-limit complex orders once
designated conditions are met. Through the SCOA process, the Exchange
intends to allocate resting interest against auctioned stop-limit
orders to maximize executed volume, thereby filling stop-limit complex
orders to the extent possible based on the auction responses received
for the SCOA and resting interest in the COB. The Exchange believes
this allocation method will benefit investors because it will result in
execution of as many contracts of the auctioned order(s) as possible.
The Exchange believes that the proposal to initiate a SCOA once the
designated trigger condition for a stop-limit complex order has been
met removes impediments to, and perfects the mechanisms of, a free and
open market and a national market system and, in general, protects
investors and the public interest because the Exchange will initiate a
SCOA for a stop-limit complex order in accordance with the user's
instructions. Additionally, through the SCOA functionality that bundles
multiple stop-limit complex orders with the same trigger condition into
the same SCOA, SCOA processing will pursue price improvement through
its allocation algorithm that is designed to maximize execution
quantity while optimizing price-improvement opportunity for customers.
The proposed execution of SCOA orders following the conclusion of a
SCOA is consistent with general principles of customer priority and
protects the leg markets. While SCOA orders may execute against complex
contra-side interest only, the prices of these executions must improve
the SBBO if there is a Priority Customer representing any leg on the
Simple Book as required by Rule 5.33(f)(2)(A)(iv). The proposed
[[Page 14741]]
stop-limit complex order rules also promote equal access by providing
recipients of the Exchange's data feeds that include auction
notifications with the opportunity to interact with orders in a SCOA.
The Exchange again notes that the communication functionality for
SCOA is the same as the existing functionality for COA, providing Users
with the ability to place a stop-limit complex order if they so choose.
When utilizing a stop-limit complex order, Users also have the choice
to select the trigger condition for the order. Market participants who
wish to place a stop-limit complex order have the flexibility to choose
one of two types of trigger conditions which, if met, would execute the
stop-limit complex order for SCOA processing. The trigger conditions
rely on certain option or underlying prices, or index levels. The
Exchange believes it is appropriate to use the Market-Maker SBBO for
one of the trigger conditions because it will help insulate a stop-
limit complex order from being triggered by an inappropriate trigger
event (such as one or more customer orders placed at an extreme price)
that could otherwise be caused by including non-Market-Maker limit
orders into the SBBO. Use of the Market-Maker SBBO as a triggering
condition is intended to help avoid cascading triggering events that
could result from customer stop-limit complex orders with limit prices
that are not necessarily reflective of market valuation. Use of the
Market-maker SBBO will help support greater market stability and
execution and provides certain protections to market participants who
wish to utilize stop-limit complex orders. The Exchange believes the
proposed changes to add stop-limit complex orders and SCOA are not
unfairly discriminatory, as the abilities to place a stop-limit order
and respond to a SCOA auction message are generally available to all
Users. The proposed rule change provides the Exchange with the
authority to determine if all Users or only Market-Makers and certain
TPHs may respond to auction messages in alignment with Exchange
authority for responses to auction messages for COA,\18\ and the
Exchange believes is appropriate to limit responses to Market-Makers
and certain TPHs if it is necessary to incentivize those Market-Makers
or TPHs to provide liquidity and further encourage competition. If the
Exchange were to limit responses to only Market-Makers and designated
TPHs, the Exchange would do so to encourage more competitive responses
because such responses will have a greater likelihood of fulfillment in
larger quantities when such responses are at more competitive prices.
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\18\ See Rule 5.33(d)(1)(D).
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Additionally, regarding risk controls and price protection
mechanisms, the Exchange believes the proposed change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and protect investors and the public interest
by providing market participants with enhanced abilities to manage
their risk with respect to stop-limit complex orders on the Exchange.
The Exchange believes that the proposed rule change will protect
investors and the public interest because the proposed extension of
reasonability checks and the inclusion of SCOA processing with drill-
through protection as a risk monitoring mechanism will assist Users in
minimizing their risk exposure, thereby reducing the potential for
disruptive, market-wide events. The Exchange also notes that the
proposed amendment to Rule 5.33(k) to cancel or reject all auction
responses to a SCOA in the event that any component or underlying
security to a stop-limit complex order is halted provides an addition
layer of protection to market participants by eliminating SCOA
processing when trading in underlying securities is not available. SCOA
will function in a similar manner as COA with respect to these
protection and risk mechanisms, as well as trading halts, and the
proposed amendments are consistent with Cboe Rules as applicable to
COA.
Proposed amendments to Rules 5.34(b) and (c) specifically include
SCOA with safeguards that exist for COA. The Exchange believes the
proposed change to include SCOA in the auction mechanism types that
allow Users to specify whethervolume orexecutions in the various named
auction mechanisms will count toward the User's class, EFID, or EFID
Group limitis reasonable because orders executed through these auction
mechanisms are subject to different protections, such as price
improvement requirements, as compared to other order types. As a
result, these orders have different risk considerations. The Exchange
notes that this functionality is optional, and Users may continue to
include executions resulting from these exchange auctions in their risk
parameters (as is the case today) if they prefer. Additionally, the
Exchange believes the proposed changes are not unfairly discriminatory,
as the risk controls and protection mechanisms that will be applied to
SCOA are currently available for other auction types. Additionally, the
risk controls and protection mechanisms are available to all Users and
applied uniformly to all Users who may choose to utilize enhanced risk
parameter settings.
Last, the Exchange believes correcting a grammatical error by
replacing ``appointed'' with ``appointment'' in Rule 5.33(d)(1)(D) will
eliminate confusion in this provision of the rule.
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 proposed rule change is
intended to provide market participants with new voluntary
functionality to automate a manual monitoring process to determine when
to execute an order in the event that a specific condition has been
met. 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 stop-
limit complex orders will be available to all Users and processed in
the same manner. A stop-limit complex order is a type of complex order
that is intended to achieve the execution of a complex order that Users
can achieve today through manual monitoring and order submissions.
Stop-limit complex orders offer market participants an automated
alternative to this manual process. The proposed rule change provides
all Users with the ability to submit a stop-limit complex order, which
will be processed through SCOA once the trigger condition for the order
has been met. Use of a stop-limit complex order (as well as the trigger
condition) will be voluntary and within the discretion of a User, and a
User may continue to manage complex orders to achieve an execution of a
complex order under certain conditions in the same manner they do
today. Additionally, SCOA messaging for an order will be sent to all
Users who are recipients of auction messaging data, and all Users
generally may submit responses to the auction if they so choose.
The Exchange does not believe 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 changes apply only to a permissible User order instruction
regarding how the Exchange will handle and then execute an order. Stop-
limit complex orders extend functionality that is available today on
the Exchange
[[Page 14742]]
in stop-limit orders for simple orders to complex orders, and SCOA will
utilize certain COA functionality that is currently used on the
Exchange. Additionally, to the extent that the proposed changes may
make the Exchange a more attractive trading venue for market
participants on other exchanges, such market participants may elect to
become Exchange market participants.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 shall: (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#82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4"><span class="__cf_email__" data-cfemail="186a6d747d357b7775757d766c6b586b7d7b367f776e">[email protected]</span></a>. Please include
file number SR-CBOE-2026-024 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-2026-024. 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-2026-024 and should be submitted on
or before April 16, 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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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-05845 Filed 3-25-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 26, 2026.
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