Notice2026-07988
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.17 To Adopt a Wide Market Protection Mechanism Designed To Reduce the Risk of Orders Executing at Extreme or Adverse Prices When the National Best Bid and Offer (“NBBO”) Is Determined To Be Wide
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
April 24, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 79 (Friday, April 24, 2026)</title>
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[Federal Register Volume 91, Number 79 (Friday, April 24, 2026)]
[Notices]
[Pages 22184-22189]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07988]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105280; File No. SR-CboeEDGX-2026-023]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 21.17 To Adopt a Wide Market Protection Mechanism Designed
To Reduce the Risk of Orders Executing at Extreme or Adverse Prices
When the National Best Bid and Offer (``NBBO'') Is Determined To Be
Wide
April 21, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 10, 2026, Cboe EDGX Exchange, Inc. (``Exchange'' or
``EDGX'') 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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend Rule 21.17 to adopt a wide market protection mechanism designed
to reduce the risk of orders executing at extreme or adverse prices
when the national best bid and offer (``NBBO'') is determined to be
wide. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/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
[[Page 22185]]
forth in sections A, B, and C below, of the most significant aspects of
such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule filing is to amend Rule 21.17(a),
Additional Price Protection Mechanisms and Risk Controls (Simple
Orders), to adopt a wide market protection mechanism designed to reduce
the risk of orders executing at extreme or adverse prices when the NBBO
is determined to be wide.\3\ The Exchange notes that its affiliated
exchange, Cboe Exchange, Inc. (hereinafter ``C1'' or Cboe Exchange''),
recently implemented rule changes adopting a substantially similar wide
market protection mechanism.\4\ The proposed wide market protection
mechanism, similar to that implemented by Cboe Exchange, will leverage
the existing iterative drill-through protection mechanism for certain
orders when the NBBO is wide and will initiate a drill-through pause on
applicable inbound market or limit orders or elected Stop (Stop-Loss)
\5\ or Stop-Limit \6\ orders which would either execute or post to the
EDGX Book \7\ at potentially extreme prices.
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\3\ The Exchange notes it currently has a Market Order NBBO
Width Protection Mechanism set forth in Rule 21.17(a)(1); the
proposed rule change does not result in changes to the Market Order
NBBO Width Protection Mechanism, which is infrequently triggered. In
general, the current Market Order NBBO Width Protection Mechanism
applies when the NBBO is significantly wider than will be considered
under the proposed wide market protection mechanism. Further, the
Market Order NBBO Width Protection is applicable only to market
orders and does not apply to Stop (Stop-Loss) orders. The proposed
wide market protection mechanism is applicable to market and limit
orders (subject to certain exceptions), and is intended to ``catch''
more orders. Unlike the Market Order NBBO Width Protection
Mechanism, which cancels orders too far outside the NBBO, the
proposed mechanism will trigger the drill-through process for
applicable orders and thus provide additional execution
opportunities.
\4\ See Securities Exchange Act Release No. 34-104245 (November
24, 2025), 90 FR 54806 (November 28, 2025) (SR-CBOE-2025-081)
(amending Cboe Exchange Rule 5.34 to adopt a wide market protection
mechanism). See also Securities Exchange Act Release No. 34-104435
(December 17, 2025), 90 FR 59890 (December 22, 2025) (SR-CBOE-2025-
091) (amending Cboe Exchange Rule 5.34 to exclude all M and N
capacity orders from the wide market protection mechanism).
\5\ An order may include a Stop Price which will convert the
order into a Market Order when the Stop Price is triggered. An order
to buy converts to a Market Order when the consolidated last sale in
the security occurs at, or above, the specified Stop Price. An order
to sell converts into a Market Order when the consolidated last sale
in the security occurs at, or below, the specified Stop Price. See
Rule 11.8(a)(1) (definition of ``Stop Price'' order).
\6\ An order may contain a Stop Limit Price which will convert
to a Limit Order once the Stop Limit Price is triggered. A Limit
Order to buy with a Stop Limit Price becomes eligible for execution
by the System when the consolidated last sale in the security occurs
at, or above, the specified Stop Price. A Limit Order to sell with a
Stop Limit Price becomes eligible for execution by the System when
the consolidated last sale in the security occurs at, or below, the
specified Stop Limit Price. See Rule 11.8(b)(1) (definition of
``Stop-Limit Price'' order).
\7\ ``EDGX Book'' shall mean the System's electronic file of
orders. See Rule 1.5(d) (definition of ``EDGX Book'').
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Drill-Through Price protection is currently described in Exchange
Rule 21.17(a)(4). Under Rule 21.17(a)(4)(A), if a buy (sell) order
enters the EDGX Book at the conclusion of the opening auction process
or would execute or post to the EDGX Book when it enters the EDGX Book,
the System \8\ executes the order up (down) to a buffer amount (the
Exchange determines the buffer amount on a class and premium basis)
above (below) the offer (bid) limit of the Opening Collar \9\ or the
National Best Offer (``NBO'') (National Best Bid (``NBB'')) that
existed at the time of order entry, respectively (the ``Drill-Through
Price'').\10\
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\8\ ``System'' means the electronic communications and trading
facility designated by the Board through which securities orders of
Users are consolidated for ranking, execution and, when applicable,
routing away. See Rule 1.5(cc) (definition of, ``System'').
\9\ See Rule 21.7(a) for the definition of Opening Collars.
\10\ See Rule 21.17(a)(4)(A).
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Rule 21.17(a)(4)(C) establishes an iterative drill-through process,
whereby orders will rest in the EDGX Book for multiple time periods and
at more aggressive displayed prices during each time period.\11\
Specifically, for a market order with a Time-in-Force of Day or a limit
order (or unexecuted portion) with a Time-in-Force of Day, Good-til-
Cancelled (``GTC''), or Good-til-Date (``GTD''), the System enters the
order in the EDGX Book with a displayed price equal to the Drill-
Through Price. The order (or unexecuted portion) will rest in the EDGX
Book at the Drill-Through Price for the duration of consecutive time
periods (the Exchange determines on a class-by-class basis the length
of the time period in milliseconds, which may not exceed three seconds)
(each time period is referred to as an ``iteration'').\12\ Following
the end of each period, the System adds (if a buy order) or subtracts
(if a sell order) one buffer amount (the Exchange determines the buffer
amount on a class-by-class basis) to the Drill-Through Price displayed
during the immediately preceding period (each new price becomes the
``Drill-Through Price'').\13\ The order (or unexecuted portion) rests
in the EDGX Book at that new Drill-Through Price for the duration of
the subsequent period. The System applies a timestamp to the order (or
unexecuted portion) based on the time it enters or is re-priced in the
EDGX Book for priority reasons. The order continues through this
iterative process until the earliest of the following to occur: (a) the
order fully executes; (b) the User \14\ cancels the order; or (c) the
buy (sell) order's limit price equals or is less (greater) than the
Drill-Through Price at any time during application of the drill-through
mechanism, in which case the order rests in the EDGX Book at its limit
price, subject to a User's instructions.
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\11\ The Exchange will announce to Members the buffer amount and
the length of the time periods in accordance with Rule 16.3. The
Exchange notes that each time period will be the same length (as
designated by the Exchange), and the buffer amount applied for each
time period will be the same.
\12\ See Rule 21.17(a)(4)(C).
\13\ See Rule 21.17(a)(4)(C).
\14\ The term ``User'' shall mean any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Rule 11.3. See Rule 1.5(ee) (definition of''User'').
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Currently, there are common scenarios in which certain orders are
trading at prices that are, for reasons described below, artificially
wide. For example, certain trading strategies result in a significant
number of simple Stop (Stop-Loss) and Stop-Limit orders resting in the
EDGX Book and then being triggered simultaneously by a common event.
The receipt of large quantities of market and limit orders on the same
side of a series results in rapid removal of liquidity without
opportunity for replenishment (and potential related triggers of risk
protections). This results in potentially extreme or adverse execution
prices as risk is re-evaluated by Market-Makers and quotes are
replenished, typically within seconds of the start of the triggering
event. Additionally, the Exchange has observed an increase in resting
Stop (Stop-Loss) or Stop-Limit orders that are simultaneously triggered
around the opening of the relevant trading session and trading at
extremely wide price levels, up to Obvious Error prices. Similarly,
Stop (Stop-Loss) and Stop-Limit orders may be triggered on a trade
(rather than an NBBO update) that exhausts liquidity, causing the
triggered order(s) to execute at the next available bid/offer, which
may be at an extreme level, rather than affording the order the benefit
of Drill-Through Price protection by displaying the order at the price
of the triggering trade and iterating from there.
The Exchange now proposes rule changes designed to prevent trades
at extreme or adverse price levels in such
[[Page 22186]]
scenarios, when quotes are wide or when orders are removing liquidity
in rapid succession. The Exchange proposes to amend Rule 21.17 to add a
wide market protection mechanism that will leverage the existing
iterative drill-through protection mechanism for certain orders when
the NBBO is considered ``wide'' and will initiate a drill-through pause
on applicable near-marketable inbound market or limit orders or elected
Stop (Stop-Loss) or Stop-Limit orders which would either execute or
post to the EDGX Book at potentially extreme or adverse prices.
Specifically, the Exchange proposes to add new Rule 21.17(a)(8) to
establish a wide market protection mechanism. Under proposed Rule
21.17(a)(8)(A), if (i) when the NBBO is ``wide,'' the System receives a
buy (sell) order with a price that is more than a buffer amount above
(below) the NBB (NBO) or (ii) a Stop (Stop-Loss) or Stop-Limit buy
(sell) order is triggered and is priced more than a buffer amount above
(below) the NBB (NBO) and the NBBO after the triggering event is
``wide,'' the order enters the EDGX Book and is displayed at the
Benchmark Price for an Exchange determined-amount of time (this time
period will be considered the first drill-through iteration pursuant to
Rule 21.17(a)(4)). If the order does not execute or there is any
remaining size of the order following a partial execution, the order
will continue the drill-through process pursuant to Rule 21.17(a)(4).
As set forth in proposed Rule 21.17(a)(8)(A), for purposes of the
proposed subparagraph (6), the NBBO is ``wide'' if there is no NBO or
the width of the NBBO for the series is equal to or greater than an
amount the Exchange determines on a class-by-class basis and which is
applied based on the NBB. Further, for a buy (sell) order, the
Benchmark Price is the least aggressive price of (1) the NBB (NBO) plus
(minus) a buffer amount determined by the Exchange on a class and
premium basis; \15\ (2) the last trade price, if greater (less) than or
equal to the NBB (NBO); \16\ or (3) the midpoint of the then-current
NBBO. Consider the below examples.
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\15\ In a no-bid scenario for buy orders, the NBB will be
considered as zero and the Benchmark Price will be calculated
accordingly. In a no-offer scenario for sell orders, the NBO will
not be used; the Benchmark Price will use the less aggressive of the
last trade price or the NBB plus the buffer amount determined by the
Exchange on a class-by-class basis.
\16\ If last trade price is worse than the NBO (NBB) it will not
be used as a possible Benchmark Price.
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Example #1, Demonstrating Eligibility of a Stop-Limit Order for Wide
Market Protection
In this example, a buy Stop-Limit order is triggered, the NBBO
after the triggering event is determined to be wide, and the limit
price is more than a buffer amount above the NBB. Under the proposed
rules, the order will be paused at the Benchmark Price and begin drill-
through iteration. Assume for purposes of this example, the market will
be considered wide pursuant to proposed Rule 21.17(a)(8)(A)(i) if the
width of the NBBO for the series is equal to or greater than $1.50.
Further assume for this example, the buffer amount to determine limit
order eligibility based on price is 80% of the width of NBBO.
Order 1: Stop-Limit Buy 5 contracts @ 3.33, Stop Price = $2.30
MM1 Quote: 5 @ 1.95 x 5 @ 3.65
MM2 Quote: 5 @ 1.95 x 5 @ 2.30 (NBBO, not wide)
Order 2: Buy 5 @ 2.30
Order 2 trades with MM2 Quote at 2.30; as a result, Order 1 is elected.
The resulting NBBO after the triggering event is 1.95 x 3.65 (i.e.,
NBBO width equal to $1.70), which is considered wide, and Order 1 is
triggered with a limit price of $3.33, which is greater than the
Exchange-determined buffer amount above the NBB (i.e., NBB of 1.95 +
(NBBO width of 1.70 x 0.80 buffer) = 3.31). Thus, Order 1 is subject to
the wide market protection mechanism.
Example #2, Demonstrating Determination of Benchmark Price
In this example, a buy Stop (Stop-Loss) order is triggered by a
quote, the NBBO after the triggering event is determined to be wide,
and the price is more than a buffer amount above the NBB. Under the
proposed rules, the order will be paused at the Benchmark Price and
begin drill-through iteration. Assume for purposes of this example, the
market will be considered wide pursuant to proposed Rule
21.17(a)(8)(A)(i) if the width of the NBBO for the series is equal to
or greater than $1.50. Further assume for this example, the buffer
amount to determine the order eligibility based on price is 80% of the
width of NBBO and the buffer amount used in determining Benchmark Price
is 0.75.
Order 1: Stop (Stop-Loss) Buy 5 @ 3.40, Stop Price = $2.00
MM1 Quote: 5 @ 1.95 x 5 @ 3.75
MM2 Quote: 5 @ 1.95 x 5 @ 2.30 (NBBO, not wide)
Order 2: Buy 5 @ 2.30
Order 2 trades with MM2 Quote at 2.30; as a result, Order 1 is elected.
The resulting NBBO after the triggering event is 1.95 x 3.75 (i.e.,
NBBO width equal to $1.80), which is considered wide, and Order 1 is
triggered with a price of $3.40, which is greater than the Exchange-
determined buffer amount above the NBB (i.e., NBB of 1.95 + (NBBO width
of 1.80 x 0.80 buffer) = 3.39). Thus, Order 1 is subject to the wide
market protection mechanism. The Benchmark Price is 2.30, determined as
the least aggressive of:
<bullet> The NBB (1.95) plus a buffer amount determined by the Exchange
on a class and premium basis (0.75): 2.70
<bullet> Last Trade Price: 2.30
<bullet> The midpoint of the then-current NBBO: 2.85
Thus, executions of Order 1 up to $2.30 will be considered the
initial drill-through iteration, as the order becomes subject to the
Drill-Through Price protection mechanism under Rule 21.17(a)(4)(C).
The Exchange proposes to add Rule 21.17(a)(8)(B) to specify that
the wide market protection mechanism applies during all trading
sessions, except for a pre-determined amount of time prior to the close
of the Regular Trading Hours (``RTH'') \17\ trading session (such time
will be determined by the Exchange).\18\ This provides a final
opportunity for market participants to utilize Stop (Stop-Loss) and
Stop-Limit orders to exit positions if desired at the end of the
trading session, in order to avoid unintended overnight risk.\19\
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\17\ ``Regular Trading Hours'' means the time between 9:30 a.m.
and 4:00 p.m. Eastern Time. See Rule 1.5(y).
\18\ During this time, the drill-through process will not be
initiated by the wide market protection mechanism but may still
apply pursuant to Rule 21.17(a)(4). The Exchange further notes that
GTH trading is not currently enabled.
\19\ The Exchange notes that Rule 20.6(c), Obvious Errors, will
continue to apply as it does today; there are no changes to the
Obvious Error rules as a result of the proposed rule change.
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The Exchange proposes to add Rule 21.17(a)(8)(C), which states that
if an order would initiate the wide market protection while the drill-
through process in the applicable series is in progress pursuant to
Rule 21.17(a)(4), then the System does not initiate the wide market
protection and instead the order would join the ongoing drill-through
as set forth in Rule 21.17(a)(4)(C)(iv). The Exchange also proposes to
add Rule 21.17(a)(8)(D) to exclude bulk messages, Intermarket Sweep
Orders (``ISOs''), Immediate-or-Cancel orders (``IOCs''), and M and N
capacity orders from the wide market
[[Page 22187]]
protection mechanism; and to note that the Exchange may apply the wide
market protection on a class-by-class basis.
The Exchange also proposes to amend Rule 21.17(a)(5)(A)(ii) to
exclude from the current protections for market orders in no-bid series
certain orders that would be otherwise subject to wide market
protection under the proposed rule changes. Currently, under Rule
21.17(a)(5)(A)(ii), if the System receives a sell market order in a
series after it is open for trading with an NBB of zero, and the NBO in
the series is greater than $0.50, the System cancels or rejects the
market order, except if a drill-through process (described in
subparagraph (a)(4)) is in progress for sell orders in the series and
the sell market order would be subject to the drill-through protection,
then the order joins the ongoing drill-through process in the then-
current iteration and at the then-current Drill-Through Price,
regardless of NBBO. The Exchange proposes to amend Rule
21.17(a)(5)(A)(ii) to note that in the event the System receives a sell
market order in a series after it is open for trading with an NBB of
zero and the NBO in the series is greater than $0.50, if the order is
subject to wide market protection pursuant to proposed subparagraph
(a)(8), then the order enters the EDGX Book and is displayed at the
Benchmark Price for an Exchange determined-amount of time (this time
period will be considered the first drill-through iteration pursuant to
subparagraph (a)(4)), with any remaining size continuing the drill-
through process pursuant to subparagraph (a)(4).
Finally, the Exchange proposes to amend Rule 21.17(a)(5)(B) to
exclude from the current protections for market orders in no-offer
series certain orders that would be otherwise subject to wide market
protection under the proposed rule changes or drill-through protections
pursuant to current Rule 21.17(a)(4). Currently under Rule
21.17(a)(5)(B), if the System receives a buy market order in a series
after it is open for trading with an NBO of zero, the System cancels or
rejects the market order. The Exchange proposes to amend Rule
21.17(a)(5)(B) to note that in the event the System receives a buy
market order in a series after it is open for trading with an NBO of
zero, if the order is subject to wide market protection pursuant to
proposed subparagraph (a)(5), then the order enters the EDGX Book and
is displayed at the Benchmark Price for an Exchange determined-amount
of time (this time period will be considered the first drill-through
iteration pursuant to subparagraph (a)(4)), with any remaining size
continuing the drill-through process pursuant to subparagraph (a)(4);
or if a drill-through process (described in current subparagraph
(a)(4)) is in progress for buy orders in the series and the buy market
order would be subject to the drill-through protection, then the order
joins the ongoing drill-through process in the then-current iteration
and at the then-current Drill-Through Price, regardless of NBBO.
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.\20\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \21\ 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) \22\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
\22\ Id.
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In particular, the Exchange believes the proposed rule change to
implement a wide market protection mechanism will remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, protect investors, because it will
provide applicable orders with additional and consistent execution
opportunities and price protections. As noted above, the wide market
protection mechanism is effectively an extension of the Exchange's
current Drill-Through Price protection, of which the primary purpose is
to prevent orders from executing at prices ``too far away'' from the
market when they enter the EDGX Book for potential execution. The
Exchange believes the proposed rule change is consistent with this
purpose, because Users who submit applicable orders or have orders
triggered in markets that are wider than expected, possibly due to wide
quotes or orders removing liquidity in rapid succession, will receive
price protection against execution at potentially extreme or adverse
prices and additional execution opportunities.
Further, the proposed rule change to leverage the existing
iterative drill-through protection mechanism for certain orders when
the NBBO is considered ``wide'' allows these orders to receive the same
level of price protection as other orders otherwise subject to the
drill-through process. The proposed rule change will allow orders in
wide markets additional execution opportunities while continuing to
protect them against execution at potentially extreme prices, by
providing the opportunity for execution at reasonable prices by
allowing for liquidity replenishment that may result in more aggressive
prices, especially during times when liquidity may require additional
time to replenish, such as near the beginning of a trading session.
The Exchange believes the proposal will enhance risk protections,
the individual firm benefits of which flow downstream to counterparties
both at the Exchange and at other options exchanges, which increases
systemic protections as well. The Exchange believes enhancing risk
protections will allow Users to enter orders, including Stop (Stop-
Loss) and Stop-Limit orders, and quotes with further reduced fear of
inadvertent exposure to excessive risk, which will benefit investors
through increased exposure to liquidity for the execution of their
orders.
The Exchange also believes the proposed changes regarding the
application of the wide market protection mechanism during Exchange
trading sessions will protect investors, as the proposed application
allows market participants a final opportunity to utilize Stop (Stop-
Loss) and Stop-Limit orders to exit positions if desired at the end of
the relevant trading session, in order to avoid unintended overnight
risk. Further, the proposed changes add transparency to the rules
regarding the wide market protection functionality and provide greater
certainty as to the application of the process.
Additionally, the Exchange believes changes to specifically exclude
bulk messages, ISOs, and IOCs from the wide market protection mechanism
(similar to the Drill-Through Price protection mechanism) are
reasonable and appropriate, given the iterative pricing process would
be inconsistent with the
[[Page 22188]]
orders instruction (and thus the user's intent). The proposed change to
exclude all M and N capacity orders is designed to ensure consistency
across all potential types of Market-Maker orders. The Exchange
believes the proposed change to exclude all M and N capacity orders
from the wide market protection is reasonable, as Market-Makers are
positioned to observe and subsequently address wide market scenarios,
by tightening the NBBO with an order or quote.
The Exchange also believes the proposed change to clarify that the
System will not initiate the wide market protection while a drill-
through process in the applicable series is in progress is reasonable,
as it will bring transparency and clarity to the rulebook regarding how
the wide market protection mechanism interacts with the Drill-Through
Price protection mechanism, to the benefit of investors. This proposed
change is consistent with current drill-through functionality, where
incoming orders that enter the EDGX Book while the drill-through is in
progress and that would be subject to the drill-through protection join
the on-going drill-through process.\23\
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\23\ See Rule 21.17(a)(4)(C)(iv).
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Additionally, the Exchange believes changes to specifically exclude
from the current protections for market orders in no-bid (offer) series
certain orders that would otherwise be subject to wide market
protection will remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general,
protect investors. Specifically, the Exchange believes the change to
exclude from the current protections for market orders in no-bid
(offer) series certain orders that would otherwise be subject to wide
market protection may allow opportunity for execution than if they were
immediately canceled or rejected. This proposed rule change may
increase execution opportunities for Users that submit sell market
orders with an NBB of zero when the NBO in the series is greater than
$0.50 (in the case of market orders in no-bid series protections) or
buy market orders with an NBO of zero while still providing protection
against executions at potentially erroneous prices. Similarly, the
Exchange believes the change to allow buy market orders received by the
System when the NBO is zero to be subject to the drill-through process
is reasonable, as it may allow opportunity for execution of such
orders, rather than if they were immediately canceled or rejected. This
change aligns market order in no-bid (offer) series protection for
Users that submit sell market orders with an NBB of zero when the NBO
in the series is greater than $0.50 (in the case of market orders in
no-bid series protections) with how the Exchange will handle buy market
orders with an NBO of zero.
Finally, the Exchange believes the proposed change to apply the
wide market protection on a class-by-class basis is reasonable, as
classes may have different trading characteristics or may be affected
differently by market conditions. The proposal will provide the
Exchange with flexibility to apply wide market protections in a manner
which accounts for material differences across option classes, thereby
enhancing investor protection while minimizing unnecessary market
disruption. Further, the Exchange believes the proposed changes are not
unfairly discriminatory, as wide market protection applies uniformly to
all market participants within each class. This approach is consistent
with the Exchange's existing practice of applying certain other order
and quote price protection and risk controls, such as the limit order
fat finger check for simple orders,\24\ on a class-by-class basis where
product characteristics warrant differential treatment in regard to
risk protections.
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\24\ See Rule 21.17(a)(2).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the wide market
protection functionality will apply to all applicable orders in a class
in the same manner. Additionally, it will provide the same price
protection and execution opportunities to relevant orders that are
currently provided to orders that are subject to the Drill-Through
Price protection process, as the wide market protection mechanism is
effectively an extension of the Exchange's current Drill-Through Price
protection. As noted above, the Exchange believes it is not unfairly
discriminatory to apply this protection on a class-by-class basis, as
wide market protection applies uniformly to all market participants
within each class. This approach is consistent with the Exchange's
existing practice of applying certain other order and quote price
protection and risk controls, such as the limit order fat finger check
for simple orders,\25\ on a class-by-class basis where product
characteristics warrant differential treatment in regard to risk
protections.
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\25\ See Rule 21.17(a)(2).
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The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as the proposed
rule change relates specifically to price protections offered on the
Exchange and how the System handles orders as part of these price
protection mechanisms. The proposed wide market protection mechanism
expands the current Drill-Through Price protection mechanism and
provides relevant orders with improved protection against execution at
potentially extreme or adverse prices through Drill-Through Price
protection.
The Exchange believes the proposed rule change would ultimately
provide all market participants with additional execution opportunities
when appropriate while providing protection from extreme or adverse
execution. The Exchange believes the proposal will enhance risk
protections, the individual firm benefits of which flow downstream to
counterparties both at the Exchange and at other options exchanges,
which increases systemic protections as well. The Exchange believes
enhancing risk protections will allow Users to enter orders, including
Stop (Stop-Loss) and Stop-Limit orders, and quotes with further reduced
fear of inadvertent exposure to excessive risk, which will benefit
investors through increased exposure to liquidity for the execution of
their orders. Without adequate risk management tools, Trading Permit
Holders could reduce the amount of order flow and liquidity they
provide. Such actions may undermine the quality of the markets
available to customers and other market participants. Accordingly, the
proposed rule change is designed to encourage Trading Permit Holders to
submit additional order flow and liquidity to the Exchange. The
proposed change may similarly provide additional execution
opportunities, which further benefits liquidity, especially during
times when liquidity may require additional time to replenish, such as
near the beginning of a trading session. Additionally, as discussed
above, the Exchange's affiliated exchange, Cboe Exchange, recently
implemented rule changes adopting a substantially similar wide market
protection mechanism.\26\ Thus,
[[Page 22189]]
the proposed rule change will also align the rules of the Exchange with
that of its affiliated exchange, Cboe Exchange.
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\26\ See Securities Exchange Act Release No. 34-104245 (November
24, 2025), 90 FR 54806 (November 28, 2025) (SR-CBOE-2025-081). See
also Securities Exchange Act Release No. 34-104435 (December 17,
2025), 90 FR 59890 (December 22, 2025) (SR-CBOE-2025-091).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \27\ and Rule 19b-4(f)(6) \28\ thereunder.
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \29\ and Rule 19b-4(f)(6) \30\
thereunder.
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(6).
\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1"><span class="__cf_email__" data-cfemail="2755524b420a44484a4a424953546754424409404851">[email protected]</span></a>. Please include
file number SR-CboeEDGX-2026-023 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-CboeEDGX-2026-023. 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-CboeEDGX-2026-023 and should be
submitted on or before May 15, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-07988 Filed 4-23-26; 8:45 am]
BILLING CODE 8011-01-P
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