Notice2026-08366
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Opening Auction Process Provided Under Rule 11.23(b)(2)(B) to Delay the Opening Auction Under Certain Market Conditions
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 30, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 83 (Thursday, April 30, 2026)</title>
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[Federal Register Volume 91, Number 83 (Thursday, April 30, 2026)]
[Notices]
[Pages 23330-23332]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08366]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105316; File No. SR-CboeBZX-2026-004]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Amend the Opening Auction Process Provided
Under Rule 11.23(b)(2)(B) to Delay the Opening Auction Under Certain
Market Conditions
April 27, 2026.
On January 8, 2026, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``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 amend the Opening Auction Process provided
under Rule 11.23(b)(2)(B) to delay the Opening Auction under certain
market conditions. The proposed rule change was published for comment
in the Federal Register on January 27, 2026.\3\ On March 11, 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 has received no comments on the proposed rule change. This
order institutes proceedings under Section 19(b)(2)(B) of the Act \6\
to determine whether to approve or disapprove 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. 104654 (Jan. 22,
2026), 91 FR 3588 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 104975, 91 FR 12649
(Mar. 16, 2026). The Commission designated April 27, 2026 as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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I. Summary of the Proposed Rule Change 7
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\7\ For a full description of all aspects of the proposed rule
change, including BZX's justification for it, please see the Notice,
supra note 3.
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BZX holds an Opening Auction for each security listed on the
Exchange. During an Opening Auction, all executions, if any, occur at a
single price, and that price must be within a certain range established
by the Exchange. The Exchange proposes to amend its Opening Auction
process by, under certain circumstances, delaying the Opening Auction
and if necessary gradually widening the bands within which the Opening
Auction price must fall. The Exchange also proposes associated changes
reflecting the proposed modifications to its process.\8\
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\8\ For example, the Exchange proposes to amend BZX Rules
11.23(b)(1)(A) and (B), to reflect that the Opening Auction may
occur at a time other than 9:30 a.m. It also proposes to amend BZX
Rule 11.23(b)(1)(B) to provide that Eligible Auction Orders
designated for the Opening Auction may not be cancelled or modified
from 9:28 a.m. until the Opening Auction has concluded except that
Regular Hours Only (``RHO'') limit orders designated for the Opening
Auction may be modified, but not cancelled, from 9:28 a.m. until the
time the Opening Auction has concluded. Any such RHO limit orders
modified from 9:28 a.m. until the Opening Auction has concluded
would be treated as late-limit-on-open orders.
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The Current Opening Auction Process
Each Opening Auction price is the price level within the Collar
Price Range \9\ that maximizes the number of shares executed between
the Continuous Book \10\ and Auction Book \11\
[[Page 23331]]
in the Opening Auction.\12\ In the event of a volume based tie at
multiple price levels, the Opening Auction price is the price that
results in the minimum total imbalance. In the event of a volume based
tie and a tie in minimum total imbalance at multiple price levels, the
Opening Auction price is the price closest to the Volume Based Tie
Breaker.\13\ The Volume Based Tie Breaker for an Opening Auction is the
midpoint of the NBBO \14\ where there is a Valid NBBO \15\; where there
is no Valid NBBO, the Volume Based Tie Breaker is the Final Last Sale
Eligible Trade (``FLSET'').\16\
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\9\ ``Collar Price Range'' is defined in BZX Rule 11.23(a)(6) as
``the range from a set percentage below the Collar Midpoint (as
defined below) to above the Collar Midpoint, such set percentage
being dependent on the value of the Collar Midpoint at the time of
the auction, as described below. The Collar Midpoint will be the
Volume Based Tie Breaker for all applicable auctions, except for IPO
Auctions in ETPs (as defined in Rule 11.8, Interpretation and Policy
.02(d)(2)), for which the Collar Midpoint will be the issue price.
Specifically, the Collar Price Range will be determined as follows:
where the Collar Midpoint is $25.00 or less, the Collar Price Range
shall be the range from 10% below the Collar Midpoint to 10% above
the Collar Midpoint; where the Collar Midpoint is greater than
$25.00 but less than or equal to $50.00, the Collar Price Range
shall be the range from 5% below the Collar Midpoint to 5% above the
Collar Midpoint; and where the Collar Midpoint is greater than
$50.00, the Collar Price Range shall be the range from 3% below the
Collar Midpoint to 3% above the Collar Midpoint.''
\10\ ``Continuous Book'' is defined in BZX Rule 11.23(a)(7) as
``all orders on the BZX Book that are not Eligible Auction Orders.''
\11\ ``Auction Book'' is defined in BZX Rule 11.23(a)(1) as
``all Eligible Auction Orders on the BZX Book.''
\12\ See BZX Rule 11.23(b)(2)(B) (governing the determination of
the BZX Official Opening Price).
\13\ Volume Based Tie Breaker is defined in BZX Rule
11.23(a)(23).
\14\ NBBO is defined in BZX Rule 1.5(o) as ``the national best
bid or offer.''
\15\ Valid NBBO is defined in BZX Rule 11.23(a)(23) as an NBBO
where: ``(i) there is both a NBB and NBO for the security; (ii) the
NBBO is not crossed; and (iii) the midpoint of the NBBO is less than
the Maximum Percentage away from both the NBB and the NBO.'' The
Maximum Percentage will be determined by the Exchange and will be
published in a circular distributed to Members with reasonable
advance notice. Id.
\16\ FLSET is defined in BZX Rule 11.23(a)(9) as ``the last
round lot trade occurring during Regular Trading Hours on the
Exchange if the trade was executed within the last one second prior
to either the Closing Auction or, for Halt Auctions, trading in the
security being halted. Where the trade was not executed within the
last one second, the last round lot trade reported to the
consolidated tape received by the Exchange during Regular Trading
Hours and, where applicable, prior to trading in the security being
halted will be used. If there is no qualifying trade for the current
day, the BZX Official Closing Price from the previous trading day
will be used.''
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The Collar Price Range for an Opening Auction is the range from a
set percentage below the Collar Midpoint (which is generally the Volume
Based Tie Breaker) to above the Collar Midpoint.\17\ The Collar
Midpoint (and Volume Based Tie Breaker) will be the midpoint of the
NBBO where there is a Valid NBBO. Where there is no Valid NBBO, the
FLSET will be used as the Collar Midpoint (and Volume Based Tie
Breaker).
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\17\ See supra note 9.
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Proposed Changes to the Opening Auction Process
The Exchange proposes to change its Opening Auction in
circumstances where the Indicative Price \18\ is outside the Collar
Price Range--whether an FLSET-established Collar Price Range or NBBO-
established Collar Price Range.\19\ In these circumstances, BZX
proposes to delay the Opening Auction, as follows:
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\18\ The term ``Indicative Price'' means the price at which the
most shares from the Auction Book and the Continuous Book would
match. In the event of a volume based tie at multiple price levels,
the Indicative Price will be the price which results in the minimum
total imbalance. In the event of a volume based tie and a tie in the
minimum total imbalance at multiple price levels, the Indicative
Price will be the price closest to the Volume Based Tie Breaker. See
BZX Rule 11.23(a)(10).
\19\ See Notice. at 3589-90.
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1. BZX would implement an initial five-second delay period
(9:30:00-9:30:05 a.m.). During this delay period, the system will check
every second to determine whether (1) there is a Valid NBBO and the
Indicative Price is within the NBBO-established Collar Price Range, or
(2) there is no Valid NBBO and the Indicative Price is within the
FLSET-established Collar Price Range. If either condition is met, the
Opening Auction price will be established pursuant to the Standard
Opening Auction Process. If during any one-second check, there is no
Indicative Price (meaning there is no longer crossed interest), the
Opening Auction would occur immediately pursuant to proposed Rule
11.23(2)(B)(v), which provides that the BZX Official Opening Price will
be the price of the FLSET.
2. If the Opening Auction has not occurred by 9:30:05, the System
would widen the Collar Price Range in the direction of the Indicative
Price by 5% of the Volume Based Tie Breaker \20\ as of 9:30:05 a.m.
(``Widening Amount'').\21\ The System would check to see whether the
Indicative Price is inside the widened Collar Price Range every second
between 9:30:05 and 9:30:30 a.m.
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\20\ If there is no Valid NBBO, the FLSET would be used as the
Volume Based Tie Breaker. See BZX Rule 11.23(a)(23).
\21\ The Widening Amount would be locked-in as of 9:30:05, and
will not change between 9:30:05 and 9:34:30 even in the event that a
round lot trade reported to the consolidated tape was received by
the Exchange during that time (i.e., a FLSET).
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a. If the Indicative Price is within the widened Collar Price
Range, the Opening Auction price would be established pursuant to the
Standard Opening Auction Process.
b. If the Indicative Price is not within the widened Collar Price
Range, the Opening Auction would be further delayed, as discussed
below.
3. If by 9:30:30 a.m. the Indicative Price is not within the
widened Collar Price Range, the Collar Price Range would again widen by
the Widening Amount. The System would check to see whether the
Indicative Price is inside the widened Collar Price Range every second
between 9:30:30 and 9:31:30 a.m.
a. If an Indicative Price is inside the widened Collar Price Range
during a check, the Opening Auction price would be established pursuant
to the Standard Opening Auction Process.
b. If the Indicative Price is not within the widened Collar Price
Range, the Opening Auction would be further delayed, as discussed
below.
4. If by 9:31:30 a.m. the Indicative Price is not within the
widened Collar Price Range, the System will check to see whether the
Indicative Price is inside the widened Collar Price Range every second
between 9:31:30 and 9:34:30 a.m.
a. If an Indicative Price is inside the widened Collar Price Range
during a check, the Opening Auction price would be established pursuant
to the Standard Opening Auction Process.
b. Unless the Opening Auction has occurred, the Collar Price Range
would widen in the direction of the Indicative Price by the Widening
Amount each minute from 9:31:30 to 9:34:30.
5. If no Opening Auction has occurred by 9:34:30 a.m., the Opening
Auction would occur pursuant to the Standard Opening Auction Process
using the expanded Collar Price Range as of 9:34:30.
In summary, the Opening Auction would be delayed until either: (1)
the NBBO becomes a Valid NBBO; (2) the Indicative Price is within the
Collar Price Range (i.e., if the Opening Auction occurred between
9:30:01 and 9:30:05) or within the widened Collar Price Range (i.e., if
the Opening Auction occurred between 9:30:06 and 9:34:30); (3) there no
longer is an Indicative Price; or (4) four minutes and 30 seconds
elapsed.
BZX states that the proposal is designed to increase the likelihood
that auction eligible orders priced equally or more aggressive than the
Indicative Price are able to participate in the Opening Auction at a
price that reflects current market conditions, instead of being
canceled because they are priced outside the FLSET-established Collar
Price Range.\22\
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\22\ See Notice, at 3592.
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BZX also proposes to modify the definition of BZX Official Opening
Price in Rule 11.23(a)(5) to mean the price disseminated to the
consolidated tape as the market center open (rather than market center
opening trade). This proposed change would allow the Exchange to
determine the BZX Official Opening Price by execution of either a
round-lot or an odd-lot trade in the Opening Auction.
The BZX Official Opening Price and Limit Up Limit Down Bands
The Exchange states that the proposal will result in (1) fewer
limit up-limit down (``LULD'') halts due to LULD bands that are based
on a stale price; and (2) more accurate Collar Price Ranges that are
based on current market
[[Page 23332]]
conditions rather than the BZX Official Closing Price.\23\ BZX believes
that this proposal strikes an appropriate balance by providing
additional time for the Opening Auction Process to facilitate more
meaningful price formation that better reflects current market
conditions for BZX-listed securities, while limiting any delay to
ensure the BZX Office Price is still reported to the Securities
Information Processor (``SIP'') by 9:35 a.m. and used to set the LULD
price bands. The Exchange notes that, while there will be no LULD price
bands until the Exchange disseminates a reference price and thus there
will be no LULD price bands during the period before the Opening
Auction Process occurs, this is a tradeoff that already exists as it
relates to the opening process on the New York Stock Exchange LLC
(``NYSE''), which may delay the opening process for an indefinite
period of time.\24\ Further, the Exchange states that any potential
drawback in the delay of the LULD price bands is mitigated by the
limited circumstances in which the delay would occur and that any LULD
price bands disseminated during such delay may not be reflective of
current market conditions.\25\
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\23\ See id.
\24\ See id.
\25\ See id.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2026-004 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act \26\ to determine whether the proposed
rule change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change to inform the Commission's analysis of
whether to approve or disapprove the proposal.
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\26\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Exchange Act,\27\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to, the
consistency of the proposal with Section 6(b)(5) of the Act,\28\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, protect
investors and the public interest; and not be designed to regulate by
virtue of any authority conferred by the Exchange Act matters not
related to the purposes of the Exchange Act or the administration of
the exchange.
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\27\ Id.
\28\ 15 U.S.C. 78f(b)(5).
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Pursuant to Section 19(b)(2)(B) of the Act,\29\ the Commission is
providing notice of the grounds for disapproval under consideration. As
described above, the Exchange has proposed to amend the Opening Auction
Process Provided Under Rule 11.23(b)(2)(B). In certain cases, the
proposed Opening Auction Process would result in a delay in the
calculation of the BZX Official Opening Price, which in most cases is
the reference price for initial LULD price bands for BZX-listed
securities. In particular, the Commission seeks comment on whether the
proposal includes sufficient analysis to support a conclusion that the
proposal is consistent with the requirements of Section 6(b)(5) of the
Act,\30\ including the requirements that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, promote just and equitable principles of trade,
protect investors and the public interest; and not be designed to
regulate by virtue of any authority conferred by the Exchange Act
matters not related to the purposes of the Exchange Act or the
administration of the exchange.
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\29\ Id.
\30\ 15 U.S.C. 78f(b)(5).
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III. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with the Act, and the rules and regulations thereunder.
Although there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of data,
views, and arguments, the Commission will consider, pursuant to Rule
19b-4 under the Act,\31\ any request for an opportunity to make an oral
presentation.\32\
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\31\ 17 CFR 240.19b-4.
\32\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by May 21, 2026. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
June 4, 2026.
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#3042455c551d535f5d5d555e4443704355531e575f46"><span class="__cf_email__" data-cfemail="80f2f5ece5ade3efedede5eef4f3c0f3e5e3aee7eff6">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2026-004 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeBZX-2026-004. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-CboeBZX-2026-004 and should be submitted
by May 21, 2026. Rebuttal comments should be submitted by June 4, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(57).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-08366 Filed 4-29-26; 8:45 am]
BILLING CODE 8011-01-P
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