[Federal Register Volume 83, Number 72 (Friday, April 13, 2018)]
[Notices]
[Pages 16140-16142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07676]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83021; File No. SR-CboeBZX-2018-026]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Modify 
Rule 21.9 of the Exchange's Rules and Related Functionality Applicable 
to the Routing Options Made Available by the Exchange's Equity Options 
Platform

April 9, 2018.
    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 2, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'') 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 Exchange has designated this 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) 
thereunder,\4\ which renders it effective upon filing with the 
Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to modify Rule 21.9 of the Exchange's 
rules and related functionality applicable to the routing options made 
available by the Exchange's equity options platform (``BZX Options'').
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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 parts 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 modify Rule 21.9 to modify the description 
of two existing routing strategies (without modifying such strategies) 
and to adopt a new routing strategy. Exchange Rule 21.9 describes 
various options to route orders away from BZX Options to other options 
exchanges. Rule 21.9(a)(2)(A) describes Parallel D routing as a routing 
option under which an order checks the System \5\ for available 
contracts and then is sent to destinations on the System routing table. 
Parallel 2D is described in Rule 21.9(a)(2)(B) in the same way. To 
distinguish the two options, however, Parallel D routing is described 
as a routing option that may route to multiple destinations at a single 
price level simultaneously whereas Parallel 2D routing is described as 
a routing option that may route to multiple destinations and at 
multiple price levels simultaneously. The Exchange proposes to retain 
this functionality but to change the refer to the routing strategy 
equivalent to both Parallel D and Parallel 2D as the ROUT routing 
option and then to specify that a User \6\ may select either Route To 
Improve (``RTI'') or Route To Fill (``RTF'') for the ROUT routing 
option, thus capturing the distinction between the two strategies. In 
other words, the RTI routing option would continue to function as the 
Parallel D routing option is described (i.e., routing at a single price 
level) and the RTF would continue to function as the Parallel 2D 
routing option is described (i.e. routing at multiple price levels). 
The proposed description is substantively identical to and based on the 
description employed for the Exchange's cash equities trading platform 
(``BZX Equities'').\7\ The Exchange does not propose any other changes 
to these routing options.
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    \5\ The ``System'' is the automated trading system used by BZX 
Options for the trading of options contracts. See Rule 16.1(a)(59).
    \6\ The term ``User'' means any Options Member or Sponsored 
Participant who is authorized to obtain access to the Exchange's 
System pursuant to Rule 11.3. See Rule 16.1(a)(63).
    \7\ See BZX Rule 11.13(b)(3)(G).
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    The Exchange also proposes to adopt the SWPA routing option based 
on a similar routing option offered with respect to BZX Equities. 
Specifically, as proposed, SWPA would be a routing option under which 
an order checks the

[[Page 16141]]

System for available contracts and then is sent to only Protected 
Quotations \8\ and only for displayed size. Further, to the extent that 
any portion of the routed order is unexecuted, the remainder is posted 
to the BZX Options Book at the order's limit price, unless otherwise 
instructed by the User. This proposed routing strategy is based on and 
similar to BZX Rule 11.13(b)(3)(I), which describes the SWPA routing 
strategy for BZX Equities. However, the Exchange has proposed language 
describing SWPA on BZX Options instead on rule text of its affiliate, 
Cboe EDGX Exchange, Inc. (``EDGX''), which also offers the SWPA routing 
strategy for its cash equities trading platform (``EDGX Equities'').\9\ 
The proposed rule text for BZX Options' version of SWPA is specifically 
based on EDGX Rule 11.11(g)(9), and is identical except for references 
to ``contracts'' instead of ``shares'' and reference to the ``BZX 
Options Book'' instead of the ``EDGX Book.'' The Exchange also has not 
proposed to adopt the final sentence of the routing strategy as defined 
for EDGX Equities because that sentence is only necessary to 
differentiate the SWPA routing strategy from the SWPB routing strategy 
and the Exchange is not proposing to adopt SWPB routing for BZX 
Options.
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    \8\ The term Protected Quotation is defined in BZX Rule 
27.1(a)(19) and has the same meaning as is set forth in Regulation 
NMS Rule 600(b)(58).
    \9\ Although BZX Equities also offers the SWPA routing strategy, 
its description is formatted differently than the EDGX Equities 
version. In turn, because EDGX is simultaneously proposing to adopt 
a SWPA routing strategy for its options trading platform (``EDGX 
Options'') based on the EDGX Equities description, the Exchange 
believes it is preferable to retain consistency between BZX Options 
and EDGX Options. Accordingly, the Exchange has proposed to follow 
the structure of the EDGX Equities description rather than the BZX 
Equities description.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. The change to the references to the Parallel D and Parallel 
2D routing options are intended to align the Exchange's routing 
strategies between BZX Equities and BZX Options. As noted above, there 
is no substantive change to the operation of the strategies.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change also is designed to support the principles 
of Section 11A(a)(1) \12\ of the Act in that it seeks to assure fair 
competition among brokers and dealers and among exchange markets. In 
particular, the proposed change to introduce an additional routing 
strategy will provide market participants with greater flexibility in 
routing orders consistent with the options market Options Order 
Protection and Locked/Crossed Market Plan without developing order 
routing strategies on their own. The Exchange again notes that the 
proposed routing strategy is based on and substantively identical to a 
routing option offered by BZX Equities.\13\
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    \12\ 15 U.S.C. 78k-1(a)(1).
    \13\ See EDGX Rule 11.11(g)(9).
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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 notes that the 
proposal will further promote consistency between the Exchange's 
trading platforms for BZX Equities and BZX Options. The Exchange does 
not believe that the proposed changes will have any impact on inter-
market competition as the proposed SWPA routing strategy will be 
available to all Users. The Exchange does not believe that the proposed 
SWPA routing strategy will impose any burden on intra-market 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange provides routing services in a highly 
competitive market in which participants may avail themselves of a wide 
variety of routing options offered by self-regulatory organizations, 
other broker-dealers, market participants' own proprietary routing 
systems, and service bureaus. In such an environment, system 
enhancements such as the changes proposed in this rule filing do not 
burden competition, because they can succeed in attracting order flow 
to the Exchange only if they offer investors higher quality and better 
value than services offered by others.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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)\14\ of the Act and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 the 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \16\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
states that waiver of the 30-day operative delay would allow Exchange 
Users to more quickly benefit from this proposed rule change and would 
be consistent with routing options that are already available on BZX 
Equities. Based on the foregoing, the Commission believes the waiver of 
the operative delay is consistent with the protection of investors and 
the public interest. Therefore, the Commission hereby waives the 
operative delay and designates the proposal operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings

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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 proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-CboeBZX-2018-026 on the subject line.

Paper Comments

     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 No. SR-CboeBZX-2018-026. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-CboeBZX-2018-026 and should be submitted on 
or before May 4, 2018.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07676 Filed 4-12-18; 8:45 am]
 BILLING CODE 8011-01-P