[Federal Register Volume 83, Number 245 (Friday, December 21, 2018)]
[Notices]
[Pages 65769-65771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27618]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84830; File No. SR-CboeBYX-2018-025]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend
the Pilot Period for the Exchange's Retail Price Improvement Program
December 17, 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 December 11, 2018, Cboe BYX Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BYX Exchange, Inc. (``BYX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to extend the pilot period for the Exchange's
Retail Price Improvement Program.
The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange's Office of the Secretary, 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 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 the proposed rule change is to extend the pilot
period for the Exchange's Retail Price Improvement Program (the
``Program''). The Program is currently set to expire on the earlier of
approval of the filing to make the Program permanent or December 31,
2018.\5\ The Exchange now proposes to extend the Program until the
earlier of approval of the filing to make the Program permanent or June
30, 2019.
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\5\ The Exchange has filed to make the pilot program permanent.
See Securities Exchange Act Release No. 83831 (August 13, 2018), 83
FR 41128 (August 17, 2018) (SR-CboeBYX-2018-014).
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Background
In November 2012, the Commission approved the Program on a pilot
basis.\6\ The Program is designed to attract retail order flow to the
Exchange, and allows such order flow to receive potential price
improvement. The Program is currently limited to trades occurring at
prices equal to or greater than $1.00 per share. Under the Program, all
Exchange Users \7\ are permitted to provide potential price improvement
for Retail Orders \8\ in the form of non-displayed interest that is
better than the national best bid that is a Protected Quotation
(``Protected NBB'') or the national best offer that is a Protected
Quotation (``Protected NBO'', and together with the Protected NBB, the
``Protected NBBO'').\9\
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\6\ See Securities Exchange Act Release No. 68303 (November 27,
2012), 77 FR 71652 (December 3, 2012) (``RPI Approval Order'') (SR-
BYX-2012-019).
\7\ A ``User'' is defined in BYX Rule 1.5(cc) as any member or
sponsored participant of the Exchange who is authorized to obtain
access to the System.
\8\ A ``Retail Order'' is defined in Rule 11.24(a)(2) as an
agency order that originates from a natural person and is submitted
to the Exchange by a RMO, provided that no change is made to the
terms of the order with respect to price or side of market and the
order does not originate from a trading algorithm or any
computerized methodology. See Rule 11.24(a)(2).
\9\ The term Protected Quotation is defined in BYX Rule 1.5(t)
and has the same meaning as is set forth in Regulation NMS Rule
600(b)(58). The terms Protected NBB and Protected NBO are defined in
BYX Rule 1.5(s). The Protected NBB is the best-priced protected bid
and the Protected NBO is the best-priced protected offer. Generally,
the Protected NBB and Protected NBO and the national best bid
(``NBB'') and national best offer (``NBO'', together with the NBB,
the ``NBBO'') will be the same. However, a market center is not
required to route to the NBB or NBO if that market center is subject
to an exception under Regulation NMS Rule 611(b)(1) or if such NBB
or NBO is otherwise not available for an automatic execution. In
such case, the Protected NBB or Protected NBO would be the best-
priced protected bid or offer to which a market center must route
interest pursuant to Regulation NMS Rule 611.
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The Program was approved by the Commission on a pilot basis running
one year from the date of implementation.\10\ The Commission approved
the Program on November 27, 2012.\11\ The Exchange implemented the
Program on January 11, 2013, and has extended the pilot period six
times.\12\ The pilot period for the Program is currently set to expire
on the earlier of approval of the filing to make this rule permanent or
December 31, 2018. This filing seeks to extend the pilot until the
earlier of approval of the filing to make the Program permanent or June
30, 2019.
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\10\ See RPI Approval Order, supra note 6 at 71652.
\11\ Id.
\12\ See Securities Exchange Act Release Nos. 71249 (January 7,
2014), 79 FR 2229 (January 13, 2014) (SR-BYX-2014-001); 74111
(January 22, 2015), 80 FR 4598 (January 28, 2015) (SR-BYX-2015-05);
76965 (January 22, 2016), 81 FR 4682 (January 27, 2016) (SR-BYX-
2016-01); 78180 (June 28, 2016), 81 FR 43306 (July 1, 2016) (SR-
BatsBYX-2016-15); 81368 (August 10, 2017), 82 FR 38960 (August 16,
2017) (SR-BatsBYX-2017-18); 83758 (August 1, 2018), 83 FR 38757
(August 7, 2018) (SR-CboeBYX-2018-015).
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Proposal To Extend the Operation of the Program
The Exchange established the Program in an attempt to attract
retail order flow to the Exchange by potentially providing price
improvement to such order flow. The Exchange believes that the Program
promotes competition for retail order flow by allowing Exchange members
to submit Retail Price Improvement Orders (``RPI Orders'') \13\ to
interact with Retail Orders. Such competition has the ability to
promote efficiency by facilitating the price discovery process and
generating
[[Page 65770]]
additional investor interest in trading securities, thereby promoting
capital formation. The Exchange believes that extending the pilot is
appropriate because it will allow the Exchange and the Commission
additional time to gather and analyze data regarding the Program that
the Exchange has committed to provide.\14\ As such, the Exchange
believes that it is appropriate to extend the current operation of the
Program.\15\ Through this filing, the Exchange seeks to extend the
current pilot period of the Program until the earlier of approval of
the filing to make the Program permanent or June 30, 2019.
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\13\ A ``Retail Price Improvement Order'' is defined in Rule
11.24(a)(3) as an order that consists of non-displayed interest on
the Exchange that is priced better than the Protected NBB or
Protected NBO by at least $0.001 and that is identified as such. See
Rule 11.24(a)(3).
\14\ See RPI Approval Order, supra note 6 at 71655.
\15\ Concurrently with this filing, the Exchange has submitted a
request for an extension of the exemption under Regulation NMS Rule
612 previously granted by the Commission that permits it to accept
and rank the RPI orders in sub-penny increments. See Letter from
Anders Franzon, SVP, Deputy General Counsel, Cboe BYX Exchange, Inc.
to Brent J. Fields, Secretary, Securities and Exchange Commission
dated December 11, 2018.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\16\ In particular,
the Exchange believes the proposed change furthers the objectives of
Section 6(b)(5) of the Act,\17\ in that it is 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The Exchange believes that
extending the pilot period for the Program is consistent with these
principles because the Program is reasonably designed to attract retail
order flow to the exchange environment, while helping to ensure that
retail investors benefit from the better price that liquidity providers
are willing to give their orders. Additionally, as previously stated,
the competition promoted by the Program may facilitate the price
discovery process and potentially generate additional investor interest
in trading securities. The extension of the pilot period will allow the
Commission and the Exchange to continue to monitor the Program for its
potential effects on public price discovery, and on the broader market
structure.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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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 proposed rule change
extends an established pilot program, thus allowing the Program to
enhance competition for retail order flow and contribute to the public
price discovery process.
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: (A)
Significantly affect the protection of investors or the public
interest; (B) impose any significant burden on competition; and (C) by
its terms, 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 \18\ and
paragraph (f)(6) of Rule 19b-4 thereunder,\19\ the Exchange has
designated this rule filing as non-controversial.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4. As required under Rule 19b-4(f)(6)(iii),
the Exchange has given 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. 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.\20\
However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission may
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 proposed
rule change may become operative upon filing. The Exchange states that
waiver of the operative delay is consistent with the protection of
investors and the public interest and will allow the Exchange to extend
the Program, which will ensure that the Program continues while the
Exchange and Commission continue to analyze data regarding the Program.
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay for
the instant filing is consistent with the protection of investors.
Accordingly, the Commission designates the proposed rule change as
operative upon filing with the Commission.\22\
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\22\ For purposes only of waiving the operative delay for this
proposal, the Commission has 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: (1)
Necessary or appropriate in the public interest; (2) for the protection
of investors; or (3) 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
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBYX-2018-025 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 Number SR-CboeBYX-2018-025. 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
[[Page 65771]]
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
the filing also will 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 Number SR-
CboeBYX-2018-025 and should be submitted on or before January 11, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27618 Filed 12-20-18; 8:45 am]
BILLING CODE 8011-01-P