[Federal Register Volume 84, Number 114 (Thursday, June 13, 2019)]
[Notices]
[Pages 27675-27678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12451]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86066; File No. SR-C2-2019-015]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend the Fat Finger Check for Simple Orders in Rule 6.14
June 7, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 6, 2019, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'')
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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to
amend the fat finger check for with respect to simple orders in Rule
6.14. The text of the proposed rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe C2 Exchange, Inc.
* * * * *
Rule 6.14. Order and Quote Price Protection Mechanisms and Risk
Controls
(a)-(b) No change.
(c) All Orders.
(1) Limit Order Fat Finger Check. If a User submits a buy (sell)
limit order to the System with a price that is more than a buffer
[[Page 27676]]
amount above (below) the NBO (NBB) for simple orders or the SNBO
(SNBB) for complex orders, the System cancels or rejects the order.
The Exchange determines a default buffer amount; however, a User may
establish a higher or lower amount than the Exchange default.
(A) For simple buy (sell) orders, the Exchange may determine to
apply this check on a class-by-class basis and not apply it to limit
orders entered prior to the conclusion of the RTH [O]opening auction
[P]process. If the check applies prior to the conclusion of the RTH
[O]opening auction [P]process, it uses [the midpoint of the prior
trading day's closing NBBO (prior to 9:30 a.m.) or](i) the last
disseminated NBBO on that trading day, or (ii) the midpoint of the
prior trading day's closing NBBO, if no NBBO has been disseminated
on that trading day[(if there is one, after 9:30 a.m.)]. The
Exchange or User, as applicable, may establish a different default
amount prior to the conclusion of the RTH [O]opening auction
[P]process than it does after trading is open. If the check applies
prior to the conclusion of the O]RTH opening auction [P]process, it
does not apply (i) if there is a corporate action impacting the
corporate stock price, (ii) if there is no NBBO from the prior
trading day, (iii) to orders with origin code M or N, or (iv) to GTC
and GTD orders that reenter the Book from the prior trading session
[day].
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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 proposed rule change amends the fat finger check with respect
to simple orders in Rule 6.14. Current Rule 6.14(c)(1) states if a User
submits a buy (sell) limit order to the System with a price that is
more than a buffer amount above (below) the national best offer
(``NBO'') (national best bid (``NBB'')) for simple orders, the System
cancels or rejects the order.\5\ Under current Rule 6.14(c)(1)(A) for
simple orders, the Exchange may determine to apply this check on a
class-by-class basis and not apply it to limit orders entered prior to
the conclusion of the opening auction process. If the check applies
prior to the conclusion of the opening auction process, it uses the
midpoint of the prior trading day's closing NBBO (prior to 9:30 a.m.)
or the last disseminated NBBO (if there is one, after 9:30 a.m.).\6\
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\5\ The Exchange determines a default buffer amount; however, a
User may establish a higher or lower amount than the Exchange
default.
\6\ Current Rule 6.14(c)(1)(A) also states that the Exchange or
User, as applicable, may establish a different default amount prior
to the conclusion of the opening auction process than it does after
trading is open. If the check applies prior to the conclusion of the
Opening Process, it does not apply (i) if there is a corporate
action impacting the corporate stock price, (ii) if there is no NBBO
from the prior trading day, (iii) to orders with origin code M
(Market-Maker) or N (away market-maker), or (iv) to good-til-
cancelled (``GTC'') or good-til-day (``GTD'') orders that reenter
the Book from the prior trading day.
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The Exchange recently adopted a global trading hours (``GTH'')
trading session, which will occur from 8:30 to 9:15 a.m. Eastern Time,
which the Exchange intends to implement on June 17, 2019.\7\ For
classes that trade during the GTH trading session, there may be an NBBO
disseminated prior to 9:30 a.m., as well as a GTH opening auction
process. Therefore, the Exchange proposes to update the fat finger
check for simple orders to reflect a GTH trading session. Because the
GTH and regular trading hours (``RTH'') trading sessions will each have
an opening auction process,\8\ the Exchange now proposes to amend Rule
6.14(c)(1)(A) to specify that if the check applies prior to the
conclusion of the RTH opening auction process (therefore, from the
beginning of the GTH opening process \9\ through the RTH opening
process), it uses the last disseminated NBBO during that trading day
(which accounts for NBBOs disseminated during GTH),\10\ or the midpoint
of the prior trading day's closing NBBO, if no NBBO has been
disseminated during that trading day. The Exchange notes that it is
deleting the language that refers to using the prior trading day's
closing NBBO if the check applies prior to 9:30 a.m., as well as
language that refers to an NBBO after 9:30 a.m., to accommodate the new
GTH session. For example, if it is 9:25 a.m. the check would use the
last disseminated NBBO from the GTH session (i.e., on that trading
day), and, if no NBBO has been disseminated on that trading day then
the System would pull the midpoint of the prior trading day's closing
NBBO, as it currently does today. It also proposes to amend Rule
6.14(c)(1)(A) to state that if the check applies prior to the
conclusion of the RTH opening auction process, it does not apply to
good-til-cancelled (``GTC'') and good-til-date (``GTD'') orders that
reenter the Book from the prior trading session. This proposed change
accounts for a prior trading session instead of the trading day because
the Exchange will use the same Book for all trading sessions, and thus
any GTC or GTD orders that do not trade during GTH may become eligible
for trading during RTH.
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\7\ See Securities Exchange Act Release No. 85788 (May 6, 2019),
84 FR 20673 (May 10, 2019) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the Exchange's
Opening Process and Add a Global Trading Hours Session for DJX
Options) (SR-C2-2019-009).
\8\ See Rule 6.11 which provides for the opening auction
processes for GTH and RTH.
\9\ The Exchange notes this includes the queuing period as
defined under Rule 6.11 which provides for the opening auction
process.
\10\ See Rule 1.1 which states that a trading day includes both
trading sessions on that day. The Exchange also notes that it is
amending the term ``orders'' to state ``buy (sell) orders'' in Rule
6.14(c)(1)(A) to mirror the same language used in Rule 6.14(c)(1),
as well as the term ``Opening Process'' to ``opening auction
process'' which is consistent with the verbiage used throughout Rule
6.11 (Opening Auction Process).
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The Exchange notes that the proposed change is substantially
similar to the current rule, and merely proposes to update language in
connection with the implementation of the GTH trading session,
specifying to which opening auction process the check under Rule
6.14(c)(1)(A) will apply, and accounting for the fact that there may be
an NBBO disseminated prior to 9:30 a.m. for classes that will trade
during the GTH trading session.
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.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ 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
[[Page 27677]]
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) \13\
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
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In particular, the Exchange believes that by updating the fat
finger check for simple orders to account for the recently adopted GTH
trading session, the proposed rule change serves to remove impediments
to and perfect the mechanism of a free and open market and a national
market system. As described above, the proposed change is substantially
similar to the way in which the current fat finger check for simple
orders functions, and merely accounts for the fact that there will be
two trading sessions on the Exchange, each with an opening auction
process and one of which will occur, and may disseminate an NBBO,
before 9:30 a.m. Therefore, the Exchange believes that by amending rule
language to specify that the fat finger check under Rule 6.14(c)(1)(A)
will apply prior to the conclusion of the RTH opening auction process
and by updating language to reflect the earlier GTH session time and
potential NBBO dissemination during that session in connection with the
fat finger check, it will remove impediments to and perfect the
mechanism of a free and open market, thereby protecting investors, by
increasing transparency of the Exchange's fat finger price protection
mechanism as it relates to the earlier GTH trading session.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues, but rather to update a
current price protection mechanism in connection with the addition of a
GTH trading session. The Exchange does not believe that the proposed
rule change to update the fat finger check as it relates to the GTH
trading session will impose any burden on intramarket competition that
is not necessary or appropriate in furtherance of the purposes of the
Act because it will apply in the same manner to all Users' limit orders
prior to the conclusion of the RTH opening auction process. The
Exchange notes that a User may choose to establish a different default
amount prior to the conclusion of the RTH opening auction process.
Furthermore, the Exchange does not believe that the proposed change
will impose any burden on intermarket competition that that is not
necessary or appropriate in furtherance of the purposes of the Act
because the proposed change merely updates a price protection mechanism
already in place on the Exchange and applicable only to trading on the
Exchange.
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 designated this rule filing as non-controversial
under Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) \15\
thereunder. Because the 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 and Rule 19b-
4(f)(6) thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
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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. The
Exchange believes that waiver of the operative delay is consistent with
the protection of investors and the public interest because it is
substantially similar to the way in which the current fat finger check
for simple orders functions, and merely accounts for the fact that
there will be two trading sessions on the Exchange (each with an
opening auction process and one of which will occur, and may
disseminate an NBBO, before 9:30 a.m.), and does not raise any new or
novel issues. For this reason, the Commission believes that waiver of
the 30-day 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 as 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 also 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 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 change 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-C2-2019-015 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-C2-2019-015. 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
[[Page 27678]]
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-C2-2019-015
and should be submitted on or before July 5, 2019.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12451 Filed 6-12-19; 8:45 am]
BILLING CODE 8011-01-P