[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28363-28366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12787]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86094; File No. SR-CboeEDGX-2019-037)
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating To Amend the Fat Finger Check With Respect to Limit Orders in
Rule 21.17
June 12, 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 10, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
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amend the fat finger check with respect to limit orders in Rule 21.17.
The text of the proposed rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe EDGX Exchange, Inc.
* * * * *
Rule 21.17. Additional Price Protection Mechanisms and Risk Controls
The System's acceptance and execution of orders, quotes, and
bulk messages, as applicable, are subject to the price protection
mechanisms and risk controls in Rule 21.16, this Rule 21.17 (related
to all orders other than complex orders), Rule 21.20 (related to
complex orders) and as otherwise set forth in the Rules. All numeric
values established by the Exchange pursuant to this Rule will be
maintained by the Exchange in publicly available specifications and/
or published in a Regulatory Circular. Unless otherwise specified
the price protections set forth in this Rule, including the numeric
values established by the Exchange, may not be disabled or adjusted.
The Exchange may share any of a User's risk settings with the
Clearing Member that clears transactions on behalf of the User.
(a) No change.
(b) 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
amount established by the Exchange above (below) the NBO (NBB), or,
in the case of an order received prior to [9:30 a.m.]the conclusion
of the RTH opening auction process, [above (below) the midpoint of
the NBBO at the close of the market on the previous trading day](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, the System will reject or cancel
back to the User the limit order. This check does not apply to bulk
messages.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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 limit orders in Rule 21.17. Current Rule 21.17(b) states if a User
submits a buy (sell) limit order to the System with a price that is
more than a buffer amount established by the Exchange above (below) the
NBO (NBB), or, in the case of an order received prior to 9:30 a.m.,
above (below) the midpoint of the NBBO at the close of the market on
the previous trading day, the System will reject or cancel back to the
User the limit order.
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 24, 2019.\5\ For
classes that trade during the GTH trading session, there may be an NBBO
disseminated prior to 9:30 a.m. Therefore, the Exchange proposes to
update the fat finger check for limit orders to reflect a GTH trading
session. Specifically, the Exchange proposes that in the case of an
order received prior to the conclusion of the RTH opening auction
process then the fat finger check amount will be the last disseminated
NBBO on that trading day, or the midpoint of the prior trading day's
NBBO, if no NBBO has been disseminated on that trading day.
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\5\ See Securities Exchange Act Release No. 85797 (May 7, 2019),
84 FR 20920 (May 13, 2019) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change Relating To Amend the
Exchange's Opening Process and Add a Global Trading Hours Session
for XSP Options) (SR-CboeEDGX-2019-027). The changes in SR-CboeEDGX-
2019-027 are currently effective but not yet operative; however, the
proposed rule changes assume operativeness of those effective
changes.
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First, the Exchange notes that it is updating the fat finger check
amount to be the last disseminated NBBO on that trading day (which
accounts for NBBOs disseminated during GTH),\6\ or the midpoint of the
prior trading day's closing NBBO, if no NBBO has been disseminated on
that trading day in order to accommodate the new GTH trading session
and the fact that there may be an NBBO disseminated prior to 9:30 a.m.
for classes that will trade during the 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. The Exchange also notes that this proposed language is
substantively identical to that of the corresponding limit order fat
finger rule under its affiliated exchange, Cboe C2 Exchange, Inc.
(``C2''), recently filed with the Commission.\7\
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\6\ See Rule 16.1 which states that a trading day includes both
trading sessions on that day.
\7\ See Securities Exchange Act Release No. 86066 (June 7, 2019)
(SR-C2-2019-015). The changes in SR-C2-2019-015 are currently
effective but not yet operative; however, the proposed rule changes
assume operativeness of those effective changes.
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Second, the Exchange notes that it is also updating the language
that refers to an order received prior to 9:30 a.m. to refer to an
order received prior to the conclusion of the RTH opening auction
process. The Exchange notes that the conclusion of the RTH opening
auction process occurs within the 9:30 a.m. minute and that the System
currently applies the limit order fat finger check to orders received
prior to the conclusion of the RTH opening auction process within this
minute. Moreover, upon the implementation of the GTH trading session,
this proposed timeframe will serve to encompass orders received from
the beginning of the GTH opening process \8\ through the RTH opening
process. As such, the Exchange is amending this language to more
accurately reflect the timeframe in which the System already applies
the fat finger check, and will continue to apply the fat finger check
upon the implementation of the GTH trading session.
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\8\ The Exchange notes this includes the queuing period as
defined under Rule 21.7 which provides for the opening auction
process.
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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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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
[[Page 28365]]
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) \11\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In particular, the Exchange believes that by updating the fat
finger check for limit 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 check will function as it does
today and the proposed change merely provides an added step that the
System will take in order to account for the fact that there will be
two trading sessions on the Exchange, one before 9:30 a.m. in which an
NBBO may be disseminated. In addition to this, the proposed change
updates language regarding the timeframe in which the System currently
applies the fat finger check amounts under Rule 21.17(b). Therefore,
the Exchange believes that by amending rule language to reflect the
earlier GTH session time and potential NBBO dissemination during that
session in connection with the fat finger check and by updating
language to reflect the timeframe in which the System currently applies
(and will apply with the implementation of GTH) the fat finger check to
orders it receives, 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 and current
System functionality. The Exchange also notes that this proposed change
is substantively the same as the limit order fat finger check rule of
its affiliated exchange, C2, recently filed with the Commission. As a
result, the Exchange believes that the proposed rule change will serve
to protect investors by providing similar price protection mechanisms
between the affiliated exchanges, thereby bolstering understanding of
the affiliated exchanges' rules and functionality for those
participating across both exchanges.
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.
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
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 if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)
thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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 under Rule 19b-4(f)(6) \14\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has asked the Commission to waive the 30-day operative
delay. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest
because the proposed rule change is substantively similar to the the
limit order fat finger check rule of its affiliated exchange, C2,
recently filed with the Commission.\16\ Thus, as represented by the
Exchange, the proposed rule change does not introduce 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.\17\
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\16\ See supra note 7.
\17\ 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-CboeEDGX-2019-037 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.
[[Page 28366]]
All submissions should refer to File Number SR-CboeEDGX-2019-037. 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 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-CboeEDGX-2019-
037 and should be submitted on or before July 9, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12787 Filed 6-17-19; 8:45 am]
BILLING CODE 8011-01-P