[Federal Register Volume 84, Number 128 (Wednesday, July 3, 2019)]
[Notices]
[Pages 31935-31937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14157]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86211; File No. SR-C2-2019-016]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Update Its Rules Related to Complex Orders and Trading Halts

June 27, 2019.
    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 June 17, 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 
update its rules related to complex orders and trading halts. The text 
of the proposed rule change is provided in Exhibit 5.
    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 updates the Exchange's trading halt 
procedures as they relate to complex orders. The Exchange recently 
adopted a rule change (Rule 6.11) to eliminate the distinction between 
how the opening auction process applies to a User's simple orders 
following a Regulatory Halt and a non-Regulatory Halt.\5\ This change 
will be implemented on June 17, 2019 and provides that the opening 
auction process following any trading halt will apply in the same 
manner (the manner in which Regulatory Halts functioned previously): 
The System will queue a User's orders and quotes resting on the book at 
the time of the trading halt for participation in the opening auction 
process following the trading halt, unless the User entered 
instructions to cancels its resting orders and quotes.
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    \5\ See Securities Exchange Act No. 85931 (May 23, 2019), 84 FR 
25086 (May 30, 2019) (Notice of Filing and Immediate Effectiveness 
of a Proposed Rule Change Relating To Amend Rule 6.11) (SR-C2-2019-
011). The changes in SR-C2-2019-011 are currently effective but not 
yet operative; however, the proposed rule text in this rule filing 
assume operativeness of those effective changes. The Exchange notes 
that the distinction between the two trading halts was made 
throughout its rules in connection with Regulatory Halts under the 
Regulation NMS Plan to Address Extraordinary Market Volatility (the 
``Plan''). During a Regulatory Halt an underlying security has 
halted trading across the industry, and during a non-Regulatory Halt 
the primary exchange has experienced a technical issue but the 
underlying security continues to trade on other equities platforms. 
However, the Exchange determined that there would be a Queuing 
Period following a non-Regulatory Halt, like that of a Regulatory 
Halt, in order eliminate potential investor confusion regarding how 
the System will handle orders and quotes in the event of any trading 
halt. This is consistent with the Plan.
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    The Exchange now proposes to update the Complex Order Book 
(``COB'') re-opening process following a trading halt under Rule 6.13 
to align with the proposed changes to the opening auction process 
following a halt for a User's simple orders. Currently, Rule 6.13(k)(1) 
provides that if a trading halt exists for the underlying security or a 
component of a complex strategy, trading in the complex strategy is 
suspended. The System queues a Trading Permit Holder's open orders 
during a Regulatory Halt, unless the Trading Permit Holder entered 
instructions to cancel its open complex orders upon a Regulatory Halt, 
for participation in the re-opening of the COB. A Trading Permit 
Holder's complex orders are cancelled unless the Trading Permit Holder 
instructed the Exchange not to cancel its orders. The System cancels a 
Trading Permit Holder's open complex orders upon a halt that is not a 
Regulatory Halt. The Exchange now proposes to update this process to 
mirror that of the process for simple orders. Specifically, the 
Exchange proposes to amend Rule 6.13(k)(1) by replacing references to 
``Regulatory Halts'' with ``halts'', as well as removing language which 
states that a Trading Permit Holder's complex orders will be cancelled 
unless the Trading Permit Holder instructed the Exchange not to cancel 
its orders, and that the System cancels a Trading Permit Holder's open 
complex orders upon a halt that is not a Regulatory Halt. The Exchange 
also believes that in addition to harmonizing the complex order halt 
process with that of the simple order process, removing language that 
states that a Trading Permit Holder's complex orders are cancelled 
unless the Trading Permit Holder instructed the Exchange not to cancel 
its orders, serves to make its rules clearer and easier to understand. 
Currently, this language appears to be in conflict with the Rule 
language that states (as proposed) that the System will queue a User's 
open complex orders during a Regulatory Halt, unless the User entered 
instructions to cancel its open complex orders.
    In addition to this, the Exchange proposes to make the same updates 
to Rule 6.32, which provides for trading halts generally, thereby 
aligning this rule with the trading halt process to be implemented on 
June 17, 2019. The Exchange also proposes non-substantive rule changes. 
It proposes to amend an inaccurate cross reference in Rule 6.13(c)(1) 
(which currently references Rule 6.11(a) (Definitions)) to reference 
Rule 6.11, thus accurately encompassing the times and manner set forth 
in the opening process as stated in Rule 6.13(c)(1). The Exchange adds 
proposed language that refers specifically to a User's open complex 
orders, as opposed to open orders, which provides additional clarity as 
to the type of orders covered by this Rule. The Exchange also makes 
reference changes from ``Trading Permit Holder'' to ``User'', as this 
is consistent with the terminology used throughout Rule 6.13.
    The Exchange believes that this proposed change will provide Users 
with the ability to decide how their resting complex orders a should be 
handled in the event of a non-Regulatory Halt, as they are currently 
able to do in the event of a Regulatory Halt. The Exchange also 
believes elimination of this distinction will

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eliminate potential investor confusion regarding how the System will 
handle complex orders in the event of a trading halt, as well as 
potential investor confusion regarding how the System will handle 
complex orders as compared to simple orders upon implementation of the 
changes to the trading halt process for simple orders on June 17, 2019.
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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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 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) \8\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
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    The proposed rule change to harmonize the process for a User's 
complex orders during all types of trading halts will protect investors 
by eliminating potential confusion regarding how the System will handle 
their complex orders during a non-Regulatory Halt (as they are 
currently handled during a Regulatory Halt). The Exchange believes that 
the proposed rule change will serve to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system by harmonizing its various rules regarding trading halts, 
thereby protecting investors by providing them with consistent rules. 
Furthermore, the Exchange believes the proposed change eliminates 
conflicting language regarding a User's order instructions during 
halts, thereby protecting investors by providing rules that are clear 
and easy to understand. In addition to this, the proposed non-
substantive changes will benefit investors by providing additional 
clarity to the Rules.

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 
will not impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. All 
Users will have the same flexibility regarding how the System will 
handle their complex orders during non-Regulatory Halts, which is the 
same flexibility currently available to Users during Regulatory Halts. 
If a User wants its complex orders to be handled during a non-
Regulatory Halt in the manner they are today, that User may instruct 
the Exchange to do so (as they currently may do during a Regulatory 
Halt). The proposed rule change will not impose any burden on 
intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
intended as a competitive change, but rather to provide Users with 
flexibility with respect to the handling of their complex orders during 
a non-Regulatory Halt, to provide consistent trading halt procedures 
under the Exchange's rules, as well as to provide clarity to investors 
by eliminating conflicting language. The Exchange also notes that the 
proposed non-substantive changes do not impact trading, and thus have 
no competitive impact; they merely provide additional clarity to the 
Rules.

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 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) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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, 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. 
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 \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ 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 requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. Waiver 
of the operative delay would allow the Exchange to implement this 
proposed rule change simultaneously with the rule change to eliminate 
the trading halt distinctions following the opening auction process for 
a User's simple orders, which the Exchange intends to implement on June 
17, 2019. Therefore, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission hereby waives the 
operative delay and designates the proposed rule change operative upon 
filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ 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:

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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-C2-2019-016 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-C2-2019-016. 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-C2-2019-016 and should be submitted on 
or before July 24, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14157 Filed 7-2-19; 8:45 am]
BILLING CODE 8011-01-P