[Federal Register Volume 86, Number 98 (Monday, May 24, 2021)]
[Notices]
[Pages 27905-27907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10842]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91921; File No. SR-CboeBZX-2021-023]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Approving a Proposed Rule Change To Extend the Cutoff Time for 
Accepting on Close Orders Entered for Participation in the Exchange's 
Closing Auction and To Clarify Changes to the Definitions of Late-
Limit-On-Close and Late-Limit-On-Open Orders

May 18, 2021.

I. Introduction

    On March 26, 2021, Cboe BZX Exchange, Inc. (``Cboe BZX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to modify Exchange Rule 11.23 to amend the cutoff 
time for accepting on close orders entered for participation in the 
Exchange's Closing Auction and to make clarifying changes to the 
definitions of Late-Limit-On-Close and Late-Limit-On-Open orders. The 
proposed rule change was published for comment in the Federal Register 
on April 9, 2021.\3\ The Commission received no comments on the 
proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 91479 (April 5, 
2021), 86 FR 18580 (``Notice'').
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II. Description of the Proposal

    Exchange Rule 11.23(c) currently provides that Users may submit 
Limit-on-Close (``LOC'') \4\ and Market-on-Close (``MOC'') \5\ orders 
to the Exchange until 3:55 p.m. ET (``Closing Auction Cutoff''), at 
which point any additional LOC and MOC orders will be rejected.\6\ 
Users may submit Late-Limit-on-Close (``LLOC'') \7\ orders between 3:55 
p.m.

[[Page 27906]]

and 4:00 p.m. and any LLOC orders submitted before 3:55 p.m. or after 
4:00 p.m. will be rejected.\8\ Exchange Rule 11.23(c) also provides 
that Eligible Auction Orders \9\ designated for the Exchange's Closing 
Auction \10\ may not be cancelled between 3:55 p.m. and 4:00 p.m.\11\
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    \4\ Exchange Rule 11.23(a)(13) defines Limit-on-Close as ``. . . 
a BZX limit order that is designated for execution only in the 
Closing Auction.''
    \5\ Exchange Rule 11.23(a)(15) defines Market-on-Close as ``. . 
. a BZX market order that is designated for execution only in the 
Closing Auction or Cboe Market Close.''
    \6\ See Exchange Rule 11.23(c)(1)(A).
    \7\ Exchange Rule 11.23(a)(11) defines ``Late-Limit-On-Close'' 
as ``. . . a BZX limit order that is designated for execution only 
in the Closing Auction. To the extent a LLOC bid or offer received 
by the Exchange has a limit price that is more aggressive than the 
NBB or NBO, the price of such bid or offer is adjusted to be equal 
to the NBB or NBO, respectively, at the time of receipt by the 
Exchange. Where the NBB or NBO becomes more aggressive, the limit 
price of the LLOC bid or offer will be adjusted to the more 
aggressive price, only to the extent that the more aggressive price 
is not more aggressive than the original User entered limit price. 
The limit price will never be adjusted to a less aggressive price. 
If there is no NBB or NBO, the LLOC bid or offer, respectively, will 
assume its entered limit price.''
    \8\ See Exchange Rule 11.23(c)(1)(A).
    \9\ See Exchange Rule 11.23(a)(8).
    \10\ See Exchange Rule 11.23(c).
    \11\ See Exchange Rule 11.23(c)(1)(B).
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    As described in more detail in the Notice,\12\ the Exchange now 
proposes to amend Exchange Rule 11.23(c) to extend the cutoff time for 
accepting on close orders to permit the submission of LOC and MOC 
orders until 3:59 p.m. ET, to allow the submission of LLOC orders 
between 3:59 p.m. and 4:00 p.m. ET, and to prevent the cancellation of 
Eligible Auction Orders designated for the Closing Auction between 3:59 
p.m. and 4:00 p.m. ET. As proposed, Exchange Rule 11.23(c)(1)(A) would 
provide that Users may submit LOC and MOC orders until 3:59 p.m., at 
which point any additional LOC and MOC orders submitted would be 
rejected. Proposed Exchange Rule 11.23(c)(1)(A) would also provide that 
users may submit LLOC orders between 3:59 p.m. and 4:00 p.m., and any 
LLOC orders submitted before 3:59 p.m. or after 4:00 p.m. would be 
rejected. As proposed, Exchange Rule 11.23(c)(1)(B) would provide that 
Eligible Auction Orders designated for the Closing Auction may not be 
cancelled between 3:59 p.m. and 4:00 p.m.
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    \12\ See Notice, supra note 3.
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    The Exchange also proposes to amend the definitions of LLOC and 
Late-Limit-on-Open (``LLOO'') \13\ in Exchange Rule 11.23(a). 
Currently, Exchange Rules 11.23(a)(11) and (a)(12) provide that, to the 
extent a LLOC or LLOO bid or offer received by the Exchange has a limit 
price that is more aggressive than the National Best Bid (``NBB'') or 
National Best Offer (``NBO''), the price of such bid or offer is 
adjusted to be equal to the NBB or NBO, respectively, at the time of 
receipt by the Exchange. Where the NBB or NBO becomes more aggressive, 
the limit price of the LLOC or LLOO bid or offer will be adjusted to 
the more aggressive price, only to the extent that the more aggressive 
price is not more aggressive than the original User entered limit 
price. The limit price will never be adjusted to a less aggressive 
price. If there is no NBB or NBO, the LLOC or LLOO bid or offer, 
respectively, will assume its entered limit price. The Exchange 
proposes to amend these definitions to clarify that, rather than never 
be adjusted to a less aggressive price, the limit price of a LLOC order 
or a LLOO order would not be adjusted to a less aggressive price, 
unless otherwise provided by Exchange rules. The Exchange stated that, 
for example, a short sale LLOO or LLOC order entered at a price less 
than the NBB while a short sale circuit breaker pursuant to Regulation 
SHO was in effect would be re-priced by the Exchange's System \14\ at 
one minimum price variation above the NBB pursuant to Exchange Rules 
11.9(g)(5) and (6).\15\
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    \13\ Exchange Rule 11.23(a)(12) defines the term Late-Limit-On-
Open as ``. . . a BZX limit order that is designated for execution 
only in the Opening Auction. To the extent a LLOO bid or offer 
received by the Exchange has a limit price that is more aggressive 
than the NBB or NBO, the price of such bid or offer is adjusted to 
be equal to the NBB or NBO, respectively, at the time of receipt by 
the Exchange. Where the NBB or NBO becomes more aggressive, the 
limit price of the LLOO bid or offer will be adjusted to the more 
aggressive price, only to the extent that the more aggressive price 
is not more aggressive than the original User entered limit price. 
The limit price will never be adjusted to a less aggressive price. 
If there is no NBB or NBO, the LLOO bid or offer, respectively, will 
assume its entered limit price. Notwithstanding the foregoing, a 
LLOO order entered during the Quote-Only Period of an IPO will be 
converted to a limit order with a limit price equal to the original 
User entered limit 137 price and any LLOO orders not executed in 
their entirety during the IPO Auction will be cancelled upon 
completion of the IPO Auction.''
    \14\ Exchange Rule 1.5(aa) provides that the term ``System'' 
means ``the electronic communications and trading facility 
designated by the Board through which securities orders of Users are 
consolidated for ranking, execution and, when applicable, routing 
away.''
    \15\ See Notice, supra note 3, at 18581.
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III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange and, in particular, the requirements of Section 6(b) of the 
Act.\16\ Specifically, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act,\17\ which requires, among 
other things, that a national securities exchange have rules 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, 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.
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    \16\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
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    As discussed above, the Exchange proposes to amend Exchange Rule 
11.23(c) to extend the cutoff time for accepting on close orders to 
permit the submission of LOC and MOC orders until 3:59 p.m.,\18\ to 
allow the submission of LLOC orders between 3:59 p.m. and 4:00 
p.m.,\19\ and to prevent the cancellation of Eligible Auction Orders 
designated for the Closing Auction between 3:59 p.m. and 4:00 p.m.\20\ 
The Exchange asserts that extending the Closing Auction Cutoff for 
submitting on close orders will assist market participants in managing 
their trading at the close by allowing them to retain control over 
their orders for a longer period of time.\21\ The Exchange expects that 
this would reduce risk for those market participants participating in 
the Closing Auction and improve price discovery by facilitating the 
additional participation of market participants.\22\ The Commission 
believes that extending the cutoff time to submit LOC, MOC and LLOC 
orders and to cancel Eligible Auction Orders to 3:59 p.m. ET would 
allow market participants to retain flexibility with respect to 
submitting and cancelling their orders, while still providing time for 
market participants to react to and offset imbalances. As a result, the 
Commission believes that the proposal could encourage participation in 
the Closing Auction by market participants that are unwilling to give 
up flexibility and control over these orders. The Commission notes that 
the Exchange has represented that another exchange uses a 3:59 p.m. ET 
cutoff time for the entry of MOC and LOC orders in its closing 
auction.\23\
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    \18\ See proposed Exchange Rule 11.23(c)(1)(A).
    \19\ Id.
    \20\ See proposed Exchange Rule 11.23(c)(1)(B).
    \21\ See Notice, supra note 3, at 18581.
    \22\ Id. at 18582.
    \23\ Id. at 18581, 18582.
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    In addition, as discussed above, the Exchange proposes to amend the 
definitions of LLOC and LLOO in Exchange Rule 11.23(a), which currently 
state that the limit price of these orders will never be adjusted to a 
less aggressive price, in order to clarify that the limit price of LLOC 
and LLOO orders, respectively, would not be adjusted to a less 
aggressive price unless otherwise provided by Exchange

[[Page 27907]]

rules.\24\ The Exchange has explained that its System, in certain 
instances, may adjust the limit price of LLOC and LLOO orders to a less 
aggressive price pursuant to other Exchange Rules.\25\ The Commission 
believes that the proposed amendments to the definitions of LLOC and 
LLOO would provide greater transparency regarding the operation of the 
Exchange.
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    \24\ See proposed Exchange Rules 11.23(a)(11) and (a)(12).
    \25\ See supra note 15 and accompanying text.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-CboeBZX-2021-023) be, and 
hereby is, approved.
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    \26\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.300-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10842 Filed 5-21-21; 8:45 am]
BILLING CODE 8011-01-P