[Federal Register Volume 86, Number 223 (Tuesday, November 23, 2021)]
[Notices]
[Pages 66609-66611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25476]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93598; File No. SR-CBOE-2021-066]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 5.34

November 17, 2021.
    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 November 5, 2021, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') 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 Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend Rule 5.34. 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://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.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 Exchange proposes to modify the optional duplicate order 
protection risk limit setting for Users in Rule 5.34(c)(9). Duplicate 
order protection is voluntary functionality, which was designed to 
protect Users against execution of multiple identical orders that may 
have been erroneously entered. Specifically, pursuant to current Rule 
5.34(c)(9), if a User enables this functionality for a port, then after 
the System receives a specified number of duplicate orders with the 
same EFID,\5\ side, price, quantity, and class within a specified time 
period (the User determines the number and length of the time period), 
the System will (A) reject additional duplicate orders until it 
receives instructions from the User to reset this control or (B) reject 
all incoming orders submitted through that port for that EFID until the 
User contacts the Trade Desk to request it reset this control. The User 
may continue to submit cancel requests prior to reset.
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    \5\ The term ``EFID'' means an Executing Firm ID. The Exchange 
assigns an EFID to a Trading Permit Holder, which the System uses to 
identify the Trading Permit Holder and the clearing number for the 
execution of orders and quotes submitted to the System with that 
EFID.
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    The Exchange proposes to amend this risk setting to eliminate the 
time parameter. Particularly, as amended, the System will continue to 
check for a specified number of duplicate orders (which will continue 
to be determined by the User), but no longer check to see if any such 
duplicative orders were received over a specified period of time. 
Instead, the system will compare each submitted order against the 
immediately preceding order that was submitted with respect to the 
orders' EFID, side, price, quantity, and class. For example, suppose a 
User sets the duplicative order count to 10 orders. When the System 
receives an incoming order, the System checks if the immediately 
preceding order it received had the same EFID, side, price, quantity 
and class. If the order does not, then the System keeps the count at 
``0'' (and performs the same process for the next incoming order). If 
the order does, the System will count that order as ``1''. If the 
following 9 incoming orders through that port are also duplicates 
(i.e., same EFID, side, price, quantity and class), then regardless of 
how long it takes for such orders to come into the System, the System 
will (i) reject any additional duplicate orders until it receives a 
reset instruction from the User or (ii) reject all incoming orders 
submitted through that port for that EFID until the User contacts the 
Trade Desk to request it reset this control, as it does today.
    The Exchange has observed that the time parameter check under the 
current duplicate order protection feature can potentially create a 
(albeit minor) latency impact for Users who opt to use the 
functionality. More specifically, minor latency can arise in connection 
with the specified time parameter because the System must store and 
conduct a check across all orders sent during the specified time period 
when this risk check is enabled. The Exchange believes removing the 
time parameter check will eliminate this latency for Users that opt to 
use the duplicate order protection. The Exchange does not believe that 
the proposed rule change will impact the effectiveness of the duplicate 
order protection feature for those Users that opt to enable such 
functionality. Also, as noted above, the use of the risk limit is 
voluntary. The Exchange will continue to offer Users a full suite of 
additional price protection mechanisms and risk controls which the 
Exchange believes sufficiently mitigate risks associated with Users 
entering orders and quotes at unintended prices, and risks associated 
with orders and quotes trading at prices that are extreme and 
potentially erroneous, as a likely result of human or operational 
error.
    Lastly, the Exchange proposes to correct an erroneous rule number. 
Particularly, the Exchange proposes to update Rule 5.34(c)(12) to Rule 
5.34(c)(11), which follows the immediately preceding subparagraph (10) 
of Rule 5.34(c).
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the

[[Page 66610]]

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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    In particular, the proposed rule change will remove impediments to 
and perfect the mechanism of a free and open market and national market 
system and benefit investors, because the Exchange believes it will 
remove small latency that may currently be caused by use of the 
duplicate order protection functionality. Moreover, the Exchange does 
not believe that the proposed rule change will affect the protection of 
investors or the public interest or the maintenance of a fair and 
orderly market because Users still have the ability to enable such 
control to protect against execution of multiple identical orders that 
may have been erroneously entered, just in a different manner (i.e., 
without a specified time parameter check). As stated, the Exchange does 
not believe that the proposed rule change will impact the effectiveness 
of the duplicate order protection feature for those Users that opt to 
enable such functionality. In addition to this, the Exchange notes that 
the use of this risk control is voluntary, and the Exchange will 
continue to offer a full suite of alternative price protection 
mechanisms and risk controls.
    The Exchange believes updating an erroneous subparagraph reference 
in Rule 5.34 removes impediments to and perfects the mechanism of a 
free and open market and national market system and benefits investors, 
because it eliminates potential confusion and maintains clarity in 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. In particular, the Exchange 
does not believe that the proposed rule change would impose a burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because it will amend this risk 
control in the same manner for all Users on the Exchange. In addition 
to this, and as stated above, the use of the duplicative order 
protection risk control is voluntary, and the Exchange will continue to 
offer various other price protections and risk controls that 
sufficiently mitigate risks associated with market participants 
entering and/or trading orders and quotes at unintended or extreme 
prices. The Exchange does not believe the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as the proposed 
rule change only updates an existing risk control applicable to ordered 
submitted to the Exchange. The Exchange also notes that market 
participants on other exchanges are welcome to become participants on 
the Exchange if they determine that this proposed rule change has made 
Cboe Options a more attractive or favorable venue.

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 after the date of the filing, 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) 
\10\ thereunder.
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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) 
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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    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 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-CBOE-2021-066 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-CBOE-2021-066. 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

[[Page 66611]]

office of the Exchange. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-CBOE-2021-066 and should be submitted on or before December 14, 
2021.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25476 Filed 11-22-21; 8:45 am]
BILLING CODE 8011-01-P