[Federal Register Volume 87, Number 94 (Monday, May 16, 2022)]
[Notices]
[Pages 29776-29777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10417]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94883; File No. SR-CboeEDGX-2022-004]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Codify Certain Practices and Requirements 
Related to the Exchange's Port Message Rate Thresholds

May 10, 2022.

I. Introduction

    On January 21, 2022, Cboe EDGX Exchange, Inc. (``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 
codify certain practices and requirements related to the Exchange's 
port message rate thresholds. The proposed rule change was published 
for comment in the Federal Register on February 9, 2022.\3\ On March 
23, 2022, pursuant to Section 19(b)(2) of the Act,\4\ the Commission 
designated a longer period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to disapprove the proposed rule change.\5\ The 
Commission has received no comment letters on the proposed rule change. 
This order institutes proceedings pursuant to Section 19(b)(2)(B) of 
the Act \6\ to determine whether to approve or disapprove 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. 94144 (February 3, 
2022), 87 FR 7519 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94496, 87 FR 18410 
(March 30, 2022). The Commission designated May 10, 2022 as the date 
by which the Commission shall approve or disapprove, or institute 
proceedings to determine whether to disapprove, the proposed rule 
change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change

    The Exchange states that its System \7\ does not have unlimited 
port capacity to consistently support an unlimited number of messages 
throughout the trading day.\8\ The Exchange states that for this 
reason, the Exchange limits each Member \9\ to a maximum number of 
messages over a set amount of time, per port (``Port Order Rate 
Threshold'').\10\ The Exchange states that historically, it has 
provided Members with the Port Order Rate Threshold through its 
publicly available technical specifications.\11\ The Exchange's current 
Port Order Rate Threshold is 10,000 messages per second.\12\ The 
Exchange further states that while Members may elect to establish a 
lower Port Order Rate Threshold, each Member is subject to the same 
maximum Port Order Rate Threshold.\13\
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    \7\ ``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. See Exchange Rule 1.5(cc).
    \8\ See Notice, supra note 3, at 7519.
    \9\ ``Member'' means a registered broker or dealer that has been 
admitted to membership in the Exchange. A Member will have the 
status of a ``member'' of the Exchange as that term is defined in 
Section 3(a)(3) of the Act. Membership may be granted to a sole 
proprietor, partnership, corporation, limited liability company or 
other organization which is a registered broker or dealer pursuant 
to Section 15 of the Act, and which has been approved by the 
Exchange. See Exchange Rule 1.5(n).
    \10\ See Notice, supra note 3, at 7519.
    \11\ See id. See also Cboe FIX Specifications at p. 72, 
available at: https://cdn.cboe.com/resources/membership/Cboe_US_Equities_FIX_Specification.pdf; and Cboe BOE Specifications, 
available at: https://cdn.cboe.com/resources/membership/Cboe_US_Equities_BOE_Specification.pdf.
    \12\ See id. According to the Exchange, when the first non-
administrative message is received, a one second window begins. 
During the second no more than 9,999 additional non-administrative 
messages will be allowed within that one second window. If the rate 
is exceeded, all new orders in the time window are rejected, 
modifies are treated as cancels, and cancels are processed. See 
Notice, supra note 3, at 7519 n. 6.
    \13\ See Notice, supra note 3, at 7519.
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    The Exchange now proposes to establish Rule 11.23, entitled Port 
Order Rate Threshold, to state that all Members shall be subject to a 
Port Order Rate Threshold, as determined by the Exchange in its 
discretion. In support of its proposal, the Exchange cites to rules 
that historically existed in the Cboe Options Exchange (``C1'') and the 
Cboe C2 Options Exchange (``C2'') rulebooks.\14\ The Exchange further 
states that proposed Rule 11.23 is based on MIAX and MIAX Emerald Rule 
502.\15\ The Exchange states that the proposed amendment will promote 
transparency and maintain clarity in its rules and help preserve its 
operational resiliency.\16\
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    \14\ See Notice, supra note 3, at 7519-20.
    \15\ Id.
    \16\ Id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeEDGX-2022-004 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \17\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the proposal. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide comments on the proposed rule 
change.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\18\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
described above, the Exchange's proposed rule states that each Member 
shall be subject to a maximum Port Order Rate Threshold, as determined 
by the Exchange. As proposed, the rule provides the Exchange with 
discretion to set the maximum Port Order Rate Threshold and does not 
include a set maximum or range within which the maximum threshold would 
be set. Further, although the Exchange describes how the current 
maximum Port Order Rate Threshold is applied to new non-administrative 
messages received once the threshold is reached,\19\ the Exchange does 
not specify its application under the proposed rule change. The 
Commission is instituting proceedings to allow for additional analysis 
of the proposal's consistency with Section 6(b)(5) of the Act, which 
requires that the rules of a national securities exchange be designed, 
among other things, to promote just and equitable principles of trade, 
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.\20\
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    \18\ Id.
    \19\ See supra note 12.
    \20\ 15 U.S.C. 78f(b)(5).
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and

[[Page 29777]]

the rules and regulations issued thereunder . . . is on the [SRO] that 
proposed the rule change.'' \21\ The description of a proposed rule 
change, its purpose and operation, its effect, and a legal analysis of 
its consistency with applicable requirements must all be sufficiently 
detailed and specific to support an affirmative Commission finding,\22\ 
and any failure of an SRO to provide this information may result in the 
Commission not having a sufficient basis to make an affirmative finding 
that a proposed rule change is consistent with the Act and the 
applicable rules and regulations.\23\
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    \21\ 17 CFR 201.700(b)(3).
    \22\ See id.
    \23\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposal is consistent with the Act.

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with Section 6(b)(5) or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of data, views, and arguments, the 
Commission will consider, pursuant to Rule 19b-4 under the Act,\24\ any 
request for an opportunity to make an oral presentation.\25\
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    \24\ 17 CFR 240.19b-4.
    \25\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by June 6, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
June 21, 2022.
    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 No. SR-CboeEDGX-2022-004 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 No. SR-CboeEDGX-2022-004. The 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 No. SR-CboeEDGX-2022-004 and should be submitted 
by June 6, 2022. Rebuttal comments should be submitted by June 21, 
2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10417 Filed 5-13-22; 8:45 am]
BILLING CODE 8011-01-P