[Federal Register Volume 87, Number 226 (Friday, November 25, 2022)]
[Notices]
[Pages 72527-72537]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25669]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96359; File No. SR-CboeBZX-2022-038]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of Amendment No. 1 and Order Instituting Proceedings To 
Determine Whether To Approve or Disapprove a Proposed Rule Change To 
Amend Rule 11.28(a) To Extend the MOC Cut-Off Time

November 18, 2022.
    On August 5, 2022, Cboe BZX Exchange, Inc. (``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 amend BZX Rule 11.28(a) to extend the cut-off 
time for accepting Market-on-Close orders entered for participation in 
the Cboe Market Close. The proposed rule change was published for 
comment in the Federal Register on August 24, 2022.\3\ On October 4, 
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\ On 
November 11, 2022, the Exchange submitted Amendment No. 1 to the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. Amendment No. 1 amended and 
superseded the proposed rule change as originally filed.\6\ The 
Commission is publishing this notice and order to solicit comments on 
the proposed rule change, as modified by Amendment No. 1, from 
interested persons and to institute proceedings pursuant to section 
19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 95529 (August 17, 
2022), 87 FR 52092.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 95967, 87 FR 61425 
(October 11, 2022). The Commission designated November 22, 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\ Amendment No. 1 is available on the Commission's website at: 
https://www.sec.gov/comments/sr-cboebzx-2022-038/srcboebzx2022038.htm.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to 
amend Rule 11.28(a) to extend the Cboe Market Close MOC Cut-Off Time 
from 3:35 p.m. Eastern Time to 3:49 p.m. Eastern Time. 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/equities/regulation/rule_filings/bzx/), 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.

[[Page 72528]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Exchange Rule 11.28 (Cboe Market Close, a Closing Match Process for 
Non-BZX-Listed Securities) provides Members an optional closing match 
process for non-BZX-Listed securities, known as Cboe Market Close 
(``CMC''). Currently, per Rule 11.28(a) (Order Entry) Members \8\ may 
enter, cancel, or replace Market-on-Close (``MOC'') orders designated 
for participation in CMC beginning at 6:00 a.m. Eastern Time \9\ up to 
3:35 p.m. (``MOC Cut-Off Time''). The Exchange now proposes to move the 
MOC Cut-Off Time from 3:35 p.m. to 3:49 p.m. The Exchange is not 
proposing to make any other changes to the CMC process.
---------------------------------------------------------------------------

    \8\ The term ``Member'' shall mean any 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 Rule 1.5(n), definition of ``Member''.
    \9\ All times noted throughout are in Eastern Time.
---------------------------------------------------------------------------

    By way of background, on May 5, 2017, the Exchange filed a proposed 
rule change to adopt CMC, a match process for MOC orders in non-BZX 
listed securities and on December 1, 2017, filed Amendment No. 1 \10\ 
to that proposal (the ``Original Proposal'').\11\ On January 17, 2018, 
the Commission, acting through authority delegated to the Division of 
Trading and Markets,\12\ approved the Original Proposal (``Approval 
Order'').\13\ On January 31, 2018, NYSE Group, Inc. (``NYSE'') and the 
Nasdaq Stock Market LLC (``Nasdaq'') filed petitions for review of the 
Approval Order (``Petitions for Review''). Pursuant to Commission Rule 
of Practice 431(e),\14\ the Approval Order was stayed by the filing 
with the Commission of a notice of intention to petition for 
review.\15\ On March 1, 2018, pursuant to Commission Rule of Practice 
431, the Commission issued a scheduling order granting the Petitions of 
Review of the Approval Order, and provided until March 22, 2018, for 
any party or other person to file a written statement in support of, or 
in opposition to, the Approval Order.\16\ On April 12, 2018, NYSE and 
Nasdaq submitted written statements opposing the Approval Order and BZX 
submitted a statement in support of the Approval Order.\17\ On October 
4, 2018, BZX filed Amendment No. 2 \18\ to the Original Proposal.
---------------------------------------------------------------------------

    \10\ The only change in Amendment No. 1 was to rename the 
proposed closing match process as Cboe Market Close. Per the 
Commission, because Amendment No. 1 was a technical amendment and 
did not materially alter the substance of the proposed rule change 
or raise unique or novel regulatory issues, Amendment No. 1 was not 
subject to notice and comment.
    \11\ See Securities Exchange Act Release No. 34-80683 (May 16, 
2017), 82 FR 23320 (May 22, 2017) (SR-Bats-BZX-2017-34) (Notice of 
Filing of a Proposed Rule Change to Introduce Bats Market Close, a 
Closing Match Process for Non-BZX Listed Securities Under New 
Exchange Rule 11.28).
    \12\ 17 CFR 200.30-3(a)(12).
    \13\ See Securities Exchange Act Release No. 34-82522 (January 
17, 2018), 83 FR 3205 (January 23, 2018) (SR-BatsBZX-2017-34) 
(Notice of Filing of Amendment No. 1 and Order Granting Approval of 
a Proposed Rule Change, as Modified by Amendment No. 1, To Introduce 
Cboe Market Close, a Closing Match Process for Non-BZX Listed 
Securities Under New Exchange Rule 11.28).
    \14\ 17 CFR 201.431(e).
    \15\ See Letter to Christopher Solgan, Assistant General 
Counsel, Cboe Global Markets, Inc. (Jan. 24, 2018) (providing notice 
of receipt of notices of intention to petition for review of 
delegated action and stay of order), available at: https://www.sec.gov/rules/sro/batsbzx/2018/sr-batsbzx-2017-34-letter-from-secretary-to-cboe.pdf.
    \16\ See Securities Exchange Act Release No. 82794, 83 FR 9561 
(Mar. 6, 2018). On March 16, 2018, the Office of the Secretary, 
acting by delegated authority, issued an order on behalf of the 
Commission granting a motion for an extension of time to file 
statements on or before April 12, 2018. See Securities Exchange Act 
Release No. 82896, 83 FR 12633 (Mar. 22, 2018).
    \17\ See Statement of NYSE Group, Inc., in Opposition to the 
Division's Order Approving a Rule to Introduce Cboe Market Close 
(``NYSE Statement''); Statement of the Nasdaq Stock Market LLC in 
Opposition to Order Granting Approval of a Proposed Rule Change, as 
Modified by Amendment No. 1, to Introduce Cboe Market Close 
(``Nasdaq Statement''); and Statement of Cboe BZX Exchange, Inc., in 
support of Commission Staff's Approval Order (``BZX Statement''), 
available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734.htm.
    \18\ See Securities Exchange Act Release No. 34-84670 (November 
28, 2018), 83 FR 62646 (December 4, 2018) (SR-BatsBZX-2017-34) 
(``Notice of Filing of Amendment No. 2 to Proposed Rule Change to 
Introduce Cboe Market Close, a Closing Match Process for Non-BZX 
Listed Securities Under New Exchange Rule 11.28'').
---------------------------------------------------------------------------

    The Commission conducted a de novo review of the CMC proposal and 
associated public record, including Amendment No. 2, the Petitions for 
Review, and all comments and statements submitted by certain exchanges, 
issuers, and other market participants,\19\ to determine whether the 
proposal was consistent with the requirements of the Act and the rules 
and regulations issued thereunder that are applicable to a national 
securities exchange.\20\ The Commission noted that under Rule 700(b)(3) 
of the Commission's Rule of Practice, the ``burden to demonstrate that 
a proposed rule change is consistent with the Exchange Act and the 
rules and regulations issued thereunder . . . is on the self-regulatory 
organization that proposed the rule change.'' \21\
---------------------------------------------------------------------------

    \19\ See ``Statements on File No. SR-BatsBZX-2017-34'', 
available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734.htm.
    \20\ See Securities Exchange Act Release No. 34-88008 (January 
21, 2020), 85 FR 4726 (January 27, 2020) (SR-BatsBZX-2017-34) 
(``Order Setting Aside Action by Delegated Authority and Approving a 
Proposed Rule Change, as Modified by Amendments No. 1 and 2, To 
Introduce Cboe Market Close, a Closing Match Process for Non-BZX 
Listed Securities Under New Exchange Rule 11.28'').
    \21\ Id.
---------------------------------------------------------------------------

    Importantly, after reviewing the entire record, the Commission 
concluded that BZX met its burden to show that the proposed rule change 
was consistent with the Act, and pursuant to its January 21, 2020, 
order, set aside the Approval Order and approved BZX's CMC proposal, as 
amended (``Final Approval Order'').\22\ Notably, the Commission stated 
that the record ``demonstrate[d] that Cboe Market Close should 
introduce and promote competitive forces among national securities 
exchanges for the execution of MOC orders'' \23\ and that ``the record 
demonstrate[d] that Cboe Market Close should not disrupt the closing 
auction price discovery process nor should it materially increase the 
risk of manipulation of official closing prices''.\24\ For the reasons 
discussed more fully below, the Exchange believes that when applying 
the Commission's analysis in the Final Approval Order to the current 
proposal, such review would similarly conclude that this proposal is 
consistent with the Act and should be approved.
---------------------------------------------------------------------------

    \22\ Id.
    \23\ Id.
    \24\ Id.
    \25\ See Securities Exchange Act Release No. 34-84454 (October 
19, 2018), 83 FR 53923 (October 25, 2018) (SR-Nasdaq-2018-068) 
(Order approving a rule change by Nasdaq) (The Commission approved a 
rule change by Nasdaq to move the cut-off times for the entry of MOC 
and LOC orders from 3:50 p.m. to 3:55 p.m.); see also Securities 
Exchange Act Release No. 34-85021 (January 31, 2019) (SR-NYSE-2018-
58) (Order approving a rule change by NYSE) (The Commission approved 
a rule change by the NYSE to amend Rule 123C to extend the cut-off 
times for order entry and cancellation for participation in the 
closing auction, from 3:45 p.m. to 3:50 p.m.).
    \26\ See infra, ``Price Discovery'' and ``Fragmentation'', which 
describes the growth of off-exchange closing volume.
---------------------------------------------------------------------------

    Since the Original Proposal various exchanges have extended the MOC 
cut-off times for their closing auctions, moving them closer to 4:00 
p.m.\25\ Additionally, closing price match services offered by off-
exchange venues have grown in popularity,\26\ including alternative 
trading systems (``ATS'') that offer a MOC cut-off time as close as 30-
seconds before the primary exchanges'

[[Page 72529]]

cut-off times, as well as MOC cut-off times aligned with those of NYSE, 
NYSE Arca, and Nasdaq.\27\ As the market structure for closing auctions 
and closing price match offerings has continued to evolve, and in 
response to customer feedback and to better compete with off-exchange 
venues, the Exchange is proposing this rule change to align CMC's MOC 
Cut-Off Time more closely with the other exchanges and off-exchange 
venues.
---------------------------------------------------------------------------

    \27\ For example, JP Morgan Securities' ATS, JPB-X, offers Close 
Price Match. This functionality utilizes a conditional order process 
to match orders and crosses them at the security's official closing 
prices, as determined by the closing auction at the primary exchange 
for a security. The Close Price Match time for an NMS stock is 
currently 30-seconds before the MOC cut-off time for that stock's 
primary exchange. Additionally, Instinet, LLC's ATS, CBX provides 
for three MOC Crossing Sessions, which consist of: a cross for 
securities where the primary listing exchange is the Nasdaq 
(``Nasdaq Cross''), a cross for securities where the primary listing 
exchange is the NYSE Arca (``Arca Cross''), and a cross for 
securities where the primary listing exchange is the NYSE (``NYSE 
Cross'') (collectively, ``MOC Crosses''). Each MOC Cross occurs two 
minutes prior to the relevant exchange's cut-off time; i.e. the 
Nasdaq Cross currently occurs at or near 3:53 p.m., the NYSE Cross 
at or near 3:48 p.m., and the Arca Cross at or near 3:57 p.m. See 
Form ATS-N, JPB-X, available at: https://www.sec.gov/Archives/edgar//data/782124/000001961722000459/xslATS-N_X01/primary_doc.xml; see 
also Form ATS-N, Instinet, LLC's ATS, CBX, available at: https://www.sec.gov/Archives/edgar/data/310607//0000310607/22000009/xslATS-N_X01/primary_doc.xml.
---------------------------------------------------------------------------

    The Exchange notes that Members have requested a MOC Cut-Off Time 
that is closer to the end of Regular Trading Hours \28\ so that they 
may retain control of their trading for a longer period and be better 
able to manage their trading at the close.\29\ Generally speaking, 
notional trading and trading volatility are typically at their highest 
towards the end of Regular Trading Hours. Accordingly, market 
participants often prefer to trade as close to 4:00 p.m. as possible, 
because doing so can provide them with more time to seek better priced 
liquidity for their orders in a variety of ways, including but not 
limited to, finding contra-side liquidity in the marketplace and 
trading directly against such interest, or guaranteeing a customer 
order at a price better than the national best bid or offer by 
committing capital to an order and filling it in a principal capacity, 
as well as continuing to trade orders algorithmically into the close, 
thus reducing the size of their outstanding orders that they may decide 
to commit to CMC or the primary auctions.
---------------------------------------------------------------------------

    \28\ The term ``Regular Trading Hours'' means the time between 
9:30 a.m. and 4:00 p.m. Eastern Time. See Rule 1.2 (w), definition 
of, ``Regular Trading Hours.''
    \29\ The Exchange notes that part of its rationale for extending 
CMC's MOC Cut-Off Time is substantively identical to that of other 
exchanges moving their MOC cut-off times to later in the trading 
day, namely, NYSE and Nasdaq. See Securities Exchange Act Release 
No. 34-84454 (October 19, 2018), 83 FR 18580 (October 25, 2018) (SR-
Nasdaq-2018-068) (``Specifically, the Exchange believes that 
extending the cutoff times for submitting on close orders will allow 
market participants to retain control over their orders for a longer 
period of time, and thereby assist those market participants in 
managing their trading at the close.''); see also Securities 
Exchange Act Release No. 34-84804 (December 12, 2018), 83 FR 64910 
(December 18, 2018) (SR-NYSE-2018-58) (``The Exchange believes that 
extending the cut-off times for entry and cancellation of MOC and 
LOC Orders, cancellation of CO orders, as well as when the Exchange 
would begin disseminating Order Imbalance Information for the close 
would. . .allow market participants to retain control over their 
orders for a longer period of time, and thereby assist those market 
participants in managing their trading at the close.'').
---------------------------------------------------------------------------

    Additionally, Members have indicated that extending the MOC Cut-Off 
Time to 3:49 p.m. will help to make CMC a more comparable alternative 
to NYSE and Nasdaq, which have MOC cut-off times of 3:50 p.m.\30\ and 
3:55 p.m.,\31\ respectively. For reasons discussed directly above, cut-
off times closer to 4:00 p.m. are beneficial to market participants, 
and by extending CMC's MOC Cut-Off Time to 3:49 p.m., CMC will be 
better positioned to serve as a viable option for market participants 
to consider when deciding which venues to route their MOC orders, thus 
enhancing intermarket competition.
---------------------------------------------------------------------------

    \30\ See NYSE Rule 73.5(a)(8), Closing Auction Imbalance Freeze 
Time.
    \31\ See Nasdaq Rule 4702(b)(11)(A), Market On Close Order.
---------------------------------------------------------------------------

    In support of the above, the chart below shows the total traded 
volume across all market centers, from 3:30 p.m. to 4:00 p.m. in 30-
seconds intervals, and includes labels for the different MOC cut-off 
times for CMC, NYSE, and Nasdaq. As illustrated, at NYSE's 3:50 p.m. 
MOC cut-off time, Nasdaq's 3:55 p.m. MOC cut-off time, and 4:00 p.m. 
market close, there is a noticeable increase in traded volume in the 
overall marketplace, with volume relatively flat in the overall 
marketplace prior to those times. Comparatively, there is no observed 
spike in traded volume in the overall marketplace at the current CMC 
MOC Cut-Off Time of 3:35 p.m. The Exchange believes that this data 
substantiates the view that a MOC cut-off time closer to 4:00 p.m. is 
valued by market participants, and that by extending the CMC MOC Cut-
Off Time to 3:49 p.m. CMC will be better positioned as a viable 
alternative to the primary exchanges' closing auctions, ``foster[ing] 
price competition and thereby decreas[ing] costs for market 
participants.'' \32\
---------------------------------------------------------------------------

    \32\ Supra note 20.

---------------------------------------------------------------------------

[[Page 72530]]

[GRAPHIC] [TIFF OMITTED] TN25NO22.046

    Source: Internal Exchange Data

    The Exchange also notes that today's market participants, including 
users of CMC, are technologically equipped \33\ to handle a 3:49 p.m. 
MOC Cut-Off Time. As a general matter, today's market participants, 
including CMC users, rely on electronic smart order routers, order 
management systems, and trading algorithms, which make routing and 
trading decisions on an automated basis, in times typically measured in 
microseconds. In this regard, the Exchange believes that if a CMC user 
receives a message that their MOC order was not matched in CMC,\34\ 
such CMC user will have more than enough time to reroute their MOC 
order to the primary exchange. Importantly, the Exchange discussed the 
proposed change with both current CMC users and potential new CMC users 
\35\ to gauge whether a MOC Cut-Off Time one-minute prior to the NYSE 
cut-off time, and six-minutes prior to the Nasdaq cut-off time, would 
present operational or technological challenges, and confirmed that 
both current CMC users as well as potential new CMC users can in fact 
technologically manage the proposed change.
---------------------------------------------------------------------------

    \33\ The Exchange notes that today's equities markets involve 
the widespread use of automated trading algorithms and routing 
solutions, as well as market connectivity options with speeds often 
measured in microseconds. See generally ``Staff Report on 
Algorithmic Trading in U.S. Capital Markets'' (August 5, 2020), 
available at https://www.sec.gov/tm/reports-and-publications/special-studies/algo_trading_report_2020 (``Algorithmic Trading 
Report'') (``Over the past decade, the `manual handling of 
institutional orders is increasingly rare and has been replaced by 
sophisticated institutional order execution algorithms and smart 
order routing systems.'') (``The secondary market for U.S.-listed 
equity securities that has developed within this structure is now 
primarily automated. The process of trading has changed dramatically 
primarily as a result of developments in technologies for 
generating, routing, and executing orders, as well as by the 
requirement imposed by law and regulation.'') (``Modern equity 
markets are connected in part by the data flowing between market 
centers. An enormous volume of data is available to market 
participants. In recent years, there has been an exponential growth 
in the amount of market data available, the speed with which it is 
disseminated, and the computer power used to analyze and react to 
price movements.'').
    \34\ The CMC Closing Match Process--i.e., the matching of all 
buy and sell MOC orders entered into the System by time priority at 
the MOC Cut-Off Time, the electronic notification to Members of any 
unmatched MOC orders, and the dissemination by the Exchange of the 
total size of all buy and sell orders matched via CMC via the Cboe 
Auction Feed--generally occurs within microseconds. As such, a MOC 
Cut-Off Time one-minute prior to the primary exchanges' cut-off 
times is a sufficient period of time for Members to reroute their 
unmatched MOC orders to the primary exchanges, should they choose to 
do so.
    \35\ The Exchange discussed the proposed amendment with both 
current CMC users, as well as potential new users. By way of 
background, a large majority of CMC Users are mid-size, regional 
broker dealers that utilize third-party front-end providers or 
broker-dealers that provide them with electronic and automated 
trading solutions such as algorithms and smart order routers, which 
they use to access CMC. Specifically, the Exchange discussed the 
proposed amendment with CMC's Users' two (2) third-party providers 
whose end users are responsible for 100% of CMC's volume, and these 
providers indicated that the automated routing and trading solutions 
they offer to CMC's users can appropriately manage the proposed MOC 
Cut-Off Time. Additionally, the Exchange discussed the proposed 
amendment with potential new users of CMC (approximately sixty (60) 
market participants, including proprietary trading firms, regional 
broker-dealers, and bulge bracket broker-dealers). These market 
participants indicated that amending the MOC Cut-Off Time would 
likely encourage them to use CMC as part of their trading strategies 
(whether directly or through a third-party provider) because the 
proposed MOC Cut-Off Time enables market participants to hold onto 
and trade their orders closer to 4:00 p.m. and makes CMC a more 
viable alternative to the primary exchanges' closing auctions.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\36\ Specifically, the Exchange believes the proposed rule change 
is consistent with the section 6(b)(5) \37\ 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) \38\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b).
    \37\ 15 U.S.C. 78f(b)(5).
    \38\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes that moving the MOC Cut-Off 
Time to 3:49 p.m. would remove impediments to and perfect the mechanism 
of a free and open market and a national market system because it would 
allow Members to retain control over their orders for a longer period, 
thereby assisting market participants in managing their trading at the 
close. As discussed more fully above, market participants may prefer to 
trade as close to 4:00 p.m. as possible,

[[Page 72531]]

because doing so can provide them with more time to seek better priced 
liquidity for their orders in a variety of ways, as well as give them 
more time to determine the size of their outstanding orders that they 
may decide to commit to CMC the primary auctions, or services offered 
by off-exchange venues such as ATSs.
    Additionally, the Exchange believes that a MOC Cut-Off Time 
fifteen-minutes (15) prior to NYSE's cut-off time, and twenty-five-
minutes (25) prior to Nasdaq's cut-off time, is no longer necessary. 
Rather, the Exchange notes that today's market participants are 
technologically equipped \39\ to handle a 3:49 p.m. MOC Cut-Off Time. 
Specifically, CMC's current users utilizes third-party providers or 
broker-dealers \40\ that provide them with electronic trading 
technology enabling them to quickly react to market conditions and 
messages, such as the Cboe Auction Feed. Moreover, as noted above, many 
market participants, including non-users of CMC, utilize electronic 
smart order routers, order management systems, and trading algorithms, 
which make routing and trading decisions on an automated basis, in 
times often measured in microseconds. Therefore, the Exchange believes 
that both current users of CMC, as well as those that may utilize CMC 
following approval of this amendment, will be technologically equipped 
to efficiently respond to CMC's publication of matched shares and 
should they so choose, reroute any unmatched MOC orders to the 
respective primary closing auction.\41\
---------------------------------------------------------------------------

    \39\ Supra note 33.
    \40\ As a general matter, third-party technology providers and 
broker-dealers with electronic trading offerings provide automated 
trading and routing products and services to market participants 
that may not possess their own proprietary technology, or simply 
choose to leverage third party solutions they deem superior to their 
own internal technology. By way of example, portfolio managers 
responsible for reweighting their managed funds may not possess 
internal automated routing and algorithmic trading capabilities, and 
instead utilize third-party solutions enabling them to trade on an 
automated basis. As such, the proposed MOC Cut-Off Time of 3:49 p.m. 
is not likely to negatively impact market participants who may not 
possess the internal capabilities to reroute unmatched CMC MOC 
orders to the primary exchanges' closing auctions. The Exchange 
further notes that the utilization of third parties and broker-
dealers for technological trading solutions was even noted by the 
Commission in its Algorithmic Trading Report. Supra note 33 
(``Institutions that do not create their own algorithms generally 
use algorithms provided to them by institutional brokers.'') 
(``Brokers are tasked by their customers with finding liquidity in a 
complex, fragmented market, achieving best execution, and minimizing 
information leakage and other implicit costs. To try to meet these 
goals, brokers use, and offer to their customers, a wide range of 
execution algorithms.'')
    \41\ By way of background, CMC calculates the matched shares at 
the MOC Cut-Off Time (currently 3:35 p.m.) Importantly, the matching 
process happens quickly, and while the duration may vary, the total 
matching process typically takes a fraction of second (e.g., ~948 
microseconds), with the maximum being around 1-second. With these 
timeframes in mind, a user should in most instances knows the paired 
CMC quantity no later than 3:49:01 p.m., leaving the user at least 
fifty-nine-seconds (59) to reroute any unpaired CMC MOC orders to 
the primary exchanges' closing auctions. As noted by the Exchange 
throughout this filing, the speed of today's trading technology is 
typically measured in microseconds, making fifty-nine-seconds (59) a 
significant amount of time for a user to make an automated trading 
decision. For reference, a microsecond is 1-millionth of a second.
---------------------------------------------------------------------------

    The Exchange acknowledges that there are market participants that 
may not currently possess internal high-speed routing and trading 
technology. However, such market participants may, and likely already 
do, utilize routing and trading services offered by third-party 
providers or broker-dealers \42\ to handle and execute their orders 
electronically. Accordingly, the Exchange believes that the proposed 
MOC Cut-Off Time is not likely to result in disparate treatment amongst 
CMC users and other market participants.
---------------------------------------------------------------------------

    \42\ Supra note 40.
---------------------------------------------------------------------------

    The Exchange also believes that the extension of cut-off times by 
the primary exchanges since CMC's proposal, as well as the growth of 
off-exchange venues \43\ with cut-off times in such close proximity to 
the end of Regular Trading Hours is indicative of Members' desires for 
such offerings. Logically, such a change in market structure would not 
have occurred if market participants did not already possess the 
operational and technological wherewithal to effectively manage the 
multitude of cut-off times offered by the exchanges and off-exchange 
venues.
---------------------------------------------------------------------------

    \43\ Supra note 27.
    \44\ As noted above, NYSE's cut-off time is 3:50 p.m., and 
Nasdaq's cut-off time is 3:55 p.m. NYSE Arca's cut-off time for MOC 
orders is 3:59 p.m. See ``Trading Information--Closing Auctions'', 
available at: https://www.nyse.com/markets/nyse-arca/trading-info.
    \45\ Supra note 20.
    \46\ The Exchange spoke with four (4) designated market makers 
for the primary exchanges and confirmed that while they do not 
currently monitor the Cboe Auction Feed, they are technically 
equipped to do so.
    \47\ Supra note 41.
    \48\ As a general matter, third-party technology providers and 
broker-dealers with electronic trading offerings provide automated 
trading and routing products and services to market participants 
that may not possess their own proprietary technology, or simply 
choose to leverage third party solutions they deem superior to their 
own internal technology. By way of example, portfolio managers 
responsible for reweighting their managed funds may not possess 
internal automated routing and algorithmic trading capabilities, and 
instead utilize third-party solutions enabling them to trade on an 
automated basis. As such, the proposed MOC Cut-Off Time of 3:49 p.m. 
is not likely to negatively impact market participants who may not 
possess the internal capabilities to reroute unmatched CMC MOC 
orders to the primary exchanges' closing auctions. The Exchange 
further notes that the utilization of third parties and broker-
dealers for technological trading solutions was even noted by the 
Commission in its Algorithmic Trading Report. Supra note 33 
(``Institutions that do not create their own algorithms generally 
use algorithms provided to them by institutional brokers.'') 
(``Brokers are tasked by their customers with finding liquidity in a 
complex, fragmented market, achieving best execution, and minimizing 
information leakage and other implicit costs. To try to meet these 
goals, brokers use, and offer to their customers, a wide range of 
execution algorithms.'')
---------------------------------------------------------------------------

    Moreover, the Exchange believes that the proposed rule change will 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because extending the MOC Cut-Off 
Time to 3:49 p.m. would more closely align the CMC MOC Cut-Off Time to 
the cut-off times in place for the primary exchanges.\44\ For the 
reasons discussed more fully above, the primary exchanges' cut-off 
times are beneficial to market participants because of their proximity 
to 4:00 p.m. By moving the MOC Cut-Off Time closer to the primary 
exchanges' cut-off times, CMC can become a comparable alternative to 
the primary exchanges' closing auctions for Members to route their 
unpriced MOC orders, and ``should foster price competition and thereby 
decrease costs for market participants.'' \45\ Importantly, even with a 
MOC Cut-Off Time closer to the primary exchanges' cut-off times, CMC 
removes any perceived impact on the primary listing markets' close by 
publishing the number of matched order shares, by security, in advance 
of the primary markets' cut-off time. The total matched shares would 
still be disseminated by the Exchange free of charge via the Cboe 
Auction Feed, albeit at the new proposed MOC Cut-Off Time of 3:49 p.m. 
Because of the speeds and widespread use of market technology the 
market makers on the primary exchanges could, should they choose to do 
so, incorporate the Cboe Auction Feed information into their closing 
processes.\46\ Additionally, as discussed above, because of the market 
technology utilized by market participants in today's markets, those 
who choose to participate in CMC will still have ample time \47\ to 
reroute any MOC orders not matched via CMC to reach the primary market 
to be included in their closing auction process. Specifically, CMC's 
current users rely on third-party providers or broker-dealers \48\ to 
handle and execute their orders electronically. Furthermore, potential 
new users of

[[Page 72532]]

CMC either likely already possess the necessary routing and trading 
technology or may simply choose to utilize third-party solutions.\49\ 
Accordingly, the Exchange believes that the proposed MOC Cut-Off Time 
is not likely to result in disparate treatment amongst CMC users.
---------------------------------------------------------------------------

    \49\ Supra note 40.
---------------------------------------------------------------------------

    The proposed rule change would also more closely align CMC's MOC 
Cut-Off Time with that of off-exchange venues that offer cut-off times 
aligned with those currently offered by the primary exchanges, and as 
little as 30-seconds prior to market close.\50\ As such, the Exchange 
believes that the proposed rule change is supported by both ample 
precedent as well as current market structure, and should not present 
any new or novel issues that market participants must consider when 
managing their trading and determining which exchange or off-exchange 
venue to route their MOC orders.
---------------------------------------------------------------------------

    \50\ Supra note 27.
---------------------------------------------------------------------------

Price Discovery \51\
---------------------------------------------------------------------------

    \51\ As part of this proposed rule change the Exchange is 
addressing several questions considered by the Commission in 
connection with the Exchange's Original Proposal, including price 
discovery and fragmentation, market complexity and operational risk, 
and manipulation. Importantly, in considering these questions, the 
Commission found that based on CMC's design and the record before 
the Commission, that the proposal was consistent with Section 
6(b)(5) of the Act. Supra note 20.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent 
with the section 6(b)(5) requirements.\52\ As previously noted by the 
Exchange,\53\ CMC accepts and matches only unpriced MOC orders. By 
matching only unpriced MOC orders, and not Limit-On-Close (``LOC'') 
orders and executing those matched MOC orders that naturally pair off 
with each other and effectively cancel each other out, CMC is designed 
to avoid impacting price discovery. While the proposed rule change 
would have CMC accept MOC orders up to 3:49 p.m., such extension will 
not change this underlying functionality. As previously noted by the 
Exchange,\54\ matched MOC orders are merely recipients of price 
formation and do not directly contribute to the price formation 
process. Indeed, in its Final Approval Order for CMC, even the 
Commission noted that unpriced, paired-off MOC orders do not directly 
contribute to setting the official closing price of securities on the 
primary listing exchanges but, rather, are inherently the recipients of 
price formation information.\55\
---------------------------------------------------------------------------

    \52\ The Exchange notes that the Commission, in its Final 
Approval Order, carefully analyzed and considered CMC and its 
potential effects, if any, on the primary listing exchanges' closing 
auctions, including their price discovery functions. Importantly, 
the Commission found that, based on CMC's design, CMC should not 
disrupt the price discovery process in the closing auctions of the 
primary listing exchanges. Supra note 20.
    \53\ See Letter from Joanne Moffic-Silver, Executive Vice 
President, General Counsel, and Corporate Secretary, Bats Global 
Markets, Inc. (August 2, 2017), available at: https://www.sec.gov//batsbzx-2017-34/batsbzx201734-2162452-157801.pdf; see also Letter 
from Joanne Moffic-Silver (October 11, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734-2634580-161229.pdf.
    \54\ Id.
    \55\ Supra note 20.
---------------------------------------------------------------------------

    Moreover, the Exchange believes that even if extending the MOC Cut-
Off Time to 3:49 p.m. reduces the number of MOC orders routed to a 
security's primary listing market, CMC is designed to remove any 
perceived adverse impact on the primary listing markets' close because 
the total matched shares would still be disseminated by the Exchange 
free of charge via the Cboe Auction Feed prior to the primary 
exchanges' cut-off times. Additionally, because of the technological 
capabilities of today's market participants discussed more fully above, 
the market makers on the primary exchanges could, should they choose to 
do so, incorporate the Cboe Auction Feed information into their closing 
processes. Furthermore, current users of CMC are technologically 
equipped to manage the proposed CMC MOC-Cut Off Time. Potential new CMC 
users are capable of rerouting any unmatched CMC MOC orders to the 
primary exchanges. As discussed above, CMC's current users rely on 
third-party solutions that provide them with the technological 
capability to appropriately manage the proposed MOC Cut-Off Time above. 
Similarly, given the widespread use of routing and trading technology 
in today's markets, it is likely that potential new CMC users already 
possess the technological capabilities to manage the proposed MOC Cut-
Off time. Even where potential new users of CMC may not possess 
internally high-speed routing and trading technology, such users can 
utilize, to the extent they do not so already, third-party providers 
and broker-dealers to handle and route their orders electronically.
Fragmentation \56\
---------------------------------------------------------------------------

    \56\ Supra note 51.
---------------------------------------------------------------------------

    Another matter addressed by the Commission in their review of the 
Original Proposal was fragmentation, and whether CMC would fragment the 
markets beyond what currently occurs through off-exchange close price 
matching venues offered by broker-dealers.\57\ While comparisons to 
off-exchange MOC activity may not be a perfect measure of the potential 
resulting effect of CMC market fragmentation,\58\ the proposed 
amendment is designed to enable CMC to better compete with off-exchange 
venues and for closing volume that is already executed away from the 
primary listing venues.
---------------------------------------------------------------------------

    \57\ Supra note 20.
    \58\ Id (``. . .[C]omparisons to off-exchange activity are not a 
perfect measure of the potential resulting effect of the [CMC] 
proposal because the structures of the many off-exchange mechanisms 
differ from the structure of Cboe Market Close.'').
---------------------------------------------------------------------------

    As illustrated in the first two charts below, a growing proportion 
of trading volume at the close occurs on off-exchange venues, where the 
TRF close volume, as a percent of Exchange close volume, has risen 
steadily since January 2019.\59\ In the third chart the Exchange also 
studied the top ten most actively traded securities during the same 
time period and found that a significant portion of the total closing 
volume is executed off-exchange, following the dissemination of the 
official closing price.
---------------------------------------------------------------------------

    \59\ The Exchange conducted an analysis of off-exchange/Trade 
Reporting Facility (``TRF'') closing volume that occurs after market 
close, 4:00 p.m. Eastern Time, where the price is equal to the 
closing price and for which such trades are reported with a Prior 
Reference Price (``PRP'') trade reporting modifier. The TRF is a 
trade reporting facility where FINRA members may report trades in 
Nasdaq-listed and other exchange-listed securities, that were 
executed otherwise than on an exchange. The first two charts 
represent TRF executed volume at the close with the ``PRP'' flag 
that equals the closing auction price, divided by total on exchange 
auction volume.

---------------------------------------------------------------------------

[[Page 72533]]

[GRAPHIC] [TIFF OMITTED] TN25NO22.047

    Source: Internal Exchange Data.
    [GRAPHIC] [TIFF OMITTED] TN25NO22.048
    
    Source: Internal Exchange Data.

------------------------------------------------------------------------
                                                            TRF close %
                        Symbol         Primary exchange    inc. PRP \60\
------------------------------------------------------------------------
1...............  AAPL..............  Nasdaq............               9
2...............  T.................  NYSE..............               6
3...............  BAC...............  NYSE..............              10
4...............  INTC..............  Nasdaq............               5
5...............  MSFT..............  Nasdaq............               7
6...............  F.................  NYSE..............               9
7...............  PFE...............  NYSE..............               5
8...............  CSCO..............  Nasdaq............               5
9...............  CMCSA.............  Nasdaq............               7
10..............  WFC...............  NYSE..............               9
------------------------------------------------------------------------
Source: Internal Exchange Data.

    Given the significant volume of off-exchange MOC activity, the 
Exchange believes there is ample opportunity for CMC to attract 
existing MOC volume that is already being executed away from CMC and 
the primary listing venues. As discussed above, market participants 
have expressed the value of being able to trade closer to 4:00 p.m. In 
this regard, with the proposed MOC Cut-Off Time CMC will be able to 
meet the needs of market participants, and better compete with off-
exchange venues, ``foster[ing] price competition and thereby 
decreas[ing] costs for market participants.\61\ Members may prefer to 
execute their MOC orders via CMC rather than off-exchange venues for 
reasons such as the increased transparency and reliability that exists 
when investors execute their orders on public, well-regulated 
exchanges.

[[Page 72534]]

Moreover, by attracting such order flow, CMC can help to increase the 
amount of volume at the close executed on systems subject to the 
resiliency requirements of Regulation SCI.\62\
---------------------------------------------------------------------------

    \60\ As defined above, ``PRP''.
    \61\ Supra note 20.
    \62\ See Letter from Joanne Moffic-Silver, Executive Vice 
President, General Counsel, and Corporate Secretary, Bats Global 
Markets, Inc., a Cboe Company (Oct. 11, 2017) (``Furthermore, [CMC] 
would operate on the Exchange's reliable SCI systems . . . 
significant MOC liquidity is conducted today by off-exchange venues. 
These venues are not SCI systems and, therefore, not subject to 
Regulation SCI's enhanced resiliency requirements. [CMC] could 
attract MOC orders from these off-exchange venues to the Exchange 
and its reliable SCI system, furthering the Commission's presumed 
desire for liquidity at the close to be conducted on SCI systems.'')
---------------------------------------------------------------------------

    Indeed, an analysis by the Exchange shows that the closing auction 
volume on both NYSE and Nasdaq has increased despite the launch of CMC 
on March 6, 2020. Therefore, while the proposed amendment may lead to 
additional orders being routed to CMC rather than the primary 
exchanges' closing auctions, it cannot be said with certainty that such 
a change will significantly fragment the marketplace. In any event, the 
proposed extension of the MOC Cut-Off Time to 3:49 p.m. is not likely 
to materially increase market fragmentation and have a negative impact 
on the market because the data shows that even with the implementation 
of CMC, there is still a significant amount of volume executed on the 
primary exchanges' suggesting that market participants continue to 
utilize the primary closing auctions.
[GRAPHIC] [TIFF OMITTED] TN25NO22.049

    Source: Internal Exchange Data.
Market Complexity and Operational Risk \63\
---------------------------------------------------------------------------

    \63\ Supra note 51.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is simple and 
straightforward, and as such will not significantly increase market 
complexity or operational risk. The Exchange seeks only to extend the 
MOC Cut-Off Time to 3:49 p.m., leaving all other aspects of the CMC 
process intact. Members will not have to consider new operational 
requirements of monitoring and consuming a new data feed or consider 
the utilization of a new order type or implementation of new Exchange 
code. Rather, Members may continue to monitor the same data feed as 
they do today, the Cboe Auction Feed, and simply look for the 
publication of the CMC information at the new proposed MOC Cut-Off 
Time.
    Additionally, as discussed more fully above, the Exchange discussed 
this proposal with current CMC users prior to submitting this proposal 
and learned that CMC's current users are technologically equipped \64\ 
to manage a MOC Cut-Off Time closer to the primary exchanges' cut-off 
times, and that they can respond to CMC's publication of matched shares 
and quickly reroute any unmatched MOC orders to the respective primary 
closing auction. Moreover, CMC is a voluntary offering, and Members may 
freely decide whether to participate.
---------------------------------------------------------------------------

    \64\ Supra note 41.
---------------------------------------------------------------------------

    Furthermore, as noted throughout, both off-exchange venues and 
other exchanges already offer MOC cut-off times that are closer in time 
to the end of Regular Trading Hours. Specifically, as mentioned above, 
in 2018 Nasdaq received approval to move the cut-off times for the 
entry of MOC and Limit-On-Close (``LOC'') orders from 3:50 to 3:55 
p.m.\65\ Similarly, in 2018 the NYSE received approval from the SEC to 
extend their cut-off times for order entry and cancellation for 
participation their closing auction, from 3:45 p.m. to 3:50 p.m.\66\ 
NYSE also offers discretionary-orders, which unlike MOC/LOC orders that 
are subject to NYSE's 3:50 p.m. cut-off, may be entered for 
participation in the closing auction until 3:59:50.\67\ Additionally, 
market participants may enter MOC orders for participation in NYSE 
Arca's closing auction up to 3:59 p.m.\68\ Finally, various off-
exchange venues offer closing match processes with cut-off times 
aligned with those of

[[Page 72535]]

the primary exchanges, and even as close to 30-seconds before market 
close, 4:00 p.m.\69\
---------------------------------------------------------------------------

    \65\ Supra note 25.
    \66\ Id.
    \67\ See NYSE Rule 7.31(c)(2)(C); see also ``The Floor Broker's 
Modern Trading Tool'', available at: https://www.nyse.com/article/trading/d-order (``While D Orders are available for use throughout 
the trading day, most executions occur in the closing auction, where 
they're known as Closing D Orders. At 3:55 p.m., Closing D Order 
interest eligible to participate in the closing auction is added to 
the order imbalance feed at their discretionary price range. Closing 
D Orders can also be submitted, modified or cancelled up to 3:59:50 
p.m. These distinct features of Closing D Orders are designed to 
facilitate the Floor Broker's traditional agency role on behalf of 
larger institutional interest, allowing Floor Brokers to work in 
conjunction with their customer to find larger liquidity 
opportunities.'').
    \68\ See ``Closing Auction Timeline'', available at: https://www.nyse.com/markets/nyse-arca/trading-info.
    \69\ Supra note 27.
---------------------------------------------------------------------------

    Accordingly, the Exchange believes that market participants are 
well accustomed to managing the various cut-off times in today's 
marketplace, and in incorporating these timelines into their trading 
decisions. The number of exchanges and off-exchange venues with 
extended cut-off times indicates that market participants find value in 
their ability to retain control of their trading heading into the end 
of Regular Trading Hours, and the primary exchanges and off-exchange 
venues have responded to such demand. Certainly, market participants 
would not desire cut-off times closer to the end of Regular Trading 
Hours if they could not technologically and operationally manage their 
trading accordingly. Therefore, the extension of CMC's MOC Cut-Off Time 
should not present market participants with any novel operational or 
technological complexities.
Manipulation \70\
---------------------------------------------------------------------------

    \70\ Supra note 51.
---------------------------------------------------------------------------

    As a general matter, the Exchange notes that the value to market 
participants in extending the MOC Cut-Off Time to 3:49 p.m. is not the 
proximity of CMC's matched shares message to the cut-off times of the 
primary exchanges. Rather, the value of the proposed amendment is the 
ability of users to trade their orders for a longer period of time 
before deciding whether to commit their MOC orders to CMC. 
Nevertheless, the Exchange does not expect that the proposed extension 
of the MOC Cut-Off Time to 3:49 p.m. will result in an increase of 
manipulative activity due to information asymmetries, or raise any 
unique manipulation concerns relative to how CMC exists today with a 
current MOC Cut-Time of 3:35 p.m.
    The Exchange notes that any information CMC participants may be 
able to glean from their paired-off MOC orders, or from their unmatched 
MOC orders, is still limited in nature. For instance, any information 
that CMC participants may learn from receiving unmatched MOC order 
messages is still limited in nature because the CMC participant would 
still only know the unexecuted size of its own order.\71\ Moreover, 
even if a Member chose to participate in CMC only to gather information 
about the direction of an imbalance and use such information to 
manipulate the closing price, the Member's orders were still eligible 
for execution subjecting the Member to economic risk.
---------------------------------------------------------------------------

    \71\ The Exchange notes that in its Final Approval Order, even 
the Commission noted that, ``In particular, a market participant 
would only be able to determine the direction of the imbalance and 
would have difficulty determining the magnitude of any imbalance, as 
it would only know the unexecuted size of its own order. In 
addition, the information would only be with regard to the pool of 
liquidity on BZX and would provide no insight into imbalances on the 
primary listing exchange, competing auctions, ATSs, or other off-
exchange matching services which, as described above, can represent 
a significant portion of trading volume at the close.'' Supra note 
20.
---------------------------------------------------------------------------

    While this proposal would result in the total shares for buy and 
sell orders in CMC being disseminated closer in time to the primary 
exchanges' cut-off times, this change does not suddenly make such 
information more valuable or useful in terms of enhancing opportunities 
for gaming and manipulating the official closing price. The proposed 
MOC Cut-Off Time is one-minute prior to NYSE's cut-off time of 3:50 
p.m., and six-minutes prior to Nasdaq's cut-off time of 3:55 p.m. As 
noted above, today's markets are marked by technological solutions 
which typically operate in durations of microseconds. In this context, 
the separation between the CMC MOC Cut-Off Time and that of NYSE's and 
Nasdaq's is a substantial duration of time, during which much can 
change in the marketplace, thus limiting the value of information, if 
any, that can be gleaned from CMC's dissemination of matched shares at 
3:49 p.m.
    Furthermore, as with the current MOC Cut-Off Time, the proposed 
extension does not present any information asymmetries that do not 
already exist in today's markets, as the very nature of trading creates 
short term asymmetries of information to those who are parties to a 
trade.\72\ Indeed, as noted by the Commission, any party to a trade 
gains valuable insight regarding the depth of the market when an order 
is executed or partially executed.\73\ Additionally, NYSE imbalance 
information is already disseminated to NYSE floor brokers, who are 
permitted to share with their customers specific data from the 
imbalance feed.\74\ Even in this case, though, the Commission stated 
that the value of such information is limited because the imbalance 
information does not represent overall supply and demand for a 
security, is subject to change, and is only one relevant piece of 
information.\75\ Similarly, because any information gleaned by a CMC 
participant is limited only to the unexecuted size of their order, and 
relative to the depth of only the BZX pool of liquidity, the Exchange 
believes that the proposed extension of the MOC Cut-Off Time does not 
create an increased risk of manipulative trading activity.
---------------------------------------------------------------------------

    \72\ The Exchange also notes that in its approval order, even 
the Commission noted that, ``Further, the Commission believes 
information asymmetries as those described by commenters exist today 
and are inherent in trading, including with respect to closing 
auctions. For example, any party to a trade gains valuable insight 
regarding the depth of the market when an order is executed or 
partially executed.'' Id.
    \73\ Id.
    \74\ Id.
    \75\ Id.
---------------------------------------------------------------------------

    Moreover, there are currently controls and processes in place to 
monitor for manipulative trading activity, such as the supervisory 
responsibilities and capabilities of exchanges and the expansive cross 
market surveillance conducted by FINRA. Following approval of this 
proposal, the Exchange, FINRA and others will continue to surveil for 
potential manipulative activity and when appropriate, bring enforcement 
actions against market participants engaged in manipulative trading 
activity.

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. Rather, the proposed rule 
change seeks merely to extend the MOC Cut-Off Time from 3:35 p.m. to 
3:49 p.m., enabling all Members to manage their trading for a longer 
period. The Exchange is not proposing to make any other changes to the 
CMC process. Moreover, CMC is a voluntary closing match process, and 
Members are not required to participate in the CMC. Additionally, the 
proposed rule change applies equally to all Members. Importantly, based 
on feedback from CMC users, the proposed MOC Cut-Off Time will not 
prevent CMC's current user's from participating in CMC, as CMC's 
current users are technologically equipped to manage a 3:49 p.m. MOC 
Cut-Off Time, and should they choose to do so, reroute MOC orders not 
matched in CMC to the primary exchanges' closing auctions.
    Furthermore, the Exchange does not believe that the proposed rule 
change will impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. As 
noted above, the proposed rule change more closely aligns the CMC MOC 
Cut-Off Time to the cut-off times of other exchanges, while still 
providing CMC participants with an opportunity to reroute any of their 
unpaired MOC orders to the

[[Page 72536]]

primary exchanges. In this regard, the proposed rule change may make 
CMC a more viable alternative to the primary auctions and ``should 
foster price competition and thereby decrease costs for market 
participants.'' \76\ Additionally, the proposed MOC Cut-Off Time may 
also enable the Exchange to more effectively compete with off-exchange 
venues that have cut-off times much closer in time to the market close 
and comprise a growing percentage of closing volume.
---------------------------------------------------------------------------

    \76\ Supra note 20.
---------------------------------------------------------------------------

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. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2022-038, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \77\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, 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, as modified by 
Amendment No. 1, to further inform the Commission's analysis of whether 
to approve or disapprove the proposal.
---------------------------------------------------------------------------

    \77\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\78\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis, and input from commenters with respect to, the 
consistency of the proposal with Sections 6(b)(5) \79\ and 6(b)(8) \80\ 
of the Act. Section 6(b)(5) of the Act 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, and not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. Section 6(b)(8) of the Act 
requires that the rules of a national securities exchange not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \78\ Id.
    \79\ 15 U.S.C. 78f(b)(5).
    \80\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, which are set forth 
in Amendment No. 1,\81\ in addition to any other comments they may wish 
to submit about the proposed rule change, as modified by Amendment No. 
1. In particular, the Commission seeks comment on the following aspects 
of the proposal and asks commenters to submit data where appropriate to 
support their views:
---------------------------------------------------------------------------

    \81\ See supra note 6.
---------------------------------------------------------------------------

    1. The Exchange states that CMC users are technologically equipped 
to handle a 3:49 p.m. MOC Cut-Off Time and that, if a CMC user receives 
a message that their MOC order was not matched in CMC, such CMC user 
will have more than enough time to reroute their MOC order to the 
primary exchange.\82\ While the Exchange acknowledges that there are 
market participants that may not currently possess internal high-speed 
routing and trading technology, the Exchange states that such market 
participants may, and likely already do, utilize routing and trading 
services offered by third-party providers or broker-dealers to handle 
and execute their orders electronically.\83\ Accordingly, the Exchange 
believes that the proposed MOC Cut-Off Time is not likely to result in 
disparate treatment amongst CMC users and other market 
participants.\84\ What are commenters' views on whether the proposed 
MOC Cut-Off Time (3:49 p.m.), which would be one minute from NYSE's MOC 
cut-off time of 3:50 p.m. and six minutes from Nasdaq's MOC cut-off 
time of 3:55 p.m., would provide enough time for CMC users to reroute 
unmatched MOC orders to the primary exchanges should they choose to do 
so?
---------------------------------------------------------------------------

    \82\ See supra Item II.A.1.
    \83\ See supra Item II.A.2.
    \84\ See id.
---------------------------------------------------------------------------

    2. The Exchange states that total matched share information would 
still be disseminated by the Exchange free of charge via the Cboe 
Auction Feed, albeit at the new proposed MOC Cut-Off Time of 3:49 
p.m.\85\ The Exchange states that, because of the speeds and widespread 
use of market technology, market makers on the primary exchanges could, 
should they choose to do so, incorporate the Cboe Auction Feed 
information into their closing processes.\86\ What are commenters' 
views on whether the dissemination of total matched share information 
at an MOC Cut-Off Time of 3:49 p.m. would provide enough time for 
market participants, including market makers, to access and incorporate 
such information into their closing trading strategies and processes 
should they choose to do so?
---------------------------------------------------------------------------

    \85\ See id.
    \86\ See id.
---------------------------------------------------------------------------

    3. The Exchange states that, with an MOC Cut-Off Time at 3:49 p.m., 
CMC will be better positioned to serve as a viable option for market 
participants to consider when deciding which venues to route their MOC 
orders, thus enhancing intermarket competition.\87\ In particular, the 
Exchange states that, by extending the MOC Cut-Off Time to 3:49 p.m., 
CMC will be better positioned as a viable alternative to the primary 
exchanges' closing auctions, ``foster[ing] price competition and 
thereby decreas[ing] costs for market participants.'' \88\ The Exchange 
also states that the proposed MOC Cut-Off Time may enable the Exchange 
to more effectively compete with off-exchange venues that have cut-off 
times much closer in time to the market close and comprise a growing 
percentage of closing volume.\89\ What are commenters' views on the 
extent to which an extension of the MOC Cut-Off Time to 3:49 p.m. would 
promote competition among MOC order execution venues and foster price 
competition for MOC order execution fees?
---------------------------------------------------------------------------

    \87\ See supra Item II.A.1.
    \88\ See id. (quoting the Final Approval Order).
    \89\ See supra Item II.B.
---------------------------------------------------------------------------

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 proposal is 
consistent with Sections 6(b)(5) and 6(b)(8), 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

[[Page 72537]]

Rule 19b-4 under the Act,\90\ any request for an opportunity to make an 
oral presentation.\91\
---------------------------------------------------------------------------

    \90\ 17 CFR 240.19b-4.
    \91\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants 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, Report of the 
Senate Committee on Banking, Housing and Urban Affairs to Accompany 
S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by December 16, 
2022. Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by December 30, 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 Number SR-CboeBZX-2022-038 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-CboeBZX-2022-038. 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-CboeBZX-2022-038 and should be submitted 
on or before December 16, 2022. Rebuttal comments should be submitted 
by December 30, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\92\
---------------------------------------------------------------------------

    \92\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25669 Filed 11-23-22; 8:45 am]
BILLING CODE 8011-01-P