[Federal Register Volume 89, Number 86 (Thursday, May 2, 2024)]
[Notices]
[Pages 35866-35868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09472]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100038; File No. SR-CboeBZX-2024-006]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove 
Proposed Rule Change To Amend Rule 11.9(c)(6) and Rule 11.13(a)(4)(D) 
To Permit the Use of BZX Post Only Orders at Prices Below $1.00

April 26, 2024.

I. Introduction

    On January 8, 2024, Cboe BZX 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 permit the 
use of BZX Post Only Orders at prices below $1.00. The proposed rule 
change was published for comment in the Federal Register on January 29, 
2024.\3\ On March 8, 2024, 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 did not receive any comments. The Commission 
is instituting 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. 99414 (January 23, 
2024), 89 FR 5596 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 99698, 89 FR 18694 
(March 14, 2024) (designating April 26, 2024, as the date by which 
the Commission shall either approve, 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 7
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    \7\ For a more detailed description of the proposed rule change, 
including examples, refer to the Notice, supra note 3.
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    The Exchange proposes to amend Rule 11.9(c)(6) and Rule 
11.13(a)(4)(D)

[[Page 35867]]

to modify the treatment of BZX Post Only Orders priced below a dollar 
on the Exchange. BZX Post Only Orders priced at or above $1.00 will 
only remove liquidity if the value of the execution when removing 
liquidity equals or exceeds the value of such execution if the order 
instead posted to the BZX Book and subsequently provided liquidity, 
including the applicable fees charged or rebates provided. Currently, 
all BZX Post Only Orders priced below $1.00 are automatically treated 
as orders that remove liquidity. Under the proposed rule change, BZX 
Post Only Orders priced below $1.00 will be treated in the same manner 
as BZX Post Only Orders priced at or above $1.00 in that BZX Post Only 
Orders priced below $1.00 will only remove liquidity if the value of 
the overall execution (taking into account all applicable fees and 
rebates) make it economically beneficial for the order to remove 
liquidity.
    The Exchange also proposes to amend Rule 11.13(a)(4)(D) to permit 
Non-Displayed Orders \8\ and orders subject to display-price sliding 
(collectively, ``Resting Orders'') which are not executable at their 
most aggressive price due to the presence of a contra-side BZX Post 
Only Order to be executed at one minimum price variation less 
aggressive than the order's most aggressive price.\9\
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    \8\ See Rule 11.9(c)(11). A ``Non-Displayed Order'' is a market 
or limit order that is not displayed on the Exchange.
    \9\ See Securities Exchange Act Release No. 64475 (May 12, 
2011), 76 FR 28830 (May 18, 2011), SR-BATS-2011-015 (``Resting Order 
Execution Filing''). The Resting Order Execution Filing introduced 
an order handling change for certain Non-Displayed Orders and orders 
subject to display-price sliding that are not executable at prices 
equal to displayed orders on the opposite side of the market (the 
``locking price''). The Resting Order Execution Filing permits 
Resting Orders priced at or above $1.00 to be executed at one-half 
minimum price variation less aggressive than the locking price (for 
bids) and one-half minimum price variation more aggressive than the 
locking price (for offers), under certain circumstances.
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    Currently, Rule 11.13(a)(4)(D) states that, for securities priced 
above $1.00, incoming orders that are market orders or limit orders 
priced more aggressively than a displayed order on the same side of the 
market, the Exchange will execute the incoming order at, in the case of 
an incoming sell order, one-half minimum price variation less than the 
price of the displayed order, and, in the case of an incoming buy 
order, at one-half minimum price variation more than the price of the 
displayed order. The Exchange proposes that for securities priced below 
$1.00, incoming orders that are market orders or limit orders priced 
more aggressively than a displayed order on the same side of the 
market, the Exchange will execute the incoming order at, in the case of 
an incoming sell order, one minimum price variation less than the price 
of the displayed order, and, in the case of an incoming buy order, at 
one minimum price variation more than the price of the displayed order.

III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2024-006, and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \10\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. 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 
additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\11\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
described above, the Exchange proposes to permit the use of BZX Post 
Only Orders at prices below $1.00. In addition, as described above, for 
securities priced below $1.00, incoming orders that are market orders 
or limit orders priced more aggressively than a displayed order on the 
same side of the market, the Exchange will execute the incoming order 
at one minimum price variation less (more) than the price of the 
displayed order for sell (buy) orders.\12\ In contrast, under the 
current rule for securities priced above $1.00, the incoming order 
would execute at one-half minimum price variation less (more) than the 
price of the displayed order for sell (buy) orders.\13\ The Commission 
is instituting proceedings to allow for additional analysis of, and 
input from commenters with respect to, the proposed rule change's 
consistency with the Act, and in particular, Section 6(b)(5) of the 
Act, which requires, among other things, that the rules of a national 
securities exchange be designed to prevent fraudulent and manipulative 
acts and practices, 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.\14\ In addition, Sections 6(b)(5) 
and 6(b)(8) of the Act, respectively, prohibit the rules of an exchange 
from being designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers \15\ or imposing any burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\16\
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    \11\ Id.
    \12\ According to the Exchange, executing an incoming order at 
the same price as the price as that of a displayed order on the same 
side of the market would violate the time priority of the displayed 
order. See Notice supra note 3, 89 FR at 5599; see also Exchange 
Rules 11.12(a) and 11.13(a)(4).
    \13\ See Exchange Rule 11.13(a)(4)(D).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(b)(8).
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \17\ 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,\18\ and any failure of a self-
regulatory organization 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.\19\
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    \17\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR 
201.700(b)(3).
    \18\ See id.
    \19\ See id.
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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 Sections 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

[[Page 35868]]

Rule 19b-4 under the Act,\20\ any request for an opportunity to make an 
oral presentation.\21\
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    \20\ 17 CFR 240.19b-4.
    \21\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (Jun. 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 May 23, 2024. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
June 6, 2024. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2024-006 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-2024-006. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeBZX-2024-006 and should 
be submitted by May 23, 2024. Rebuttal comments should be submitted by 
June 6, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-09472 Filed 5-1-24; 8:45 am]
BILLING CODE 8011-01-P