[Federal Register Volume 89, Number 90 (Wednesday, May 8, 2024)]
[Notices]
[Pages 38933-38935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10003]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100051; File No. SR-CboeEDGA-2024-003]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove 
Proposed Rule Change To Amend Rule 11.6(n)(4) and Rule 11.10(a)(4)(D) 
To Permit the Use of the Post Only Order Instruction at Prices Below 
$1.00

May 2, 2024.

I. Introduction

    On January 19, 2024, Cboe EDGA 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 the Post Only order instruction (``EDGA Post Only Orders'') at 
prices below $1.00. The proposed rule change was published for comment 
in the Federal Register on February 7, 2024.\3\ On March 19, 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. 99458 (February 1, 
2024), 89 FR 8460 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 99765, 89 FR 20721 
(March 25, 2024) (designating May 7, 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 11.6(n)(4) and Rule 
11.10(a)(4)(D) to modify the treatment of EDGA Post Only Orders priced 
below a dollar on the Exchange. EDGA 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

[[Page 38934]]

execution if the order instead posted to the EDGA Book and subsequently 
provided liquidity, including the applicable fees charged or rebates 
provided. Currently, all EDGA Post Only Orders priced below $1.00 are 
automatically treated as orders that remove liquidity. Under the 
proposed rule change, EDGA Post Only Orders priced below $1.00 will be 
treated in the same manner as EDGA Post Only Orders priced at or above 
$1.00 in that EDGA 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 11.10(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 EDGA Post 
Only Order to be executed at one minimum price variation less 
aggressive than the order's most aggressive price.\9\ Currently, Rule 
11.10(a)(4)(D) states that, for securities priced at or above $1.00, 
incoming orders that are Market Orders \10\ or Limit Orders \11\ priced 
more aggressively than an order displayed on the EDGA Book, 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 an order displayed on the EDGA Book, 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.
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    \8\ See Rule 11.6(e)(2). A User may attach a ``Non-Displayed 
Order'' instruction to an order stating that the order is not to be 
displayed by the System on the EDGA Book.
    \9\ See Securities Exchange Act Release No. 75700 (August 14, 
2015), 80 FR 50689 (August 20, 2015), SR-EDGA-2015-33 (``EDGA Order 
Handling Filing''). See also 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'') on the Exchange's affiliate, 
BZX (BATS) Exchange in 2011 and is incorporated by reference in the 
EDGA Order Handling Filing. 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.
    \10\ See Rule 11.8(a). A ``Market Order'' is an order to buy or 
sell a stated amount of a security that is to be executed at the 
NBBO or better when the order reaches the Exchange.
    \11\ See Rule 11.8(b). A ``Limit Order'' is an order to buy or 
sell a stated amount of a security at a specified price or better.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeEDGA-2024-003, and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \12\ 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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    \12\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\13\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
described above, the Exchange proposes to permit the use of EDGA 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 an order displayed on the 
EDGA Book, 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.\14\ 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.\15\ 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.\16\ 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 \17\ or imposing any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act.\18\
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    \13\ Id.
    \14\ 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 8463; see also Exchange 
Rules 11.9(a) and 11.10(a)(4).
    \15\ See Exchange Rule 11.10(a)(4)(D).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 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.'' \19\ 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,\20\ 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.\21\
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    \19\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR 
201.700(b)(3).
    \20\ See id.
    \21\ 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

[[Page 38935]]

facilitated by an oral presentation of data, views, and arguments, the 
Commission will consider, pursuant to Rule 19b-4 under the Act,\22\ any 
request for an opportunity to make an oral presentation.\23\
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    \22\ 17 CFR 240.19b-4.
    \23\ 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 29, 2024. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
June 12, 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-CboeEDGA-2024-003 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-CboeEDGA-2024-003. 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-CboeEDGA-2024-003 and should 
be submitted by May 29, 2024. Rebuttal comments should be submitted by 
June 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-10003 Filed 5-7-24; 8:45 am]
BILLING CODE 8011-01-P