[Federal Register Volume 89, Number 168 (Thursday, August 29, 2024)]
[Notices]
[Pages 70214-70229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19397]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100814; File No. SR-CboeBZX-2024-032]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
Nos. 2 and 3, To Amend Rule 11.28(a) To Add Three Additional Market-on-
Close Cut-Off Times to Cboe Market Close

August 23, 2024.

I. Introduction

    On April 29, 2024, 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 add several 
additional Market-on-Close (``MOC'') Cut-Off Times to Cboe Market 
Close. On May 13, 2024, the Exchange filed Amendment No. 1, which 
replaced and superseded the proposed rule change as originally filed. 
The proposed rule change, as modified by Amendment No.1, was published 
for comment in the Federal Register on May 29, 2024.\3\
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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. 100129 (May 14, 
2024), 89 FR 46428 (``Notice'').

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[[Page 70215]]

    On July 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\ On August 12, 2024, the Exchange submitted Amendment No. 2 
to the proposed rule change.\6\ On August 14, 2024, the Exchange 
submitted Amendment No. 3 to the proposed rule change.\7\ The 
Commission has received no comments on the proposed rule change. The 
Commission is publishing this notice to solicit comments on Amendment 
Nos. 2 and 3 from interested persons and is approving the proposed rule 
change, as modified by Amendment Nos. 2 and 3, on an accelerated basis.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 100466, 89 FR 57175 
(July 12, 2024).
    \6\ Amendment No. 2 amended and superseded Amendment No. 1, 
which replaced and superseded the proposed rule change as originally 
filed. Amendment No. 2 is available on the Commission's website at: 
https://www.sec.gov/comments/sr-cboebzx-2024-032/srcboebzx2024032.htm.
    \7\ In Amendment No. 3, the Exchange revised BZX Rule 11.28(a) 
to correct an erroneous reference to ``five'' total CMC matching 
sessions. Amendment No. 3 is available on the Commission's website 
at: https://www.sec.gov/comments/sr-cboebzx-2024-032/srcboebzx2024032.htm.
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II. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 2 \8\
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    \8\ This Section II reproduces Amendment No. 2, as filed by the 
Exchange. Amendment No. 3 does not make any revisions to Section II.
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    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    BZX proposes to amend Rule 11.28(a) to add three additional CMC MOC 
Cut-Off times. These proposed CMC MOC Cut-Off times would be in 
addition to the existing CMC MOC Cut-Off time of 3:49 p.m. ET, for a 
total of four matching sessions: 3:15 p.m. ET (new); 3:30 p.m. ET 
(new); 3:49 p.m. ET (current); and 3:54 p.m. ET (new).\9\ The 3:54 p.m. 
CMC MOC Cut-Off Time will be limited to only Nasdaq-listed securities. 
Additionally, the Exchange proposes to amend Interpretations and 
Polices .02 to Rule 11.28 in order to more accurately describe how the 
Exchange will handle orders designated for multiple CMC MOC Cut-Off 
Times in the event the Exchange experiences a matching impairment 
impacting the Exchange's ability to conduct CMC matching sessions. 
Finally, the Exchange proposes to amend Rule 11.28(c) to state that at 
the conclusion of each CMC MOC Cut-Off Time, the Cboe Auction Feed will 
disseminate the total size of all buy and sell orders matched in CMC, 
and that such information will only be for that particular CMC matching 
session and would not include the total size of matched buy and sell 
orders from any prior CMC MOC Cut-Off Time.
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    \9\ Hereinafter, all times referenced are in Eastern Time.
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    The proposed CMC MOC Cut-Off Times are based on Member 
feedback.\10\ Specifically, in response to CMC's noticeable increase in 
executed volume (discussed infra), there has been heightened interest 
in CMC from both existing users, as well as potential new users of CMC 
(collectively ``Members''). Collectively, these Members have requested 
certain enhancements to CMC that would encourage existing users to 
increase their utilization of CMC, as well encourage prospective users 
to begin using CMC. Namely, Members have expressed a desire for: (1) 
CMC MOC Cut-Off Times earlier in the trading day, and prior to the 
current CMC MOC Cut-Off Time of 3:49 p.m.; and (2) a CMC MOC Cut-Off 
Time closer to Nasdaq's MOC cut-off time of 3:55 p.m.\11\ Accordingly, 
both the Exchange and its Members believe that these additional CMC MOC 
Cut-Off Times will help to position CMC as more viable alternative to 
the primary exchanges' closing auctions and off-exchange closing price 
services. Additionally, multiple CMC MOC Cut-Off Times will make CMC 
more appealing to a larger segment of market participants by providing 
Members with different trading strategies and technical and operational 
capabilities more flexibility in how they manage their market-on-close 
(``MOC'') and closing price orders.
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    \10\ The Exchange notes that its Amendment No. 1 also proposed 
an MOC Cut-Off Time of 3:58 p.m. The Exchange, however, has removed 
the 3:58 MOC Cut-Off Time from its proposal reflected in this 
Amendment No. 2, and instead now proposes additional MOC Cut-Off 
Times of 3:15 p.m., 3:30 p.m., and 3:54 p.m. (the 3:54 p.m. ET 
session is limited to Nasdaq-listed securities only).
    \11\ See Nasdaq Rule 4702(b)(11)(A), ``A ``Market On Close 
Order'' or ``MOC Order'' is an Order Type entered without a price 
that may be executed only during the Nasdaq Closing Cross. Subject 
to the qualifications provided below, MOC Orders may be entered 
between 4 a.m. ET and immediately prior to 3:55 p.m. ET. MOC Orders 
may be cancelled and/or modified between 4 a.m. ET and immediately 
prior to 3:50 p.m. ET. Between 3:50 p.m. ET and immediately prior to 
3:58 p.m. ET, an MOC Order can be cancelled and/or modified only if 
the Participant requests that Nasdaq correct a legitimate error in 
the Order (e.g., Side, Size, Symbol, or Price, or duplication of an 
Order). MOC Orders cannot be cancelled or modified at or after 3:58 
p.m. ET for any reason. An MOC Order shall execute only at the price 
determined by the Nasdaq Closing Cross.''
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Procedural 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 \12\ to that proposal (the 
``Original Proposal'').\13\ On January 17, 2018, the Commission, acting 
through authority delegated to the Division of Trading and Markets,\14\ 
approved the Original Proposal (``Approval Order'').\15\ 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),\16\ the Approval Order was stayed by the filing with the 
Commission of a notice of intention to petition for review.\17\ 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

[[Page 70216]]

in opposition to, the Approval Order.\18\ 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.\19\ On October 
4, 2018, BZX filed Amendment No. 2 \20\ to the Original Proposal.
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    \12\ 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.
    \13\ 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).
    \14\ 17 CFR 200.30-3(a)(12).
    \15\ 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).
    \16\ 17 CFR 201.431(e).
    \17\ 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.
    \18\ 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).
    \19\ 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.
    \20\ 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'').
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    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,\21\ 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.\22\ 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.'' \23\
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    \21\ See ``Statements on File No. SR-BatsBZX-2017-34'', 
available at: https://www.sec.gov/comments/batsbzx-2017-34/batsbzx201734.htm.
    \22\ 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'').
    \23\ Id.
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    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'').\24\ 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'' \25\ 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''.\26\
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    \24\ Id.
    \25\ Id.
    \26\ Id.
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    Subsequently, on August 5, 2022, the Exchange filed a proposed rule 
change to amend Rule 11.28(a) to extend CMC's MOC Cut-Off Time from 
3:35 p.m. to 3:49 p.m. (``CMC Amendment'').\27\ On October 4, 2022, the 
Commission, acting through authority delegated to the Division of 
Trading and Markets, designated a longer period within which to take 
action on the Exchange's CMC Amendment.\28\ Later, on November 11, 
2022, BZX filed Amendment No. 1 to its CMC Amendment, and the 
Commission instituted proceedings to determine whether to approve or 
disapprove the proposed rule change as modified by Amendment No. 1.\29\ 
Finally, on February, 9, 2023, the Commission, approved the proposed 
CMC Amendment (``CMC Amendment Approval Order'').\30\
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    \27\ See Securities Exchange Act Release No. 34-95529 (August 
17, 2020), 87 FR 52092 (August 24, 2022) (SR-CboeBZX-2022-038).
    \28\ See Securities Exchange Act Release No. 34-95967 (October 
4, 2022), 87 FR 61425 (October 11, 2022) (SR-CboeBZX-2022-038).
    \29\ See Securities Exchange Act Release No. 34-96359 (November 
18, 2022), 87 FR 72537 (November 25, 2022) (SR-CboeBZX-2022-038).
    \30\ See Securities Exchange Act Release No. 34-96861 (February 
9, 2023), 88 FR 9940 (February 15, 2023) (SR-CboeBZX-2022-038).
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    In approving the CMC Amendment, the Commission stated that the 
proposal was consistent with Section 6(b)(5) of the Act,\31\ 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, and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; as well as Section 
6(b)(8) of the Act,\32\ which requires that the rules of a national 
securities exchange not impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Act.
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    \31\ 15 U.S.C. 78f(b)(5).
    \32\ 15 U.S.C. 78f(b)(8).
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    For the reasons discussed more fully below, the Exchange believes 
that when applying the Commission's analysis in the Final Approval 
Order and the CMC Amendment Approval Order, to the current proposal, 
such review would similarly conclude that this proposal is consistent 
with the Act.
Increased Volume and New Demand for CMC
    On March 10, 2023, the Exchange moved its CMC MOC Cut-Off Time from 
3:35 p.m. to 3:49 p.m. As illustrated in Figure 1 below, since 
implementing the 3:49 p.m. CMC MOC Cut-Off Time, CMC has experienced 
noticeable growth in its trading volume, rising modestly beginning in 
May 2023 and more remarkably between September 2023 and November 2023, 
ultimately reaching a record-high of 155 million shares traded in 
December 2023. Based on CMC's growing usage, the Exchange has received 
various feedback from both existing CMC users and prospective CMC 
users. Collectively, these Members have requested certain enhancements 
to CMC that would encourage existing users to increase their 
utilization of CMC, as well encourage prospective users to begin using 
CMC. Namely, Members have expressed a desire for: (1) CMC MOC Cut-Off 
Times earlier in the trading day, and prior to the current CMC MOC Cut-
Off Time of 3:49 p.m.; and (2) a CMC MOC Cut-Off Time closer to 
Nasdaq's MOC cut-off time of 3:55 p.m.
    As noted, both the Exchange and its Members believe that these 
enhancements will help to position CMC as more viable alternative to 
the primary exchanges' closing auctions and off-exchange closing price 
services. Additionally, multiple CMC MOC Cut-Off Times will make CMC 
more appealing to a larger segment of Members by providing Members with 
different trading strategies and technical and operational capabilities 
more flexibility in how they manage their MOC and closing price orders.

[[Page 70217]]

[GRAPHIC] [TIFF OMITTED] TN29AU24.000

Proposed Functionality
    Accordingly, BZX proposes to amend Rule 11.28(a) to add three CMC 
MOC Cut-Off times. These MOC Cut-Off times would be in addition to the 
existing CMC MOC Cut-Off time of 3:49 p.m., for a total of four 
matching sessions: 3:15 p.m. (new), 3:30 p.m. (new), 3:49 p.m. 
(current), 3:54 p.m. (the 3:54 p.m. matching session is for Nasdaq-
listed securities only). MOC orders may be entered for each matching 
session up to the relevant CMC MOC Cut-Off Time, beginning each day at 
6:00 a.m.\33\ Members will have the ability to specify on their order 
instructions which CMC session(s) they wish to participate in. For 
orders that specify a willingness to match in multiple matching 
sessions, any unfilled quantity from an earlier session will carry 
forward to the next session(s). Any unfilled quantity remaining after a 
Member's specified final matching session will be canceled back to the 
Member. To illustrate the proposed functionality, consider the 
following examples.
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    \33\ For instance, an MOC order specifying that it wishes to 
participate in the proposed 3:15 CMC MOC Cut-Off Time must be 
entered, cancelled, or replaced prior to 3:15 p.m. Similarly, a MOC 
order specified to participate in the proposed 3:30 CMC MOC Cut-Off 
Time may be entered, cancelled, or replaced anytime between 6:00 
a.m. and 3:29:59 p.m.
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Example 1: Order Indicates Matching in a Single Session
    Order 1: Buy 100 @MKT--CMC Session: 3:49 p.m., Timestamp: 3:00:00 
p.m.
    Order 2: Sell 100 @MKT--CMC Session: 3:15 p.m., 3:30 p.m., 3:49 
p.m., Timestamp: 3:01:00 p.m.
    Results:
     Order 1 will not match with Order 2 in the 3:15 p.m. or 
3:30 p.m. session. Order 2's unfilled quantity of 100 shares will first 
carry forward from the 3:15 session, then again from the 3:30 session, 
and finally to the 3:49 session.
     Order 1 and Order 2 match in the 3:49 p.m. session for 100 
shares at the closing price.
Example 2: Order Indicates Matching in Multiple Sessions
    Order 1: Buy 500 @MKT--CMC Session: 3:15 p.m., 3:30 p.m., 3:49 
p.m., Timestamp: 3:00:00 p.m.
    Order 2: Sell 100 @MKT--CMC Session: 3:30 p.m., Timestamp: 3:01:00 
p.m.
    Order 3: Sell 100 @MKT--CMC Session: 3:15 p.m., Timestamp: 3:02:00 
p.m.
    Order 4: Sell 100 @MKT--CMC Session: 3:49 p.m., Timestamp: 3:03:00 
p.m.
    Results:
     Order 1 and Order 3 match in the 3:15 p.m. session for 100 
shares at the closing price and Order 1's 400 remaining shares are 
carried over to the next session.
     Order 1 and Order 2 match in the 3:30 p.m. session for 100 
shares at the closing price and Order 1's 300 remaining shares are 
carried over to the next session.
     Order 1 and Order 4 match in the 3:49 p.m. session for 100 
shares at the closing price and Order 1's 200 remaining shares are 
canceled back.
Example 3: Order's Unfilled Quantity Retains Its Original Timestamp for 
Priority Purposes
    Order 1: Buy 500 @MKT--CMC Session: 3:15 p.m., 3:30 p.m., 
Timestamp: 3:00:00 p.m.
    Order 2: Buy 100 @MKT--CMC Session: 3:30 p.m., Timestamp: 3:01:00 
p.m.
    Order 3: Sell 100 @MKT--CMC Session: 3:15 p.m., Timestamp: 3:02:00 
p.m.
    Order 4: Sell 100 @MKT--CMC Session: 3:30 p.m., Timestamp: 3:03:00 
p.m.
    Results:
     Order 1 and Order 3 match in the 3:15 p.m. session for 100 
shares at the closing price and Order 1's 400 remaining shares are 
carried over to the next session.
     Order 1 \34\ and Order 4 match in the 3:30 p.m. session 
for 100 shares at the closing price and Order 1's 300 remaining shares 
are canceled back.
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    \34\ Note that Order 1 in this scenario retains its priority 
over Order 2. Because Order 1 and Order 2 are both un-priced MOC 
orders, time priority takes precedent, with Order 1 maintaining its 
queue priority versus Order 2. See Rule 11.12, Priority of Orders, 
which provides that orders are ranked based on price, then time.
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     Order 2's 100 shares are unfilled and canceled back at 
3:30 p.m.
    As reflected in the proposed edits to Rule 11.28, Interpretations 
and Policies .02, the Exchange also wishes to clarify that the 
reference to an ``impairment''

[[Page 70218]]

refers to an impairment of an Exchange's matching engine responsible 
for the CMC matching process--i.e., where a matching engine responsible 
for conducting the CMC matching process has become unresponsive or 
crashed and is unable to process Members' orders. With this in mind, 
the Exchange notes that when an Exchange matching engine responsible 
for the CMC process is impaired prior to or after a CMC MOC Cut-Off 
Time but prior to completion of CMC's closing match process in a 
security, the action taken by the Exchange on orders designated to 
participate in CMC is dependent on Member instruction. Specifically, 
and as detailed in the Exchange's technical specifications,\35\ Members 
may elect ``Cancel on Disconnect = Yes'' or ``Cancel on Disconnect = 
No''.\36\ When a Member elects ``No'', the Exchange will allow a 
Member's orders to remain open during a matching engine impairment; 
provided, however, if an impairment exceeds five-minutes all orders 
will be cancelled unconditionally, regardless of a Member's 
instruction. Importantly, even when a Member has elected ``No'', a 
Member may still cancel their order during a matching engine impairment 
and prevent their MOC order(s) from participating in CMC once the 
matching engine failover is completed. When a Member elects ``Yes'', 
all open orders associated with a session are immediately cancelled in 
the event of a matching engine impairment.
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    \35\ See ``Cboe US Equities BOE Specification,'' pg. 74, 
``Cancel on ME Disconnect,'' available at: https://cdn.cboe.com/resources/membership/Cboe_US_Equities_BOE_Specification.pdf; See 
also ``Cboe US Equities FIX Specification,'' pg. 66, ``Cancel on ME 
Disconnect,'' available at: https://cdn.cboe.com/resources/membership/Cboe_US_Equities_FIX_Specification.pdf.
    \36\ The Exchange notes that this field cannot be left blank, 
and that if a Member does not designate a value, the default is, 
``Cancel on Disconnect = YES''. Furthermore, during an impairment, 
no new Exchange orders--including CMC orders--are accepted.
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    By way of illustration, assume a Member has submitted an order to 
participate in the 3:15 CMC MOC Cut-Off Time, has selected ``Cancel on 
Disconnect = No'', a matching engine impairment occurs at 3:14 p.m., 
and an impairment impacting the CMC matching process lasts less than 
five-minutes. In this instance, the Member's MOC order will remain 
open, and post matching engine failover, the Exchange will simply 
conduct the CMC session that should have occurred at 3:15 p.m. and 
attempt to match the Member's MOC order.
    To further illustrate, assume a Member has designated its MOC order 
to participate in multiple CMC MOC Cut-Off Times (e.g., 3:30, 3:49, and 
3:54), has also selected Cancel on Disconnect = NO, a matching engine 
impairment impacting the CMC process occurs at 3:29 p.m., and the 
impairment last less than five-minutes. In this instance, the Member's 
MOC order will remain open, and post matching engine failover, the 
Exchange will simply conduct the CMC session that should have occurred 
at 3:30 p.m. and attempt to match the Member's MOC order. Should the 
Member's 3:30 p.m. MOC order not be matched, or only partially filled, 
the Member's MOC order will proceed to the 3:49 matching session.
    In addition, as is the case with the current functionality, if the 
Exchange becomes impaired after completing the closing match process in 
a security, it will retain all matched MOC orders and execute those 
orders at the official closing price once the impairment is resolved.
    Finally, the Exchange wishes to amend Rule 11.28(c) to clarify that 
even with the proposed multiple CMC MOC Cut-Off Times, the total size 
of matched buy and sell orders disseminated via the Cboe Auction Feed 
will be limited to that particular CMC matching session--i.e., the 
information disseminated for the 3:30 p.m. CMC matching session will 
include the total size of matched buy and sell orders for the 3:30 p.m. 
CMC MOC Cut-Off Time only, and would not aggregate the total sizes of 
matched buy and sell orders from the prior 3:15 p.m. CMC MOC Cut-Off 
Time.
The Proposed 3:15 p.m. and 3:30 p.m. MOC Cut-Off Times
    Members requesting CMC MOC Cut-Off Times earlier in the trading day 
have expressed that these additional CMC MOC Cut-Off Times will provide 
them more flexibility in managing their MOC and closing price order 
flow. For instance, some Members maintain multiple internal trading 
desks, each managing different types of order flow and trading 
strategies. One trading desk may manage orders that its traders 
actively trade throughout the trading day leading up to the close, 
making CMC MOC Cut-Off Times closer to 4:00 p.m. more valuable for that 
trading desk. Separately, one of the Member's other trading desks may 
typically execute orders guaranteeing the closing price or perhaps 
manage orders on behalf of index funds or ETF providers, that are often 
benchmarked to the official closing price. For this workflow, a Member 
may be agnostic as to when it commits MOC orders to CMC, a primary 
exchange's closing auction, or an off-exchange closing price service, 
and may view the ability to commit such order flow to CMC earlier in 
the trading day at 3:15 p.m. or 3:30 p.m. as a valuable tool to help 
them execute orders and de-risk their trading risk earlier in the 
trading day.
    Additionally, Members have indicated the proposed 3:15 p.m. and 
3:30 p.m. CMC MOC Cut-Off Times will also assist them in managing any 
technological and operational risk associated with managing high 
volumes of order flow. Notional trading and trading volatility are 
typically at their highest towards the end of Regular Trading Hours. 
During this time, Members systems may be managing a significant number 
of MOC or closing price orders. Unless the Member is attempting to beat 
the closing price by trading such orders for as long as possible 
heading into the close, committing such orders to CMC earlier in the 
trading day will enable them to reduce the number of MOC and closing 
price orders their trading systems must manage. Notably, the Exchange 
noted in its CMC Amendment that today's market participants, including 
CMC's existing users, were technologically equipped \37\ to handle 
CMC's current 3:49 p.m. CMC MOC Cut-Off Time. While this remains the 
case today, the recent growth in CMC's executed volume has attracted 
potential new users with trading strategies, and technological and 
operational capabilities, that have presented new use cases for CMC.
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    \37\ 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 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.'').
---------------------------------------------------------------------------

    Overall, by having the ability to submit orders to the proposed 
3:15 p.m., 3:30 p.m., and 3:49 p.m. CMC MOC Cut-Off Times, Members will 
have a greater opportunity of being matched earlier in

[[Page 70219]]

the trading day before potentially needing to re-route their unmatched 
MOC orders to the primary exchanges or off-exchange closing price 
offerings. On high-volume order days--e.g. Russell Rebalance Days where 
trading volume is high--the utility of being able to de-risk closing 
cross order volume earlier in the trading day is both a rational 
trading decision and a prudent way for Members to manage their 
operational and technological risk as such event days are marked by 
high volume and volatility that may utilize a significant portion of 
some Members' systems capacity.
The Proposed 3:54 p.m. CMC MOC Cut-Off Time
    The proposed 3:54 p.m. CMC MOC Cut-Off Time applies only to orders 
in Nasdaq-listed securities. Members requesting the CMC MOC Cut-Off 
Time of 3:54 p.m. have indicated that this CMC MOC Cut-Off Time will 
help to better align CMC with Nasdaq's MOC cut-off time of 3:55 p.m., 
thereby helping to make CMC a more viable alternative to Nasdaq's 
closing auction.
    As noted in SR-CboeBZX-2022-038,\38\ today's market participants, 
including users of CMC, are technologically equipped \39\ to handle a 
CMC MOC Cut-Off Time one-minute prior to the primary exchange's MOC 
cut-off time (here, Nasdaq's MOC cut-off time of 3:55 p.m.). 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 its MOC order was not matched in CMC, such CMC user will have more 
than enough time to reroute its MOC order(s) to Nasdaq. Importantly, 
the Exchange has confirmed with both existing and prospective CMC users 
that based on their technological capabilities (discussed infra), they 
would have ample time \40\ to reroute unmatched CMC orders from the 
proposed 3:54 CMC MOC Cut-Off Time to Nasdaq by 3:55 p.m. in order to 
participate in the Nasdaq closing auction.\41\ Furthermore, Members 
that may not possess their own internal electronic trading and routing 
capabilities to self-manage the proposed 3:54 p.m. CMC MOC Cut-Off Time 
rely on third-party solutions \42\ and broker dealers that offer high-
speed routing and trading solutions to manage their order flow, 
including their CMC orders.
---------------------------------------------------------------------------

    \38\ Supra note 28.
    \39\ Supra note 36.
    \40\ 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 through CMC via the 
Cboe Auction Feed--generally occurs within microseconds. More 
specifically, 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 Member in most instances currently knows its 
paired CMC quantity no later than 3:49:01 p.m., leaving the user at 
least fifty-nine-seconds (59) to reroute any unpaired MOC orders to 
the primary exchanges' closing auctions. As noted, 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.
    \41\ As it did for its proposal to move the CMC MOC Cut-Off Time 
to 3:49 p.m. from 3:35 p.m. (See SR-CboeBZX-2022-038) 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--namely, the proposed 
3:15 p.m., 3:30 p.m., and 3:54 p.m. MOC Cut-Off Times--with CMC's 
users, two (2) third-party providers whose end users are responsible 
for 100% of CMC's volume. Importantly these providers indicated that 
the automated routing and trading solutions they offer to CMC's 
users can appropriately manage the proposed CMC MOC Cut-Off Times, 
including the proposed 3:54 p.m. CMC MOC Cut-Off Time. Additionally, 
the Exchange discussed the proposed CMC MOC Cut-Off Times with 
potential new users of CMC (4 large, multinational bulge bracket 
broker-dealers). These market participants indicated that proposed 
CMC MOC Cut-Off Times would likely encourage them to use CMC as part 
of their trading and that they either independently maintained high-
speed routing and trading capabilities, or utilized third-party 
technology providers or broker-dealers that provide them with such 
solutions. As such, these market participants did not have any 
operational or technological concerns with the proposed CMC MOC Cut-
Off Times--particularly the 3:54 p.m. CMC MOC Cut-Off.
    \42\ 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 CMC MOC Cut-Off Time of 3:54 
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 36 
(``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.'').
---------------------------------------------------------------------------

    Similar to the rationale for extending CMC's MOC Cut-Off Time from 
3:35 p.m. to 3:49 p.m., Members desire a CMC MOC Cut-Off Time that is 
closer to Nasdaq's MOC cut-off time and the end of Regular Trading 
Hours \43\ so they can retain control of their trading for a longer 
period of time.\44\ By being able to trade closer to the Nasdaq's MOC 
cut-off time and the end of Regular Trading Hours, Members have more 
opportunities to seek better priced liquidity for their orders in a 
variety of ways and reducing the size of their outstanding orders they 
may need to commit to CMC or the primary auctions, 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 algorithmically into the close. By 
adding the CMC MOC Cut-Off Time of 3:54 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 in 
Nasdaq-listed securities, thus enhancing intermarket competition.
---------------------------------------------------------------------------

    \43\ 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.''
    \44\ The Exchange notes that part of its rationale for adding 
the proposed 3:54 p.m. MOC Cut-Off Time is substantively identical 
to that of other exchanges moving their MOC cutoff 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.'').
---------------------------------------------------------------------------

    In support of the above, Figure 2 shows the total average daily 
volume across all market centers, from 3:30 p.m. to 4:00 p.m. in 30-
second intervals, and illustrates the Nasdaq MOC cut-off time. As 
illustrated, at Nasdaq's 3:55 p.m. MOC cut-off time, and 4:00 p.m. 
market

[[Page 70220]]

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. This analysis supports the Exchange's assertion 
that certain market participants do indeed prefer cut-off times later 
in the trading day, as volumes tend to significantly increase as the 
closing auctions approach. Therefore, the Exchange now seeks to 
implement the MOC Cut-Off Time of 3:54 p.m. to better align CMC with 
Nasdaq's 3:55 p.m. MOC cut-off time. By implementing this change, the 
Exchange believes that CMC will be better positioned as a viable 
alternative to Nasdaq's closing auction, thereby ``foster[ing] price 
competition and . . . decreas[ing] costs for market participants.'' 
\45\
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    \45\ Supra note 21.
    [GRAPHIC] [TIFF OMITTED] TN29AU24.001
    
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\46\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \47\ 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) \48\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b).
    \47\ Supra note 30.
    \48\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes that the addition of the 
proposed CMC MOC Cut-Off Times would remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because the proposed times would offer CMC users increased flexibility 
in how to manage their MOC and closing price order flow and their 
associated trading, and their technological and operational risk, as 
well help to better position CMC to serve as a viable alternative to 
the primary exchanges' closing auctions, and off-exchange closing price 
mechanisms. For instance, by having the option to allocate their MOC 
order flow across various CMC MOC Cut-Off Times, Members will have the 
opportunity to receive matches earlier in the trading day, thereby 
reducing their trading risk, as well as the volume of orders their 
systems may need to handle at once, thereby reducing operational and 
technology risk.
    Furthermore, the Exchange has received feedback from Members that 
while moving the single CMC MOC Cut-Off Time from 3:35 p.m. to 3:49 
p.m. (six-minutes prior to Nasdaq's MOC cut-off time) has been helpful 
in managing their MOC orders in NYSE-listed securities, Members desire 
a CMC MOC Cut-Off Time that more closely aligns with the current Nasdaq 
MOC cut-off time of 3:55 p.m. In this regard, the proposed 3:54 p.m. 
CMC MOC Cut-Off time will enable Members to actively trade orders in 
Nasdaq-listed securities for a longer period as they will no longer 
have to submit their MOC orders to BZX in order to participate in CMC 
at 3:49 p.m.--i.e., six-minutes prior to Nasdaq's cut-off time. Rather, 
Members will have until 3:53:59 to submit MOC orders to BZX in order to 
participate in CMC, which provides Members an additional four minutes 
and fifty-nine seconds to actively trade Nasdaq-listed securities. As 
discussed above, if a Member's MOC orders are not matched in CMC the 
Member will still have ample time to reroute any unmatched to CMC MOC 
orders to Nasdaq's closing auction, thereby making CMC a more 
competitive alternative to Nasdaq's closing auction.
    The Exchange notes that the primary market participants that would 
utilize the proposed 3:54 p.m. CMC MOC Cut-Off Time are technologically 
equipped \49\ to re-route any unmatched

[[Page 70221]]

CMC MOC orders in Nasdaq-listed securities to Nasdaq prior to Nasdaq's 
3:55 p.m. MOC cut-off time. Specifically, Members are either 
technologically self-equipped to manage the proposed CMC MOC-Cut Off 
Times, or currently rely on third-party solutions that provide them 
with the technological capability to appropriately manage the proposed 
CMC MOC Cut-Off Times and timely re-route unmatched CMC orders 
participate in Nasdaq's closing auction.
---------------------------------------------------------------------------

    \49\ Supra note 36.
---------------------------------------------------------------------------

    Similarly, given the widespread use of routing and trading 
technology in today's markets, it is also likely that potential new CMC 
users currently possess the technological capabilities to manage the 
proposed CMC MOC Cut-Off Times, and if they do not, they could 
similarly rely on third-party providers \50\ with high-speed technology 
offerings. Alternatively, new CMC users lacking high-speed trading and 
routing technology can simply utilize the earlier CMC MOC Cut-Off Times 
of 3:15 p.m. and 3:30 p.m., providing themselves more flexibility to 
reroute unmatched CMC orders to the primary exchanges.
---------------------------------------------------------------------------

    \50\ Supra note 41.
---------------------------------------------------------------------------

    The Exchange also notes that as CMC volume has increased, 
prospective new users \51\ with different trading strategies and 
different technological and operational capabilities have expressed 
interest in utilizing CMC. This segment of Members has expressed a 
desire for earlier CMC MOC Cut-Off Times (i.e., 3:15 p.m. and 3:30 
p.m.), which they note will assist them in more efficiently managing 
their workflows and trading risk. For instance, some of these Members 
would prefer to commit certain of their closing price orders--e.g., 
guaranteed close orders--to a closing auction mechanism earlier in the 
trading day. By submitting such orders to CMC and potentially receiving 
a match, a Member can reduce its trading risk. Additionally, by having 
the ability to allocate MOC orders across various CMC MOC Cut-Off 
Times, Members can more capably manage their closing order volume and 
reduce the number of messages that their systems must manage and 
process heading into market close, when trading volume and volatility 
are typically at their highest. As such, Members will be better able to 
manage any operational or technology risk \52\ associated with a high 
order volume day such as index rebalance days (e.g., Russell or MSCI 
index rebalance days) or unexpected high volatility trading days, as 
well as better manage the number of MOC orders a Member may need to 
send to an exchange or off-exchange venue at any one time.\53\
---------------------------------------------------------------------------

    \51\ Prospective new users of CMC include both Members 
expressing interest in utilizing CMC for the first time, as well as 
new end-clients of Members that currently utilize CMC, and have 
inquired as to CMC's functionality, and the proposed enhancements.
    \52\ The Exchange notes 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 to handle and execute their orders 
electronically. Additionally, CMC is entirely voluntary and Members 
that do not possess internal high-speed trading and routing 
technology, or utilize third-party broker-dealers, are not required 
to use CMC. 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.
    \53\ In this regard, the Exchange notes that some Members have 
expressed that while they have ample time to redirect any unmatched 
CMC orders to the primary exchanges, internal or external message 
rate checks (e.g., SEC Rule 15c3-5 risk checks or market center 
checks) may prohibit them from doing so if the Member is submitting 
a large volume of unmatched MOC orders at one time. In this regard, 
the proposed additional MOC Cut-Off Times may assist Members in 
allocating MOC orders across multiple CMC sessions, and should they 
be matched, reduce the volume of unmatched MOC orders the Member may 
have to submit to another market center.
---------------------------------------------------------------------------

    As with existing CMC users, given the widespread use of routing and 
trading technology in today's markets, it is likely that potential new 
CMC users also currently possess the technological capabilities to 
manage the proposed CMC MOC Cut-Off Times, and if they do not, could 
similarly rely on third-party providers \54\ with high-speed technology 
offerings. Alternatively, new CMC users lacking high-speed trading and 
routing technology can simply utilize the earlier CMC MOC Cut-Off Times 
of 3:15 p.m. and 3:30 p.m., providing themselves more flexibility to 
reroute unmatched CMC orders to the primary exchanges. Regardless, the 
proposed earlier MOC Cut-Off Times occur much earlier in time than the 
primary exchanges' MOC cut-off times, giving the users of the proposed 
3:15 p.m. and 3:30 p.m. MOC Cut-Off Times more than enough time to re-
route their unmatched MOC orders to the primary exchanges' closing 
auctions; i.e., thirty-five minutes/twenty minutes prior to the NYSE 
MOC cut-off time, respectively; and forty minutes/twenty minutes prior 
to the Nasdaq MOC cut-off time respectively.
---------------------------------------------------------------------------

    \54\ Supra note 41.
---------------------------------------------------------------------------

    As noted in its CMC Amendment, the Exchange continues to believe 
that the extension of cut-off times by the primary exchanges since 
CMC's approval in 2020 as well as the growth of off-exchange venues 
\55\ 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 capabilities to effectively manage the multitude of cut-
off times offered by the exchanges and off-exchange venues.
---------------------------------------------------------------------------

    \55\ 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://sec.gov/Archives/edgar/data/31067/000031060722000009/xslATS-N_X01/primary_doc.xml.
---------------------------------------------------------------------------

    The Exchange also 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 adding the proposed 3:54 
p.m. CMC MOC Cut-Off Time would more closely align the CMC with the 
cut-off time in place for the Nasdaq closing auction. By adding the 
3:54 p.m. CMC MOC Cut-Off Time, CMC has the ability to become a more 
comparable alternative to Nasdaq's closing auction, thereby 
``foster[ing] price competition and . . . decreas[ing] costs for market 
participants.'' \56\
---------------------------------------------------------------------------

    \56\ Supra note 21.
---------------------------------------------------------------------------

    Importantly, even with the addition of the proposed CMC MOC Cut-Off 
Times, CMC will remove any perceived impact on Nasdaq's closing auction 
by publishing the number of matched order shares,\57\ by individual 
security, in advance of Nasdaq's cut-off time. The total matched shares 
will still be disseminated by the Exchange free of

[[Page 70222]]

charge via the Cboe Auction Feed, albeit at each of the newly proposed 
CMC MOC Cut-Off Times. Because of the speeds and widespread use of 
market technology the primary exchanges could, should they choose to do 
so, incorporate the Cboe Auction Feed information (including 
information about total matched shares in CMC) into their closing 
processes.\58\ 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 \59\ to 
reroute any MOC orders not matched via CMC to reach the primary 
exchanges' closing auctions. Notably, market participants that do not 
possess internal high-speed trading and routing capabilities often rely 
on third-party providers or broker-dealers \60\ to handle and execute 
their orders electronically. Moreover, if market participants do not 
possess internal high-speed routing and trading technology, and do not 
utilize third-party solutions, the addition of the proposed CMC MOC 
Cut-Off Times of 3:15 p.m. and 3:30 p.m. would allow such participants 
to try and receive CMC matches earlier in the day at 3:15 p.m. or 3:30 
p.m., rather than limiting themselves to the later CMC MOC Cut-Off 
Times of 3:49 p.m. and 3:54 p.m. and having less time to re-route the 
unmatched MOC orders to the primary exchanges or off-exchange closing 
price mechanisms. Accordingly, the Exchange believes that the proposed 
CMC MOC Cut-Off Times are not likely to result in disparate treatment 
amongst CMC users.
---------------------------------------------------------------------------

    \57\ The Exchange notes that the Cboe Auction feed will 
disseminate the total matched shares only for the current CMC MOC 
Cut-Off Time. The Cboe Auction Feed will not disseminate the 
aggregate of total matched shares across each CMC matching session. 
For example, following the completion of the 3:30 p.m. CMC matching 
session, the Cboe Auction Feed message would disseminate matched 
shares only for the 3:30 p.m. CMC matching session, and would not 
disseminate the aggregate of number of matched shares from the prior 
3:15 CMC matching session and the 3:30 p.m. CMC matching session.
    \58\ As it did in connection with its CMC Amendment, the 
Exchange again 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 technologically equipped to 
do so, and could incorporate CMC information into their closing 
auction processes if they chose to do so. Additionally, it is the 
Exchange's understanding that Nasdaq subscribes to an Exchange depth 
of book feed which provides subscribers with an uncompressed data 
feed that includes depth of book quotations and execution 
information based on equity orders enter into the Exchange's System, 
including CMC orders. As discussed further, below, given the speed 
of today's market technology, a CMC MOC Cut-Off Time one-minute 
prior to the 3:55 p.m. Nasdaq MOC cut-off undoubtedly provides 
Nasdaq with enough time, should they so choose, to incorporate any 
relevant CMC information into their closing auction processes.
    \59\ Supra note 36.
    \60\ Supra note 41.
---------------------------------------------------------------------------

    The proposed Interpretations and Policies .02 will also help to 
protect investors by making clear to Members participating in CMC how 
the Exchange will manage their CMC MOC orders in the event of a 
matching engine impairment that impacts the initiation and/or 
completion of a CMC matching session. Accordingly, Members will be 
better to manage their closing order flow and avoid risk of not 
receiving the official closing price for their orders by making 
informed decisions as to when they choose to remove their orders from 
CMC and instead re-route them to the primary exchanges' closing 
auctions, or an off-exchange closing price offering. Given the 
importance of the closing price to many investors for indexing, 
benchmark pricing, and guaranteed closing price orders, the information 
provided in proposed Interpretation and Policies .02 is critical to 
protection of investors.
    Finally, the proposed amendment to 11.28(c) is designed to foster 
the protection of investors, and to prevent fraudulent and manipulative 
acts and practices. Because the Cboe Auction Feed will only disseminate 
the total size of matched buy and sell orders for each individual CMC 
MOC Cut-Off Time, and not the aggregate size across all CMC MOC Cut-Off 
Times, the information that any Member might be able to glean from the 
Cboe Auction Feed message will remain limited in nature (discussed 
infra), thereby preventing opportunities for any Member to game or 
manipulate the official closing price.
Price Discovery \61\
---------------------------------------------------------------------------

    \61\ As part of this proposed amendment, 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 21.
---------------------------------------------------------------------------

    As was the case with its CMC Amendment, the Exchange believes that 
the proposed rule change is consistent with the Section 6(b)(5) 
requirements.\62\ As previously noted by the Exchange,\63\ CMC accepts 
and matches only unpriced MOC orders. By matching only unpriced MOC 
orders, and not priced 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. The proposed rule change--i.e., the addition of 
additional CMC MOC Cut-Off Times--does not change CMC's underlying 
functionality. As previously noted by the Exchange,\64\ 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.\65\
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    \62\ 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 21.
    \63\ 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.
    \64\ Id.
    \65\ Supra note 21.
---------------------------------------------------------------------------

    Moreover, the Exchange believes that even if the addition of CMC 
MOC Cut-Off Times reduces the number of MOC orders routed to a 
security's primary listing market, CMC is still designed to remove any 
perceived adverse impact on the primary listing markets' close because 
the total matched shares for each CMC session would still be 
disseminated by the Exchange free of charge via the Cboe Auction Feed 
prior to the primary exchanges' cut-off times. Additionally, even with 
the addition of the new CMC MOC Cut-Off Times, because of the 
technological capabilities of today's market participants discussed 
more fully above, the market makers on the primary exchanges would 
still have the ability to incorporate the Cboe Auction Feed 
information, including information about total matched shares in CMC, 
into their closing processes.
    Furthermore, current users of CMC are either technologically 
equipped to manage the proposed CMC MOC-Cut Off Times or rely on third-
party solutions that provide them with the technological capability to 
appropriately manage the proposed CMC MOC Cut-Off Times and timely re-
route unmatched CMC orders participate in the primary exchanges' 
closing auctions. 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 CMC MOC Cut-Off Times, and if they do not, similarly rely on 
third-party providers with high-speed technology offerings. 
Alternatively, CMC users lacking high-speed trading and routing 
technology can simply utilize the earlier CMC MOC Cut-Off Times of 3:15 
p.m. and 3:30 p.m., providing themselves

[[Page 70223]]

more flexibility to reroute unmatched CMC orders to the primary 
exchanges.
Fragmentation \66\
---------------------------------------------------------------------------

    \66\ Supra note 60.
---------------------------------------------------------------------------

    Another matter addressed by the Commission in its 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.\67\ While comparisons to 
off-exchange MOC activity may not be a perfect measure of the potential 
resulting effect of CMC market fragmentation,\68\ the proposed CMC MOC 
Cut-Off Times are 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.
---------------------------------------------------------------------------

    \67\ Supra note 20.
    \68\ 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 Q1 2019.\69\ 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.
---------------------------------------------------------------------------

    \69\ 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.
---------------------------------------------------------------------------

BILLING CODE 8011-01-P
[GRAPHIC] [TIFF OMITTED] TN29AU24.002


[[Page 70224]]


[GRAPHIC] [TIFF OMITTED] TN29AU24.003

[GRAPHIC] [TIFF OMITTED] TN29AU24.004

BILLING CODE 8011-01-C
    Given the significant volume of off-exchange MOC activity already 
occurring, the Exchange believes that there is still ample opportunity 
for the proposed CMC MOC Cut-Off Times to attract existing MOC volume 
that is 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,

[[Page 70225]]

the proposed CMC MOC Cut-Off Time of 3:54 p.m. satisfies the needs of 
today's market participants, and enables CMC to better compete with 
off-exchange venues, thereby ``foster[ing] price competition and . . . 
decreas[ing] costs for market participants.\70\ 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. 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.\71\
---------------------------------------------------------------------------

    \70\ Supra note 21.
    \71\ 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.'')
---------------------------------------------------------------------------

    Moreover, the Exchange's observations in Figure 6 below show that 
the closing auction volume on both NYSE and Nasdaq has increased 
despite the launch of CMC on March 6, 2020, and the subsequent 
implementation of the 3:49 p.m. CMC MOC Cut-Off Time in 2023. 
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 
cause additional fragmentation in the marketplace as it is possible 
that existing MOC order flow that already executes on off-exchange 
venues may in fact migrate to CMC. In other words, MOC orders that are 
already being executed and matched away from the primary exchanges will 
continue to match and execute on away venues, but rather would match 
and execute on CMC rather than on a less regulated, less-transparent 
venue. In fact, the Exchange believes the proposed additional CMC MOC 
Cut-Off Times are not likely to materially increase market 
fragmentation and therefore have a negative impact on the market 
because 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] TN29AU24.005

Market Complexity and Operational Risk \72\
---------------------------------------------------------------------------

    \72\ Supra note 60.
---------------------------------------------------------------------------

    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 already received approval 
to change its MOC Cut-Off Time from 3:35 p.m. to 3:49 p.m., which 
resulted in no increase in market complexity and operational risk. The 
Exchange now seeks only to offer additional CMC MOC Cut-Off Times, none 
of which will increase market complexity or operational risk. Indeed, 
the proposed 3:15 p.m. and 3:30 p.m. CMC MOC Cut-Off Times are designed 
to help aid Members in managing their MOC order flow, and actually 
mitigate their operational and technological risk. The proposed 3:54 
p.m. MOC Cut-Off Time--like the approved 3:49 p.m. MOC Cut-Off Time--is 
intended only to help better align CMC with the MOC cut-off time 
utilized by Nasdaq for its closing auction. While Members will now have 
the option to designate orders for participation in multiple CMC MOC 
Cut-Off Times, and any unmatched quantities for such orders will carry 
forward to the next CMC session, the Exchange believes that Members are 
well-equipped to manage any new workflow associated with these proposed 
enhancements. Indeed, the Exchange conferred with Members to discuss 
the proposed workflow prior to

[[Page 70226]]

submitting this proposal, and Members indicated that such changes did 
not present new or novel issues for them to consider. In addition, as 
previously noted,\73\ both current CMC users and market participants in 
general, possess high-speed routing and order handling technology, that 
will enable them to efficiently manage the proposed changes to CMC. 
Members continuing to only participate in a single CMC session 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, other than perhaps needing 
to monitor the Cboe Auction Feed for the publication of CMC information 
at a different CMC MOC Cut-Off Time. While Members electing to 
participate in multiple CMC sessions will need to monitor the Cboe 
Auction Feed for CMC information at multiple CMC MOC Cut-Off Times, 
Members have indicated that the operational and technological 
requirements to do so are not complex, and do not present any new or 
novel issues. In addition, as previously noted,\74\ market participants 
today utilize high-speed technology that enables to receive and process 
market data in sub-second latencies. As such, given that the proposed 
CMC MOC Cut-Off Times are multiple minutes apart, the proposed CMC MOC 
Cut-Off Times should not present any new or novel issues for Members.
---------------------------------------------------------------------------

    \73\ Supra note 36.
    \74\ Id.
---------------------------------------------------------------------------

    Additionally, just as the Exchange did prior to proposing the 3:49 
p.m. CMC MOC Cut-Off Time, the Exchange discussed this current proposal 
with CMC users and learned that CMC's current users are technologically 
equipped \75\ to manage the proposed 3:54 p.m. MOC Cut-Off Time, and 
that they can respond to CMC's publication of matched shares and 
quickly reroute any unmatched MOC orders in Nasdaq-listed securities to 
Nasdaq's closing auction. Furthermore, the Exchange again notes that 
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, 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.\76\ Similarly, in 2018 NYSE received approval from 
the SEC to extend cut-off times for order entry and cancellation for 
participation in its closing auction, from 3:45 p.m. to 3:50 p.m.\77\ 
NYSE also offers discretionary-orders, which unlike MOC/LOC orders 
subject to NYSE's 3:50 p.m. cut-off, may be entered for participation 
in the closing auction until 3:59:50.\78\ Additionally, market 
participants may enter MOC orders for participation in NYSE Arca's 
closing auction up to 3:59 p.m.\79\ Finally, various off-exchange 
venues offer closing match processes with cut-off times aligned with 
those of the primary exchanges, and even as close to 30-seconds before 
market close, 4:00 p.m.\80\
---------------------------------------------------------------------------

    \75\ Id.
    \76\ 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.).
    \77\ Id.
    \78\ Supra note 8.
    \79\ See ``Closing Auction Timeline'', available at: https://www.nyse.com/markets/nyse-arca/trading-info.
    \80\ Supra note 54.
---------------------------------------------------------------------------

    Moreover, the proposed 3:15 p.m. and 3:30 p.m. CMC MOC Cut-Off 
Times will also enable new and existing CMC users that may not have 
high-speed trading and routing infrastructure, to still utilize CMC and 
not rely on high-speed technology to reroute unmatched CMC orders from 
the 3:49 p.m. or 3:54 p.m. MOC Cut-Off Times. The Exchange also notes 
that CMC is a voluntary offering, and Members may freely decide whether 
to participate.
    Accordingly, the Exchange believes that market participants are 
well accustomed to managing the various cut-off times in today's 
marketplace and 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 proposed additional later CMC MOC 
Cut-Off Time should not present market participants with any novel 
operational or technological complexities.
    The Exchange further notes that it has considered carefully the 
operational and technological requirements necessary to implement 
multiple CMC MOC Cut-Off Times. Relevant operations and technology 
teams were consulted in designing the proposed CMC MOC Cut-Off Times 
and confirmed that the Exchange's Systems can process and manage 
multiple CMC sessions. As such, the Exchange does not anticipate any 
undue increase in operational or technological complexity in 
implementing the proposed CMC MOC Cut-Off Times.
Manipulation 81
---------------------------------------------------------------------------

    \81\ Supra note 60.
---------------------------------------------------------------------------

    In its CMC Amendment the Exchange noted that the value of the 3:49 
p.m. CMC MOC Cut-Off Time was not the proximity of CMC's matched share 
message to the cut-off times of the primary exchanges, but rather the 
ability of users to trade their orders for a longer period of time 
before deciding whether to commit their MOC orders to CMC. The Exchange 
further stated that it did not expect that the proposed extension of 
the CMC MOC Cut-Off Time to 3:49 p.m. would result in an increase in 
manipulative activity due to information asymmetries, or that it raised 
any unique manipulation concerns relative to how CMC existed with a CMC 
MOC Cut-Off Time of 3:35 p.m. Importantly, the Exchange believes that 
this rationale also applies to the current proposal, and that the SEC 
should dismiss any manipulation concerns regarding this proposal, just 
as it did with the Original Proposal and CMC Amendment.
    Here, the Exchange notes that the mere existence of multiple CMC 
MOC Cut-Off Times does not make any information CMC participants may be 
able to glean from their paired-off MOC orders any more valuable. 
Rather, the value of any information learned by CMC participants is 
still limited in nature. For instance, any information that CMC 
participants may learn from receiving matched MOC order messages is 
indeed limited in nature because the CMC participant would still only 
know the unexecuted size of its own order(s).\82\ Even if a Member 
participated in all four CMC sessions--

[[Page 70227]]

3:15 p.m., 3:30 p.m., 3:49 p.m., and 3:54 p.m.--and received messages 
regarding matched MOC orders, the Cboe Auction Feed disseminates the 
total size of matched buy and sell orders for each MOC session 
individually (i.e., not in aggregate). Moreover, the proposed CMC MOC 
Cut-Off Times are many minutes apart, during which time new MOC orders 
may be entered, rendering useless any information a Member may have 
gleaned regarding an imbalance in the prior session. Additionally, 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.
---------------------------------------------------------------------------

    \82\ 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 
21.
---------------------------------------------------------------------------

    While this proposal would result in the total shares for buy and 
sell orders in CMC being disseminated several times during the last 
hour of trading, and with two CMC MOC Cut-Off Times in close proximity 
to the primary exchanges' MOC cut-off times, these changes do not 
suddenly make such information more valuable or useful in terms of 
enhancing opportunities for gaming and manipulating the official 
closing price. The 3:49 p.m. and 3:54 p.m. CMC MOC Cut-Off Times are 
one-minute prior to NYSE's and Nasdaq's MOC cut-off times. As noted 
throughout, 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 Times and those 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 
these times.
    Moreover, the 3:15 p.m. CMC MOC Cut-Off Time is thirty-five-minutes 
prior to NYSE's MOC cut-off time and forty-minutes prior to Nasdaq's 
MOC cut-off time. Similarly, the 3:30 p.m. CMC MOC Cut-Off Time is 
twenty-minutes prior to the NYSE's MOC cut-off time, and twenty-five-
minutes prior to the Nasdaq MOC cut-off time. These proposed CMC MOC 
Cut-Off Times are even further from the primary exchanges' cut-off 
times than the current CMC MOC Cut-Off Time, during which the 
marketplace and CMC will experience significant change, even further 
limiting the value of information, if any, that a Member may glean from 
the dissemination of matched shares.
    Furthermore, as with the current CMC MOC Cut-Off Time, the proposed 
CMC MOC Cut-off Times do 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.\83\ 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.\84\ 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.\85\ 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.\86\ Similarly, because any information gleaned by a CMC 
participant is limited only to the unexecuted size of their order(s), 
and relative to the depth of only the BZX pool of liquidity, the 
Exchange believes that the proposed addition of the CMC MOC Cut-Off 
Times does not create an increased risk of manipulative trading 
activity.
---------------------------------------------------------------------------

    \83\ The Exchange also notes that in its Final 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.
    \84\ Id.
    \85\ Id.
    \86\ 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. The proposed amendment 
applies equally to all Members, and is intended to offer additional CMC 
MOC Cut-Off Times, enabling a broader segment of Members to utilize CMC 
at times that better accommodate different trading strategies, and 
Members' technological and operational capabilities. As discussed 
above, current and prospective CMC users are technologically equipped 
to participate in the 3:54 p.m. matching session and timely re-route 
any unmatched CMC MOC orders in Nasdaq-listed securities to the Nasdaq 
closing auction. Members that may lack internal high-speed routing and 
trading technology may utilize third-party providers (discussed above) 
should they choose to participate in the 3:54 p.m. matching session. 
The Exchange notes that participation in CMC remains optional, and 
Members have the ability to determine whether or not to submit MOC 
orders to participate in CMC based on their technological capabilities.
    Alternatively, the proposed CMC MOC Cut-Off Times of 3:15 p.m. and 
3:30 p.m. will allow CMC users that may lack high-speed trading and 
routing infrastructure to utilize CMC without having to quickly re-
route unmatched CMC orders to the primary exchanges just prior to their 
cut-off times, as well as attract new users who may desire a mechanism 
that allows them to match their MOC orders earlier in the trading day. 
Moreover, CMC is a voluntary closing match process, and Members are not 
required to participate in CMC. By offering earlier CMC MOC Cut-Off 
Times in addition to the proposed later MOC Cut-Off Time of 3:54 p.m., 
the Exchange is providing various alternatives to support Members with 
different technological capabilities, thus seeking to foster 
competition rather than hinder competition.
    The Exchange also 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 3:54 p.m. MOC Cut-Off Time more closely aligns CMC 
MOC with the Nasdaq MOC cut-off time, while still providing CMC 
participants with an opportunity to reroute any of their unpaired MOC 
orders in Nasdaq-listed securities to the Nasdaq closing auction. In 
this regard, the proposed 3:54 p.m. MOC Cut-Off Time may make CMC a 
more viable alternative to the Nasdaq closing auction and ``should 
foster price competition and thereby decrease costs for market 
participants.'' \87\ Additionally, the proposed CMC MOC Cut-Off Times 
of 3:15 p.m. and 3:30 p.m. will help make CMC a more attractive 
alternative to market participants that may not feel comfortable 
attempting to match in CMC at 3:49 p.m. and re-routing any

[[Page 70228]]

unmatched CMC orders to NYSE before 3:49 p.m., or at 3:54 p.m. and re-
routing any unmatched MOC orders in Nasdaq-listed securities to Nasdaq 
prior to 3:55 p.m.. These proposed MOC Cut-Off Times may also make CMC 
a more attractive closing price alternative to market participants that 
simply wish to reduce their MOC trading obligations earlier in the 
trading day by attempting to match in CMC. Collectively, the proposed 
CMC MOC Cut-Off Times will enable the Exchange to compete with the 
primary exchanges more effectively, as well as 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.
---------------------------------------------------------------------------

    \87\ Supra note 21.
---------------------------------------------------------------------------

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. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment Nos. 2 and 3, is consistent with the 
requirements of the Act and the rules and regulations thereunder.\88\ 
In particular, the Commission finds that the proposed rule change, as 
modified by Amendment Nos. 2 and 3, is consistent with Section 6(b)(5) 
of the Act,\89\ 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, and not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers; and Section 6(b)(8) of the Act,\90\ which requires 
that the rules of a national securities exchange not impose any burden 
on competition not necessary or appropriate in furtherance of the 
purposes of the Act.
---------------------------------------------------------------------------

    \88\ In approving this proposed rule change, as modified by 
Amendments No. 2 and 3, the Commission has considered the proposed 
rule's impact on efficiency, competition, and capital formation. See 
15 U.S.C. 78c(f).
    \89\ 15 U.S.C. 78f(b)(5).
    \90\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 11.28(a) to add three 
additional CMC MOC Cut-Off Times to the existing CMC MOC Cut-Off time 
of 3:49 p.m., for a total of four matching sessions: 3:15 p.m. (new); 
3:30 p.m. (new); 3:49 p.m. (current); and 3:54 p.m. (new). The 3:54 
p.m. CMC MOC Cut-Off Time will be limited to Nasdaq-listed securities. 
The Commission believes that the earlier MOC Cut-Off Times will provide 
Exchange Members with more flexibility in mitigating any technological 
and operational risk associated with managing their MOC and closing 
price order flow. The Exchange has noted that this ability would be 
particularly useful on high-volume order days.\91\ Further, with the 
proposed 3:15 p.m. and 3:30 p.m. CMC MOC Cut-Off Times, Members could 
have a greater opportunity of being matched earlier in the trading day 
before potentially needing to re-route their unmatched MOC orders to 
the primary exchanges or off-exchange closing price offerings.\92\
---------------------------------------------------------------------------

    \91\ See Amendment No. 2, supra note 6.
    \92\ See id.
---------------------------------------------------------------------------

    The proposed later MOC Cut-Off Time of 3:54 p.m., limited to orders 
in Nasdaq-listed securities, would be one-minute prior to Nasdaq's 
current MOC cut-off time of 3:55 p.m. The Exchange states that it 
discussed the proposed rule change with both current CMC users and 
potential new CMC users and confirmed that both groups could 
technologically manage the proposed rule change.\93\ The Exchange 
states that 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.\94\ The Exchange 
states that CMC's current users 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; \95\ and further states that market 
participants that may not currently possess internal high-speed routing 
and trading technology may, and likely already do, utilize such service 
providers.\96\ According to the Exchange, if a CMC user receives a 
message that their MOC order was not matched in the CMC 3:54 p.m. 
matching session, such user would have more than enough time to re-
route their MOC order to Nasdaq's Closing Cross auction.\97\ The 
Commission believes that the data and survey information provided by 
the Exchange support the Exchange's contention that CMC users will have 
adequate time to receive electronic notification of any unmatched MOC 
orders and participate in Nasdaq's Closing Cross auction, should they 
choose to do so. Further, enabling CMC users to retain control of their 
trading for a longer period could encourage participation in CMC by 
market participants by providing more time to seek and may therefore 
promote competition among MOC order execution venues.
---------------------------------------------------------------------------

    \93\ See supra note 41. Specifically, the Exchange discussed the 
proposed change with the two third-party providers whose end users 
are responsible for 100 percent of CMC's current volume. These 
providers indicated that the automated routing and trading solutions 
that they offer to CMC users can appropriately manage the proposed 
MOC Cut-Off Times, including the proposed 3:54 p.m. MOC Cut-Off 
Time. Additionally, the Exchange discussed the proposed change with 
potential new users of CMC. These market participants indicated that 
the proposed MOC Cut-Off Times would likely encourage them to use 
CMC as part of their trading and that they either independently 
maintained high-speed routing and trading capabilities, or utilized 
third-party technology providers or broker-dealers that provide them 
with such solutions. See id.
    \94\ See supra note 37.
    \95\ See supra note 41.
    \96\ See supra note 52.
    \97\ According to the Exchange, because the total matching 
process typically takes a fraction of a second, with the maximum 
around one second, with a 3:49pm MOC Cut-Off Time for example, a 
user should, in most instances, know the paired CMC quantity no 
later than 3:49:01pm, leaving the user at least 59 seconds to re-
route any unpaired MOC orders to the primary exchanges' closing 
auctions. See supra note 40.
---------------------------------------------------------------------------

    The Exchange also states that CMC's total matched shares 
information would still be disseminated by the Exchange free of charge 
via the Cboe Auction Feed, albeit at the new proposed MOC Cut-Off 
Times. According to the Exchange, 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.\98\ Further, the Exchange 
states that it discussed the proposed rule change with four designated 
market makers for the primary exchanges who confirmed that, while they 
do not currently monitor the Cboe Auction Feed, they are technically 
equipped to do so.\99\ Therefore, with the proposed CMC MOC Cut-Off 
Times, market participants should continue to have opportunities to 
utilize CMC's total matched shares information, should they choose to 
do so.\100\
---------------------------------------------------------------------------

    \98\ See supra note 58 and accompanying text.
    \99\ See id.
    \100\ The Exchange also proposes to amend Rule 11.28(c) to state 
that at the conclusion of each CMC MOC Cut-Off Time, the Cboe 
Auction Feed will disseminate the total size of all buy and sell 
orders matched in CMC, and that such information will only be for 
that particular CMC matching session and would not include the total 
size of matched buy and sell orders from any prior CMC MOC Cut-Off 
Time. This clarification of the information disseminated in the Cboe 
Auction Feed will aid Members seeking to utilize CMC information 
into their closing auction processes.

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[[Page 70229]]

    As noted above, the Exchange's survey information and data indicate 
that CMC users and other market participants could accommodate the 
proposed CMC MOC Cut-Off Times and the total matched shares information 
would be disseminated by the Exchange free of charge at each of the 
proposed CMC MOC Cut-Off Times. Therefore, the Commission believes that 
the proposed rule change should not significantly contribute to 
increased market complexity or operational risk.\101\ Finally, the 
proposed rule change should not adversely impact the ability of 
existing self-regulatory organization surveillance and enforcement 
activity to deter market participants who might seek to abuse CMC or 
use CMC information to abuse a closing auction on a primary exchange.
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    \101\ Moreover, the Commission previously found that CMC 
``should not significantly increase market complexity and 
operational risk because it will simply constitute an additional 
optional MOC order execution venue for market participants, and an 
optional data feed that market participants may choose to monitor 
for information regarding the total size of matched MOC orders via 
Cboe Market Close.'' Securities Exchange Act Release No. 88008 
(January 21, 2020), 85 FR 4726, 4729 (January 27, 2020) (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).
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    The Exchange also proposes to amend Interpretations and Polices .02 
to Rule 11.28 to state how the Exchange will handle orders designated 
for multiple CMC MOC Cut-Off Times in the event the Exchange 
experiences a matching impairment impacting the Exchange's ability to 
conduct CMC matching sessions. The Commission believes that the 
proposed procedures provide more transparency regarding how MOC orders 
would be treated in the case of a matching engine impairment, 
particularly in the case where an MOC order has been designated for 
several matching sessions. In addition, the Commission believes that 
allowing a Member to still cancel their order during a matching engine 
impairment and prevent their MOC order(s) from participating in CMC 
once the matching engine failover is completed helps Members better 
manage their orders should an impairment occur and, if desired, re-
route their orders to the applicable primary listings exchange.
    Based on the foregoing, the Commission finds that the proposed rule 
change, as modified by Amendment Nos. 2 and 3, is consistent with the 
Act and the rules and regulations thereunder.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment Nos. 2 and 3, is consistent with the 
Act. 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-2024-32 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-2024-32. 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-2024-32 and should 
be submitted on or before September 19, 2024.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 2 and 3

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\102\ to approve the proposed rule change, as modified by 
Amendment Nos. 2 and 3, prior to the 30th day after the date of 
publication of Amendment Nos. 2 and 3 in the Federal Register. In 
Amendment No. 2, the Exchange amended the proposal to: (1) eliminate 
the proposed 3:58 p.m. matching session; (2) limit the proposed 3:54 
p.m. matching session to Nasdaq-listed securities; (3) provide that for 
the Cboe Auction Feed, the disseminated total size of all buy and sell 
orders matched via CMC will only be for that particular CMC matching; 
(4) provide more detail about the handling of CMC MOC order in the 
event of a matching engine impairment; and (5) provide additional 
justification and support of the proposal. In Amendment No. 3, the 
Exchange corrected a typographical error in the proposed rule text 
regarding the total number of CMC matching sessions.\103\
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    \102\ 15 U.S.C. 78f(b)(2).
    \103\ See Amendment No. 3, supra note 7.
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    The Commission believes that these revisions strengthen the 
proposal and provide greater specificity and justification about to the 
proposed rule change and do not raise any novel regulatory issues. The 
additional explanation in support of the proposal as well as the 
amended rule language in Amendment Nos. 2 and 3 assist the Commission 
in evaluating the Exchange's proposal and in determining that it is 
consistent with the Act. Moreover, Amendment No. 3 makes no substantive 
changes to the proposal. Accordingly, the Commission finds good cause 
for approving the proposed rule change, as modified by Amendment Nos. 2 
and 3, on an accelerated basis, pursuant to Section 19(b)(2) of the 
Act.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\104\ that the proposed rule change (SR-CboeBZX-2024-032), as 
modified by Amendment Nos. 2 and 3, be and hereby is approved.
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    \104\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\105\
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    \105\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-19397 Filed 8-28-24; 8:45 am]
BILLING CODE 8011-01-P