[Federal Register Volume 90, Number 60 (Monday, March 31, 2025)]
[Notices]
[Pages 14304-14311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-05452]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102727; File No. SR-CboeBYX-2025-008]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Exchange Rule 11.25(e) To
Allow Users To Utilize the Exchange's Match Trade Prevention
Functionality When Entering Periodic Auction Orders Onto the Exchange
for Execution
March 25, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 14, 2025, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') Cboe BYX
Exchange, Inc. (the ``Exchange'' or ``BYX'') proposes to amend Exchange
Rule 11.25(e) (``Priority and Execution of Orders'') to allow (1) Users
to utilize the Exchange's Match Trade Prevention (``MTP'')
functionality when entering Periodic Auction Orders onto the Exchange
for execution; (2) add new rule text describing how the System will
handle Periodic Auction Orders entered with MTP instructions when a
Periodic Auction is not in progress; (3) add new rule text describing
how the System will handle Periodic Auction Orders entered with MTP
instructions when a Periodic Auction is in progress; and (4) add new
rule text describing how System will handle Periodic Auction Orders
entered with both an MTP instruction and Minimum Quantity instruction,
when a Periodic Auction is in progress. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/byx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Exchange Rule 11.25(e) (``Priority
and Execution of Orders'') to allow (1) Users to utilize the Exchange's
Match Trade Prevention (``MTP'') \3\ functionality when entering
Periodic Auction
[[Page 14305]]
Orders \4\ onto the Exchange for execution; (2) add new rule text
describing how the System \5\ will handle Periodic Auction Orders
entered with MTP instructions when a Periodic Auction is not in
progress; (3) add new rule text describing how the System will handle
Periodic Auction Orders entered with MTP instructions when a Periodic
Auction is in progress; and (4) add new rule text describing how System
will handle Periodic Auction Orders entered with both an MTP
instruction and Minimum Quantity \6\ instruction, when a Periodic
Auction is in progress.
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\3\ See Rule 11.9(f).
\4\ The term ``Periodic Auction Order'' shall mean a ``Periodic
Auction Only Order'' or ``Periodic Auction Eligible Order'' as those
terms are defined in Rules 11.25(b)(1)-(2), and the term ``Periodic
Auction Book'' shall mean the System's electronic file of such
Periodic Auction Orders. See Rule 11.25(a)(6).
\5\ The term ``System'' shall mean the electronic communications
and trading facility designated by the Board through which
securities orders of Users are consolidated for ranking, execution
and, when applicable, routing away. See Rule 1.5(aa).
\6\ Minimum Quantity Order. A limit order to buy or sell that
will only execute if a specified minimum quantity of shares can be
obtained. See Rule 11.9(c)(5).
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By way of background, MTP is an existing process \7\ through which
Users can prevent their incoming orders designated with a MTP modifier
from executing against a resting opposite side order also designated
with an MTP modifier and originating from the same market participant
identifier (``MPID''), Exchange Member identifier, trading group
identifier, Exchange Sponsored Participant identifier, affiliate
identifier, or Multiple Access identifier (any such identifier, a
``Unique Identifier'').\8\ Both the buy and the sell order must include
the same Unique Identifier in order to prevent an execution from
occurring and to effect a cancel instruction. MTP is a valuable tool
for Exchange Users because it allows them to better manage order their
flow to prevent undesirable trading activity such as wash sales \9\ or
self-trades \10\ that may occur because of the high-speed nature of
trading in today's marketplace. MTP is an optional order instruction,
and Users are not required to utilize this functionality. Rather, the
Exchange offers this optional functionality for Users as a
supplementary tool which they may choose to utilize in helping them
comply with relevant securities, rules, laws, or regulations.
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\7\ The Exchange notes that previous proposals extending the
functionality of MTP to other trading scenarios were effective upon
filing with the Commission. See generally Securities and Exchange
Act Release No. 53429 (December 3, 2010), 75 FR 76763 (December 9,
2010) (SR-EDGX-2010-18); Securities and Exchange Act Release No. 34-
96292 (November 10, 20220), 87 FR 68766 (November 16, 2022) (SR-
CboeEDGX-2022-048).
\8\ See Rule 11.9(f)--Match Trade Prevention (``MTP'')
Modifiers.
\9\ A ``wash sale'' is generally defined as a trade involving no
change in beneficial ownership that is intended to produce the false
appearance of trading and is strictly prohibited under both the
federal securities laws and FINRA rules. See, e.g., 15 U.S.C
78i(a)(1); FINRA Rule 6140(b) (``Other Trading Practices'').
\10\ Self-trades are ``transactions in a security resulting from
the unintentional interaction of orders originating from the same
firm that involve no change in beneficial ownership of the
security.'' FINRA requires members to have policies and procedures
in place that are reasonably designed to review trading activity
for, and prevent, a pattern or practice of self-trades resulting
from orders originating from a single algorithm or trading desk, or
related algorithms or trading desks. See FINRA Rule 5210,
Supplementary Material .02, available at: https://www.finra.org/rules-guidance/rulebooks/finra-rules/5210.
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Proposed Rule Change
Currently, Rule 11.25(e) states that all MTP modifiers (as defined
in Rule 11.9(f)(1)-(5)) for Periodic Auction Orders will be ignored for
executions occurring during a Periodic Auction. As part of the
Exchange's prior Periodic Auction Rule filings,\11\ the Exchange
reasoned that MTP is mainly designed for use on the Continuous
Book,\12\ and use of MTP for Periodic Eligible Orders (``PAE'') \13\
and Periodic Auction Only Orders (``PAO'') \14\ (collectively, Periodic
Auction Orders) may complicate the execution of an auction that
requires the pooling and matching of multiple orders against other
orders at the Periodic Auction Book Price.\15\ Based on User feedback,
however, Users of Periodic Auctions desire the ability to utilize MTP
for their Periodic Auction Orders (when the Periodic Auction is not in
progress) to help them manage their order flow and prevent undesirable
executions against themselves. Users are not asking to utilize MTP for
their Periodic Auction Orders when a Periodic Auction is occurring.
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\11\ See Securities and Exchange Act Release No 34-91423 (March
26, 2021), 86 FR 17230 (April 1, 2021) (SR-CboeBYX-2020-021).
\12\ The term ``Continuous Book'' shall mean an order on the BYX
Book that is not a Periodic Auction Order, and the term ``Continuous
Book'' shall mean the System's electronic file of such Continuous
Book Orders. See Rule 11.25(a)(2), definition of ``Continuous Book
Order''.
\13\ ``A `Periodic Auction Eligible Order' is a non-displayed
limit order eligible to trade on the Continuous Book that is entered
with an instruction to also initiate a Periodic Auction, if possible
. . . Periodic Auction Eligible Orders will be ranked as Non-
Displayed Limit Orders consistent with the priority of order
outlined in Rule 11.12(a). An incoming Periodic Auction Eligible
Order that is eligible both to trade on the Continuous Book and
initiate a Periodic Auction against a Periodic Auction Only Order at
the same price will trade immediately with the Continuous Book.
Incoming Periodic Auction Eligible Orders will upon entry interact
with Continuous Book Orders and other Periodic Auction Eligible
Orders according to their rank under Rule 11.12(a). Periodic Auction
Eligible Orders will not trade on the Continuous Book during a
Periodic Auction Period in the security.'' See 11.25(b)(2).
\14\ ``A `Periodic Auction Only Order' is a non-displayed limit
order entered with an instruction to participate solely in Periodic
Auctions pursuant to this Rule 11.25. Periodic Auction Only Orders
are not eligible for executions on the Continuous Book.'' See Rule
11.25(b)(1). Hereinafter, Periodic Auction Only Orders as, ``PAO
Orders.''
\15\ ``The term `Periodic Auction Book Price' shall mean the
price within the Collar Price Range at which the most shares from
the Periodic Auction Book would match. In the event of a volume-
based tied at multiple price-levels, the Periodic Auction Book Price
will be the price that results in the minimum total imbalance. In
the event of a volume-based tie and a tie in minimum total imbalance
at multiple price levels, the Periodic Auction Book Price will be
the price closest to the Volume Based Tie Breaker. The Periodic
Auction Book Price will be expressed in the minimum increment for
the security unless the midpoint of the NBBO establishes the
Periodic Auction Book Price.'' See 11.25(a)(5), definition of
``Periodic Auction Book Price''.
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Accordingly, the Exchange now seeks to allow Users to enter onto
the Exchange Periodic Auction Orders with MTP instructions (``MTP
Order'').\16\ Importantly, allowing Users to enter MTP Orders will not
impact how the Periodic Auction itself is conducted, and the proposed
MTP functionality will not prevent the completion of a Periodic Auction
once it has been initiated.
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\16\ The Exchange notes that previous proposals extending the
functionality of MTP to other trading scenarios were effective upon
filing with the Commission. See Securities and Exchange Act Release
No. 53429 (December 3, 2010), 75 FR 76763 (December 9, 2010) (SR-
EDGX-2010-18); see also Securities and Exchange Act Release No. 34-
96292 (November 10, 20220), 87 FR 68766 (November 16, 2022) (SR-
CboeEDGX-2022-048).
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The Exchange also wishes to add rule text describing how the System
will handle MTP Orders when a Periodic Auction is in progress. As
proposed, when a Periodic Auction is in progress, there will be
instances where the Exchange has elected to temporarily bypass the MTP
instruction that a User has included on MTP Order or apply MTP and
cancel an inbound MTP Order despite the fact that such order would
trade with a MTP Order participating in the Periodic Auction
originating from the same Unique Identifier. As described below, when a
Periodic Auction is in progress, how the System \17\ applies MTP will
depend on whether the inbound MTP Order is a Continuous Book Order \18\
or a Periodic Auction Order.
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\17\ The term ``System'' shall mean the electronic
communications and trading facility designated by the Board through
which securities orders of Users are consolidated for ranking,
execution and, when applicable, routing away. See Rule 1.5(aa).
\18\ The term ``Continuous Book Order'' shall mean an order on
the BYX Book that is not a Periodic Auction Order, and the term
``Continuous Book'' shall mean System's electronic file of such
Continuous Book Orders. See Rule 11.25(a)(2).
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[[Page 14306]]
First, proposed Rule 11.25(g)(1)(A) would state that if a Periodic
Auction is in progress, and the inbound order is an MTP Continuous Book
Order that would, but for application of MTP, execute against a contra-
side resting MTP Periodic Auction Order participating in the Periodic
Auction, then the System will not apply MTP upon entry of the MTP
Continuous Book, or at the end of the Periodic Auction Period. Instead,
the inbound MTP Continuous Book Order would be processed as set forth
in Rule 11.25(a)-(e). The temporary bypassing of MTP in this scenario
is due to the fact that while the inbound MTP Continuous Book orders
may trade with the MTP Periodic Auction Order, it is just as likely
that the MTP Continuous Book Order may not trade with the MTP Periodic
Auction Order. As such, based on User feedback, the Exchange has
elected to temporarily bypass MTP to prevent the cancelation of the
inbound MTP Continuous Book Order and denying such order the chance
from executing on the Continuous Book.
Second, proposed Rule 11.25(g)(1)(B) would state if a Periodic
Auction is in progress, and the inbound order is an MTP Periodic
Auction Order that would, but for the application of MTP, join the
Periodic Auction, and there is a resting contra-side MTP Continuous
Book Order on the BYX Book, then the System will not apply MTP at the
of the Periodic Auction Period. Rather, the inbound MTP Periodic
Auction Order would be processed as set forth in Rule 11.25(a)-(e).
Here, the Exchange believes that the temporarily bypassing MTP is
warranted because the inbound MTP Periodic Auction Only Order may or
may not end up trading with the MTP Continuous Book order at the end of
the Periodic Auction Period. Specifically, based on feedback from its
Users, the Exchange believes that canceling the resting MTP Continuous
Book Order in this scenario would be overly restrictive, and based only
on a mere possibility that the MTP Periodic Auction Only Order might
trade with the resting MTP Continuous Book order. Moreover, while the
Periodic Auction is in progress, the resting MTP Continuous Book order
could receive an execution on the Continuous Book, and it would be more
costly to deny an order an execution at its desired terms, than to
cancel the order based on the possibility that it may trade with
another MTP Order.
Third, proposed Rule 11.25(g)(1)(C) would state that if a Periodic
Auction is in progress, and the inbound order is an MTP Periodic
Auction Order that upon entry would, but for the application of MTP,
execute against a contra-side resting MTP Periodic Auction Order
participating in the Periodic Auction, then the inbound MTP Periodic
Auction Order will be canceled. In this scenario, the canceling the
inbound MTP Periodic Auction Order is necessary in order to prevent
disrupting the Periodic Auction. While this action may result in a User
executing an undesirable wash sale, the Exchange does not wish to
interrupt a Periodic Auction once it is initiated, as doing so may
impact multiple Users, not just the User utilizing MTP.
Finally, proposed Rule 11.25(g)(2) would state that when a Periodic
Auction is in progress, the System will ignore a Minimum Quantity
instruction appended to an MTP Periodic Auction Order or an MTP
Continuous Book Order. However, at the end of the Periodic Auction
Period, Minimum Quantity Orders will execute in accordance with Rule
11.25(b)(2)(C). The Exchange notes it has designed the proposed MTP and
Minimum Quantity Order functionality in this manner because the design
of Exchange's Systems would require multiple scans of resting orders to
determine whether an incoming MTP Periodic Auction Order's Minimum
Quantity requirement could be satisfied. This additional System scan
would add unnecessary complexity to the Periodic Auction process,
potentially resulting in unwarranted order processing delays, and
impacting the initiation and completion of a Periodic Auction based on
optional risk checks that a single User has chosen to utilize, thereby
unintentionally impacting other Users participating in the Periodic
Auction.
Importantly, BYX notes that the bypassing of an inbound order's MTP
modifier--whether a MTP Continuous Book Order or MTP Periodic Auction
Order--is temporary and occurs only upon entry of the inbound order. At
the conclusion of the Periodic Auction Period (i.e., the Periodic
Auction has completed and there is no Periodic Auction in progress),
the System would again enforce the MTP modifier consistent with Rule
11.9(f) and proposed Rule 11.25(g)(2). While the scenarios described in
proposed Rule 11.25(g)(1)(A)-(C) may result in certain executions
occurring despite the User's inclusion of an MTP instruction, or the
cancelation of their inbound Periodic Auction Order when the Periodic
Auction is in progress, the Exchange believes this behavior is
necessary and appropriate to help strike a responsible balance between
providing Users with an optional risk tool and ensuring that Periodic
Auctions will complete once initiated. Importantly, in designing this
functionality, the Exchange consulted with its Periodic Auction Users,
as well as potential new Users, and explained the limitations of MTP
for Periodic Auction Orders, including that in some instances, MTP
modifiers may be temporarily bypassed, or that a User's inbound MTP
Periodic Auction Order may be canceled because it is marketable versus
their MTP Order participating in the Periodic Auction. Despite these
noted limitations, Users still believe the proposed MTP functionality
to be valuable and a reasonable compromise that is likely to foster
their increased use of Periodic Auctions. Should Users find the
proposed functionality to be too complex, or not sufficiently
restrictive in how it applies MTP, Users are free to decline usage of
MTP and instead rely on their own internal risk checks.
Periodic Auctions Background
Periodic Auctions are available on BYX during the Regular Trading
Session (9:30 a.m. ET to 4:00 p.m. ET). Periodic Auction Orders (i.e.,
PAOs or PAEs) are non-displayed, and Members may send PAOs or PAEs.
PAOs will only execute in a Periodic Auction and are eligible to
initiate a Periodic Auction when matched with a contra-side Periodic
Auction Order. PAEs are eligible to trade with Continuous Book orders
and may also participate in Periodic Auctions. PAEs are eligible to
initiate a Periodic Auction when matched with a contra-side Periodic
Auction Order. PAEs may also trade immediately upon entry with a
resting Continuous Book order instead of initiating a Periodic Auction.
PAEs will be locked from trading in the Continuous Book upon initiation
of a Periodic Auction. In addition, Continuous Book orders, both
displayed and non-displayed (e.g., Midpoint Peg Orders) are not
eligible to initiate a Periodic Auction but may be swept into the
Periodic Auction at the end of the Periodic Auction Period.\19\ A
Periodic Auction is initiated when a buy (sell) Periodic Auction Order
is eligible to trade with a sell (buy) Periodic Auction Order within
the Collar Price Range.\20\
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\19\ The term ``Periodic Auction Period'' shall mean the fixed
time period of 100 milliseconds for conducting a Periodic Auction.
Notwithstanding the foregoing, a Periodic Auction initiated pursuant
to Rule 11.25(c) will be performed at the end of the Regular Trading
Session if the Periodic Auction Period would otherwise end after the
Regular Trading Session. See Rule 11.25(a)(8).
\20\ The term ``Collar Price Range'' shall mean the more
restrictive of the Midpoint Collar Price Range, as defined in Rule
11.25(a)(1), and the Protected NBBO. Notwithstanding the foregoing,
if the Collar Price Range calculated by the Exchange would be
outside of the applicable Price Bands established pursuant to the
Limit Up-Limit Down Plan, the Collar Price Range will be capped at
such Price Bands. See Rule 11.25(a)(1).
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[[Page 14307]]
Once a Periodic Auction is initiated, a Periodic Auction message
will be generated and disseminated via the Exchange's proprietary depth
of book market data feed at a randomized time prior to the end of the
auction. All Periodic Auctions will run for a fixed time period of 100
milliseconds. The Periodic Auction Book Price \21\ will be the price
where most shares will trade within the Collar Price Range. Orders are
executed according to the following three priority levels: (1)
Displayed Continuous Book orders will be executed first using price/
time Priority; (2) Periodic Auction Orders will be executed second
using Size/Time Priority; and (3) hidden Continuous Book orders will be
executed third using standard BYX Priority.\22\
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\21\ The term ``Periodic Auction Book Price'' shall mean the
price within the Collar Price Range at which the most shares from
the Periodic Auction Book would match. In the event of a volume-
based tie at multiple price levels, the Periodic Auction Book Price
will be the price that results in the minimum total imbalance. In
the event of a volume-based tie and a tie in minimum total imbalance
at multiple price levels, the Periodic Auction Book Price will be
the price closest to the Volume Based Tie Breaker. The Periodic
Auction Book Price will be expressed in the minimum increment for
the security unless the midpoint of the NBBO establishes the
Periodic Auction Book Price. See Rule 11.25(a)(5).
\22\ See Rule 11.12, Priority of Orders.
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Example 1: Non-MTP Scenario, Periodic Auction Only or Periodic Auction
Eligible Orders Initiate an Auction
NBBO: 10.00 x 10.05
Order 1: Buy 100 @10.05 Midpoint Peg--Periodic Auction Only/
Eligible
Order 2: Sell 100 @10.05 Midpoint Peg--Periodic Auction Only/
Eligible
Result: A Periodic Auction is initiated when Order 2 matches
with Order 1
Example 2: Non-MTP Scenario, Periodic Auction Eligible Order Can Trade
Immediately With Continuous Book
NBBO: 10.00 x 10.10
Order 1: Buy 100 @10.05 Midpoint Peg--Continuous Book order
Order 2: Buy 100 @10.05 Midpoint Peg--Periodic Auction Only
Order 3: Sell 100 @10.05 Midpoint Peg--Periodic Auction
Eligible
Result: Periodic Auction is not started; Order 1 and Order 3
trade immediately for 100 @10.05
Example 3: Non-MTP Scenario, Periodic Auction Only Order and Periodic
Auction Eligible Order Start an Auction
NBBO: 10.00 x 10.10
Order 1: Buy 150 @10.05 Midpoint Peg--Periodic Auction Only
Order 2: Sell 100 @10.05 Midpoint Peg; does not trade with
Order 1 immediately or initiate a Periodic Auction
Order 3: Sell 100 @10.05 Midpoint Peg--Periodic Auction
Eligible
Result:
[cir] Periodic Auction begins when Order 3 is entered;
[ssquf] Matched size and price message is sent for 100 @10.05 after X
(random time period between 0-99 milliseconds) milliseconds.
[ssquf] Order 3 is locked from trading in the Continuous Book for
entire duration of the Periodic Auction Period
[ssquf] Order 2 is still available for trading in the Continuous Book
during the Periodic Auction Period
[cir] Periodic Auction ends after 100 milliseconds
[ssquf] Order 1 trades @10.05 with Order 3 (Periodic Auction Only/
Periodic Auction Eligible orders have priority over hidden continuous
book orders).
[ssquf] Order 1 trades 50 @10.05 with Order 2.
Periodic Auctions--When MTP Is Appended to a User's Periodic Auction
Orders
As discussed further above, Users have expressed a desire to
utilize BYX's MTP functionality for their Periodic Auction Orders.
Users have stated that use of MTP will assist them in better managing
their regulatory risk by helping to prevent the execution of wash sales
when a User's buy (sell) Periodic Auction Order or Continuous Book
order inadvertently executes with its sell (buy) Periodic Auction Order
or Continuous Book Order. By reducing their risk, Users may, in turn,
increase their usage of Periodic Auctions, thereby providing more
liquidity, including but not limited to block size transactions,
thereby providing the marketplace with alternative to off-exchange
venues where a growing percentage of such transactions are executed
today. To illustrate how MTP will behave when applied to Periodic
Auction Orders, consider the following examples:
Example 1: Periodic Auction Is Not in Progress--Two PAE Orders
Matching--MTP Action Occurs
Example 1 illustrates how MTP will operate when Firm A's resting
PAE Order with an MTP modifier of MTP Cancel Oldest (``MCO''),\23\
interacts with a subsequent inbound PAE Order submitted by Firm A with
an MTP modifier of MCO and a Periodic Auction is not in progress. Here,
MTP operates in the same manner \24\ as it would for Continuous Book
Orders, in accordance with Rule 11.9(f) and proposed Rule 11.25(g)(2);
i.e., because Firm A's inbound PAE Order was entered with an MTP
modifier of MCO, the System will cancel Firm A's Order 1,\25\ which is
the ``oldest'' contra-side Firm A order that is marketable versus Firm
A's inbound PAE Order to sell. This MTP action prevents Firm A from
potentially trading with itself either on the Continuous Book or during
a Periodic Auction.\26\
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\23\ MTP Cancel Oldest (``MCO'') is defined as ``[a]n incoming
order marked with the ``MCO'' modifier will not execute against
opposite side resting interest marked with any MTP modifier
originating from the same Unique Identifier. The resting order
marked with the MCO modifier will be cancelled back to the
originating User(s). The incoming order marked with the MCO modifier
will remain on the BYX Book. See Rule 11.9(f)(2).
\24\ See Rule 11.9(f)--Match Trade Prevention (``MTP'')
Modifiers. Any incoming order designated with an MTP modifier will
be prevented from executing against a resting opposite side order
also designated with an MTP modifier and originating from the same
market participant identifier (``MPID''), Exchange Member
identifiers, trading group identifier, Exchange Sponsored
Participant identifier, affiliate identifier, or Multiple Access
identifier (any such identifier, a ``Unique Identifier''). The order
canceled by the System will depend on the incoming order's MTP
modifier, as described in 11.9(f)(1)-(5).
\25\ See Rule 11.9(f)(2).
\26\ As MTP action is controlled by the incoming order (``. . .
the MTP modifier on the incoming order controls the interaction
between two orders marked with MTP modifiers.'' See Rule 11.21(g)),
Firm A's Order 1 was correctly cancelled in this situation. Note,
however, that if Firm A's Order 2 had included an MTP modifier of
MTP Cancel Newest (``MCN''), the result would simply be that Order 2
is instead canceled. MTP Cancel Newest (``MCN'') is defined as
``[a]n incoming order marked with the ``MCN'' modifier will not
execute against opposite side resting interest marked with any MTP
modifier originating from the same Unique Identifier. The incoming
order marked with the MCN modifier will be cancelled back to the
originating User(s). The resting order marked with an MTP modifier
will remain on the BYX Book.'' See Rule 11.9(f)(1). Similarly, if we
changed Order 1's MTP Modifier to Cancel Newest and Order 2 remained
as MTP Cancel Oldest, Order 1 would be canceled as Order 2's
instruction controls MTP action.
Order 1--Resting (Firm A): PAE Order (MTP = Cancel Oldest),
Buy 100 @1.00
Order 2--Inbound order (Firm A): PAE Order (MTP = Cancel
Oldest), Sell 200 @1.00
Result: Order 1 is canceled
Example 2: Two PAO Orders Matching--MTP Action Occurs
Example 2 illustrates how MTP will operate when Firm A's resting
PAO Order with an MTP Modifier of MCN, interacts with Firm A's inbound
PAO Order with an MCN modifier, and a Periodic Auction is not in
progress. Here, MTP operates in the same manner as it would for
Continuous Book Orders and as provided for in Rule 11.9(f) and
[[Page 14308]]
proposed Rule 11.25(g)(2); i.e. because Firm A has designated its
inbound Order 2 with MCN, the System will cancel Firm A's Order 2,
which is Firm's A's newest contra-side order that is marketable versus
Firm A's resting Order 1. This MTP action prevents Firm A from
potentially trading with itself during a Periodic Auction.
Order 1--Resting (Firm A): PAO Order (MTP = Cancel Newest),
Buy 100 @1.00
Order 2--Inbound order (Firm A): PAO Order (MTP = Cancel
Newest), Sell 200 @1.00
Result: Order 2 is canceled
For the sake of clarity, the Exchange also wishes to explain what
would happen to Order 2 if a Periodic Auction was in progress when
Order 2 arrived. To address this scenario, assume an inbound Periodic
Auction Order from Firm B--Order X--arrived between Order 1 and Order
2, and initiated a Periodic Auction with Order 1. Here, when Order 2
arrives, and the Periodic Auction is in progress, Order 2 would still
be canceled. When a Periodic Auction is in progress, and an inbound
Periodic Auction Order is designated with an MTP modifier, and such
order matches against a resting contra-side Periodic Auction Order
originating from the same Unique Identifier that is also designated
with a MTP modifier, the inbound Periodic Auction Order will be
canceled. This behavior will enable Users to better manage their order
flow and prevent undesirable executions in Periodic Auctions, just as
they do today for their Continuous Book orders.
Example 3: Incoming PAE Order Matching Against a PAO Order--MTP Action
Occurs
Example 3 illustrates how MTP will operate when Firm A's resting
PAO Order with a MTP modifier of MTP Cancel Smallest (``MCS''),\27\
interacts with Firm A's inbound PAE Order with an MCS modifier, and an
auction is not in progress. Here, MTP operates in the same manner as it
would for Continuous Book Orders; i.e., because Firm A has designated
its orders with the MTP modifier, MCS, the System will cancel Firm A's
Order 1, which is Firm A's small quantity order.\28\ This MTP action
prevents Firm A from potentially trading with itself during a Periodic
Auction.
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\27\ MTP Cancel Smallest (``MCS'') is defined as ``[a]n incoming
order marked with the ``MCS'' modifier will not execute against
opposite side resting interest marked with any MTP modifier
originating from the same Unique Identifier. If both orders are
equivalent in size, both orders will be cancelled back to the
originating User(s). If the orders are not equivalent in size, the
smaller of the two orders will be cancelled back to the originating
User and the larger order will remain on the book. See Rule
11.9(f)(5).
\28\ See Rule 11.9(f)(5).
Order 1--Resting (Firm A): PAO Order (MTP = Cancel Smallest),
Buy 100 @1.00
Order 2--Inbound order (Firm A): PAE Order (MTP = Cancel
Smallest), Sell 200 @1.00
Result: Order 1 is canceled
Example 4: Incoming PAE Order Matching Against a Continuous Book
Order--MTP Action Occurs
Example 4 illustrates how MTP will operate when Firm A's incoming
PAE Order with a MCS modifier, matches against Firm A's resting
Continuous Book Order, and a Periodic Auction is not in progress. Here,
MTP operates in the same manner as it would for Continuous Book Orders,
i.e., Firm's A's Order 1 is canceled based on Firm A's Order 2 MCS
modifier because Order 1 is smaller than Order 2. Because a PAE Order
is eligible to receive an execution on the Continuous Book, and both
Order 1 and Order 2 are designated with MTP modifiers, the System
correctly cancels Order 1, thereby preventing Firm A from potentially
trading with itself on the Continuous Book.
Order 1--Resting (Firm A): Continuous Book order (MTP = Cancel
Smallest), Buy 100 @1.00
Order 2--Inbound order (Firm A): PAE Order (MTP = Cancel
Smallest), Sell 200 @1.00
Result: Order 1 is canceled
Example 5--Incoming PAE Order Matching Against a Continuous Book Order
When a Periodic Auction Is in Progress--No MTP Action Occurs
For the sake of clarity, the Exchange wishes to describe what would
happen to Order 1 if a Periodic Auction is in progress and an inbound
Periodic Auction Order arrives (e.g., Order 4). First, note that a
Continuous Book Order cannot initiate a Periodic Auction.\29\
Therefore, to initiate a Periodic Auction in this example, assume that
two Periodic Auction Orders arrived, from Firm B and Firm C, prior to
Order 1 and Order 4--e.g., Order X (Firm B) and Order Y (Firm C).
Further assume that Order X and Order Y are marketable versus each
other and initiated a Periodic Auction. Additionally, assume that Order
1, a Continuous Book Order is entered prior to Order 4, and that Order
1 and Order 4 are designated with MTP modifiers originating from the
same Unique Identifiers. Upon the arrival of Order 4, a Periodic
Auction Order, the System will temporarily bypass \30\ Order 1's and
Order 4's MTP instruction, and Order 4 will join the Periodic Auction.
Order 1 will remain on the Book. If Order 1 did not execute in the
Continuous Book while the Periodic Auction was in progress, then Order
1 could potentially execute with Order 4, provided that Order 1 has
priority as determined by Rule 11.25(f). The bypassing of the MTP
modifiers in this scenario occurs only upon entry of Order 4 to prevent
the cancelation of orders in situations where an immediate execution
would not occur.
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\29\ See Rule 11.25(c), Initiation and Publication of Periodic
Auction Information, ``A Periodic Auction will be initiated in a
security during Regular Trading Hours when one or more Periodic
Auction Orders to buy become executable against one or more Periodic
Auction Orders to sell pursuant to this Rule 11.25.''
\30\ The Exchange notes that the bypassing of the MTP modifiers
in this scenario is temporary. Should the Periodic Auction complete
and Order 1 does not have the opportunity to trade with Order 4 in
the Periodic Auction, then Order 1 would remain posted on the
Continuous Book with its MTP modifier and be afforded the
protections of MTP.
NBBO: 10.00 x 10.05
Order X (Firm B): Buy 100 @10.03--Midpoint Peg PAO
Order Y (Firm C): Sell 100 @10.02--Midpoint Peg PAO
Auction is initiated between Order X and Order Y
Order 1 (Firm A): Buy 100 @10.03--Midpoint Peg Continuous Book
Order--MTP=Cancel Oldest
Order 4 (Firm A): Sell 100 @10.02--Midpoint Peg PAE--
MTP=Cancel Oldest
MTP would be bypassed when Order 4 is entered and Order 4
would join the Periodic Auction in progress.
Result: Order X and Order Y trade 100 @10.025 in Periodic
Auction. Order 1 and Order 2 trade 100 @10.025 in Periodic Auction
Here, even though Order 1 and Order 4 both originated from Firm A,
and are designated with an MTP modifier, Order 1 is not canceled upon
Order 4's arrival because Order 1 is a Continuous Book Order that may
or may not end up trading with Order 4 once the Periodic Auction is
complete. Because Order 1 could receive an execution on the Continuous
Book while the Periodic Auction is in progress, the Exchange
temporarily bypasses Order 1's MTP instruction upon Order 4's arrival
to prevent Order 1 from forfeiting a Continuous Book execution based on
a possibility that Order 1 would be executable versus Order 4 at the
completion of the Periodic Auction.
[[Page 14309]]
Example 6: Incoming Continuous Book Order Matching Against a PAO
Order--No MTP Action Occurs
Example 6 illustrates how MTP will operate when Firm A's incoming
Continuous Book Order with an MCS modifier matches with Firm A's
resting PAO Order with an MCS modifier, and a Periodic Auction is not
in progress. Here, MTP will not be applied because PAO Orders and
Continuous Book Orders are not permitted to trade with one another.\31\
As such, MTP is not needed to prevent Firm A's Order 1 from trading
with Firm A's Order 2 and as such, Order 2 is permitted to post to the
BYX Book.
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\31\ Supra note 12 (``Periodic Auction Only Orders are not
eligible for execution on the Continuous Book.'').
Order 1--Resting (Firm A): PAO Order (MTP = Cancel Smallest),
Buy 100 @1.00
Order 2--Inbound order (Firm A): Continuous Book order (MTP =
Cancel Smallest), Sell 200 @1.00
Result: Order 2 will rest in the Continuous Book, and there is
no MTP action
Example 7: Incoming Order Is Canceled Due to ``Periodic Auction in
Progress'' Involving a PAO Order
Example 7 illustrates how an incoming order with a MTP modifier is
canceled because a Periodic Auction is in progress. Here, Firm A's
inbound Order 2, a PAE Order to sell 200 @1.00, with a MTP modifier of
MTP Cancel Both (``MCB''),\32\ immediately starts an auction with Firm
B's Order 1, a resting PAO Order to Buy 100 @1.00, that is
participating in the Periodic Auction. While the Periodic Auction is in
progress, Firm A enters Order 3, a PAE Order to Buy 200 @1.00 with an
MCB instruction.
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\32\ MTP Cancel Both (``MCB'') is defined as ``[a]n incoming
order marketed with the ``MCB'' modifier will not execute against
opposite side resting interest marked with any MTP modifier
originating from the same Unique Identifier. The entire size of both
orders will be cancelled back to the originating User(s). See Rule
11.9(f)(4). demonstrates the proposed functionality described in
proposed Rule 11.25(e
---------------------------------------------------------------------------
The entry of Order 3 presents a scenario in which the Exchange
seeks to implement MTP functionality that behaves differently than
demonstrated in each of the preceding five examples. Specifically, if a
Periodic Auction is in progress, and an inbound Periodic Auction Order
is designated with an MTP modifier, and such order matches against a
resting contra-side Periodic Auction Order that is participating in the
Periodic Auction originating from the same Unique Identifier that is
also designated with an MTP modifier, then the inbound Periodic Auction
Order will be cancelled. Importantly, this behavior is necessary to
help ensure that once a Periodic Auction is initiated it will be
completed.
Applying this proposed behavior to Example 7's fact pattern, when
Firm A's Order 3, a PAE Order with an MCB modifier is entered after
Periodic Auction has been initiated and Order 3 subsequently matches
with Firm A's Order 2 (a PAE Order with a MCB modifier), Order 3 will
be cancelled. Without this proposed behavior, Order 3 would otherwise
be included in the Periodic Auction, and its MTP Cancel Both \33\
instruction would result in the cancelation of Order 2, preventing the
Periodic Auction from completing, and denying Firm A an execution it
would otherwise have expected to receive. The Exchange believes that
this proposed behavior appropriately balances the dual goals of
ensuring that Periodic Auctions complete once initiated and providing
Members the ability to utilize MTP for their Periodic Auction Orders in
each of the scenarios described in the preceding five examples.\34\
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\33\ See Rule 11.9(f)(4).
\34\ The Exchange notes that the proposed MTP functionality is
intended as a supplementary risk tool that Members may voluntarily
use to help them manage their risk and compliance with applicable
securities rules. As registered broker-dealers, Members are
ultimately responsible for compliance with applicable securities
rules and should not rely on the proposed functionality as a sole
means of compliance. As such, while the proposed MTP functionality
will, in some instances, operate differently than it does outside of
the context of Periodic Auctions, its design as a supplementary risk
tool will still serve to benefit Members that choose to utilize this
tool.
Order 1--Resting (Firm B): PAO Order, Buy 100 @1.00
Order 2--Inbound Order (Firm A): PAE Order (MTP = Cancel
Both), Sell 200 @1.00
Action: Order 2 initiates a Periodic Auction with Order 1
Order 3--Inbound order (Firm A): PAE Order (MTP = Cancel
Both), Buy 200 @1.00
Result: Order 3 is canceled in order to prevent Order 3 from
participating in the Periodic Auction, canceling Order 2, and
disrupting the completion of the Periodic Auction
Example 8: Incoming Order Has MTP Temporarily Bypassed in a Periodic
Auction
Example 8 is another example of MTP being temporarily bypassed when
a Periodic Auction is in progress, despite the Member adding MTP
instructions to their Periodic Auction Order(s) and Continuous Book
Order(s). Here, Firm B's Order 2, a PAE Order with an MCO modifier,
initiates a Periodic Auction upon entry with Firm A's Order 1, a
resting PAE Order with an MCO modifier. Firm A subsequently enters a
Continuous Book Order (Hidden) with an MCO modifier. Here, the Exchange
will temporarily bypass \35\ an inbound Continuous Book Order's MTP
modifier when a Periodic Auction is in progress, and such Continuous
Book Order would post to the Continuous Book, and be eligible to
participate in the Periodic Auction, or alternatively receive an
execution from the Continuous Book. In such instance, applying the
Continuous Book Order's MTP modifier and canceling such order based on
the potential that the order could trade in the Periodic Auction, would
be unnecessarily prohibitive. By posting to the Continuous Book, such
order could still execute without violating its MTP instructions.
---------------------------------------------------------------------------
\35\ The Exchange notes that the bypassing of the Continuous
Book Order's MTP modifier in this scenario is temporary. Should the
Periodic Auction complete and Order 3 does not have the opportunity
to trade with Order 1 in the Periodic Auction, then Order 3 would
remain posted on the Continuous Book with its MTP modifier and be
afforded the protections of MTP.
---------------------------------------------------------------------------
Based on the proposed MTP functionality, Order 3 will post to the
BYX Book prior to the end of the Periodic Auction as the MTP modifier
is temporarily bypassed.\36\ Order 1 and Order 2 will trade in the
Periodic Auction for 500 shares @10.02. After trading with Order 2,
Order 1 still has 500 shares remaining. Prior to the end of the
Periodic Auction, Order 3 will be matched in the Periodic Auction and
trade 200 shares with Order 1 @10.02, bypassing the MCO modifier
assigned by Firm A to its Order 1 and Order 3.
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\36\ The Exchange notes that the bypassing of the Continuous
Book Order's MTP modifier in this scenario is temporary. Should the
Periodic Auction complete and Order 3 does not have the opportunity
to trade with Order 1 in the Periodic Auction, then Order 3 would
remain posted on the Continuous Book with its MTP modifier and be
afforded the protections of MTP.
---------------------------------------------------------------------------
The Exchange believes that temporarily bypassing an MTP modifier in
this scenario is necessary to ensure that a Periodic Auction completes
once it is initiated. Additionally, bypassing Order 3's MTP instruction
is also necessary to avoid disrupting trading in the Continuous Book,
because Order 3 could perhaps post and trade while the Periodic Auction
is in progress. The Exchange therefore believes cancelling Order 3
based on its potential to trade in the Periodic Auction would
unnecessarily prevent a Member from potentially receiving a Continuous
Book execution. While the proposed MTP functionality will explicitly
and
[[Page 14310]]
automatically temporarily bypass a Member's MTP modifier when the
scenario described in Example 8 is present, the Exchange believes that
such behavior appropriately balances the dual goals of ensuring that
Periodic Auctions operate as designed (i.e., once initiated they will
complete, executing the maximum number of shares), and still provides
Members the ability to utilize MTP for their Periodic Auction Orders in
majority of instances described in each of the preceding six
examples.\37\
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\37\ The Exchange notes that the proposed MTP functionality is
intended as a supplementary risk tool that Members may voluntarily
use to help them manage their risk and compliance with applicable
securities rules. As registered broker-dealers, Members are
ultimately responsible for compliance with applicable securities
rules and should not rely on the proposed functionality as a sole
means of compliance. As such, while the proposed MTP functionality
will, in some instances, operate differently than it does outside of
the context of Periodic Auctions, its design as a supplementary risk
tool will still serve to benefit Members that choose to utilize this
tool.
Order 1--Firm A: PAE Order (MTP = Cancel Oldest), Buy 1000
@10.02
Order 2--Firm B: PAE Order (MTP = Cancel Oldest), Sell 500,
@10.02
Action: Order 2 initiates an auction with Order 1, because
Firm A and Firm B are different entities.
Order 3--Inbound order (Firm A): Continuous Book Order (MTP =
Cancel Oldest), Sell 200 @10.02
Action: MTP modifier on Order 3 is temporarily bypassed
Result: Order 3 posts to the BYX Book prior to the end of the
auction; Order 1 and Order 2 trade in the Periodic Auction for 500
@10.02; Order 3 then trades 200 @10.02 with Order 1 (bypassing MTP).
Example 9: Minimum Quantity Order Unable To Be Filled (PAE vs. PAE)
Example 9 illustrates how the System will ignore the Minimum
Quantity instruction on a Periodic Auction Order that is also
designated with an MTP modifier when the Minimum Quantity cannot be
satisfied. Specifically, in the event a Periodic Auction Order is
entered as a Minimum Quantity Order in addition to an MTP modifier
(e.g., Order 1), and such Periodic Auction Order could initiate a
Periodic Auction with a contra-side Periodic Auction Order or trade
with a Continuous Book Order (e.g., Order 2), designated with an MTP
modifier from the same Unique Identifier as Order 1, the System will
ignore Order 1's Minimum Quantity instruction, and apply MTP,
regardless of whether the Minimum Quantity is satisfied. Here, upon
entry of Order 2, the System will ignore Order 1's Minimum Quantity
instruction, and instead apply MTP, resulting in the cancelation of
Order 1.
Order 1 (Firm A): Buy 1000 @10.02--PAE--Min Quantity = 500
(MTP=any)
Order 2 (Firm A): Sell 400 @10.02--PAE order (MTP=Cancel
Oldest)
Result: Order 2 cannot initiate an auction with Order 1 due to
the MIN quantity on Order 1. `MIN' on Order 1 is ignored and Order 2
cancels Order 1. Order 2 posts to the book.
Example 10: Minimum Quantity Order Able To Be Filled (PAE vs. PAE)
Example 10 illustrates how the System will ignore the Minimum
Quantity instruction on a Periodic Auction Order that is also
designated with a an MTP modifier, when the Minimum Quantity is
satisfied. Here, even though the Minium Quantity for Order 1 can be
satisfied by Order 2, the System will apply MTP resulting in the
cancelation of Order 1.
Order 1 (Firm A): Buy 1000 @10.02--PAE--Min Quantity = 500
(MTP = any)
Order 2 (Firm 2): Sell 1000 @10.02--PAE (MTP = Cancel Oldest)
Result: The System applies MTP, and cancels Order 1
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.\38\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \39\ 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) \40\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\38\ 15 U.S.C. 78f(b).
\39\ 15 U.S.C. 78f(b)(5).
\40\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that its proposed MTP
functionality is designed to promote the just and equitable principles
of trade, and to protect investors and the public interest, by enabling
Users to better prevent undesirable trading activity such as wash sales
or self-trades for not only their Continuous Book Orders, but their
Periodic Auction Orders as well. Additionally, by providing Users with
a supplemental risk tool that will better enable them to achieve
compliance with applicable securities rules and regulations, the
proposed rule change will help to further ensure that orders eligible
for execution in the Periodic Auction indeed represent genuine trading
interest from separate and distinct firms. While the proposed MTP
functionality would not operate identically to MTP as it is used in
non-Periodic Auction scenarios, the Exchange believes that its proposal
strikes an appropriate balance between ensuring Users receive
executions in the Periodic Auction and providing Users' the ability to
utilize MTP in most trading situations involving Periodic Auctions.
By making clear to Users the differences in MTP functionality for
Periodic Auction Orders as compared to non-Periodic Auction Orders,
Users will be able to anticipate how MTP modifiers will interact with
their Periodic Auction Orders and mitigate any confusion that Users may
have in using the proposed functionality. Moreover, the Exchange notes
that the use of MTP on Periodic Auction Orders is entirely optional,
and Users may choose whether they want to utilize MTP. The Exchange
conferred with its Periodic Auction Users and despite the limitations
described in Rule 11.25(g)(1)(A)-(C), Users still requested that the
Exchange implement the proposed functionality. Moreover, the Exchange
will issue an Exchange Notice that notifies all Users of the planned
implementation date for the proposed MTP functionality and describes
the functionality. Accordingly, Users will be fully aware of how MTP
will impact their Periodic Auction Orders.
Similarly, by making clear how the Exchange will ignore Minimum
Quantity instructions appended to MTP Orders when a Periodic Auction is
in progress, Users will be better informed as to how MTP operates in
conjunction with Minimum Quantity restrictions and will be better able
to manage their Periodic Auction Orders. The Exchange notes that while
ignoring a User's Minimum Quantity instruction for their MTP Periodic
Auction Orders is not ideal, this functionality is necessary in order
to avoid adding unnecessary complexity to the Exchange's System. As
discussed further above, by
[[Page 14311]]
incorporating Minimum Quantity into the Periodic Auction process is
likely to add latency to this process, leading to longer Periodic
Auction times. Rather than impacting Users' Periodic Auction
experience, the Exchange has elected to incorporate User feedback and
instead choose, in the limited circumstance of when a Periodic Auction
is in progress, ignored Minimum Quantity instructions appended to MTP
Periodic Auction Orders.
Additionally, the Exchange believes that the proposed rule changes
are designed to facilitate transactions in securities, and to remove
impediments to and perfect the mechanism of a free and open market and
a national market system. Based on User feedback, the lack of MTP
functionality for Periodic Auction Orders may discourage Users from
entering Periodic Auction Orders because they do not have an automated
way to systematically prevent undesirable executions resulting from
orders originating from a User's algorithm or trading desk, or their
related algorithms or trading desks. In this regard, the proposed rule
changes may encourage Users to increase their Periodic Auction
participation, thereby further enhancing the Periodic Auction liquidity
pool and the ability of investors to execute larger orders that may
otherwise be difficult to execute without market impact in the
continuous market. Additionally, because Periodic Auctions are price-
forming, the enhanced liquidity pools would indeed augment Periodic
Auction's valuable price discovery function, which may be particularly
helpful for investors when trading securities that typically trade with
wider spreads.
Finally, the Exchange further believes that the proposed rule
change does not unfairly discriminate amongst Users because the
proposal will allow all Periodic Auction Users to utilize MTP just as
all Users entering Continuous Book Orders may utilize MTP today. In
this regard, the proposed amendment will avoid disparate treatment of
Users. Furthermore, the bypassing or amending of MTP modifiers, as
described in the Examples above, will apply equally to all Periodic
Auction Users, regardless of the User's size.
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. MTP is an optional risk tool
offered by the Exchange and Periodic Auction Users are free to decide
whether to use MTP when submitting Periodic Auction Orders to the
Exchange. Similarly, the Exchange does not believe that the proposed
amendment poses a burden on intermarket competition that is not
necessary or appropriate in furtherance of the Act. Indeed, the
proposed rule change is designed to increase competition by offering
Periodic Auction Users the ability to better manage their order flow
and prevent undesirable executions. In turn, Users may be further
incentivized to send additional orders to BYX's Periodic Auction
mechanism, thereby fostering competition amongst exchanges, as well as
with off-exchange venues (e.g., alternative trading systems) where
Users that may otherwise utilized Periodic Auctions, typically seek to
source block-sized liquidity.\41\
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\41\ See ``Trade Big with Cboe U.S. Periodic Auctions,''
available at: https://www.cboe.com/us/equities/trading/offerings/periodic_auctions/. (``Cboe created its patented Periodic Auctions
to establish an on-exchange alternative to the growth of off-
exchange liquidity. Most recently, the use of conditional order
types on Alternative Trading Systems (ATSs) has reached new highs as
a percentage of ATS volumes. Periodic Auctions would offer a new
price forming auction for investors seeking liquidity, including but
not limited to block size transactions, during the course of the
trading day. These intraday auctions may be a useful tool to attract
buyers and sellers in less liquid or wider spread names, and would
create an equal and fair market for market participants and
investors that wish to either initiate or respond to such auctions.
Periodic Auctions will be available on Cboe's BYXTM
market center.'').
---------------------------------------------------------------------------
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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change 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-CboeBYX-2025-008 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-CboeBYX-2025-008. 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-CboeBYX-2025-008 and should
be submitted on or before April 21, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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\42\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-05452 Filed 3-28-25; 8:45 am]
BILLING CODE 8011-01-P