[Federal Register Volume 84, Number 230 (Friday, November 29, 2019)]
[Notices]
[Pages 65878-65880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25833]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87587; File No. SR-CboeBZX-2019-100]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Remove its Partial Post Only at Limit Order Type
November 22, 2019.
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 November 21, 2019, Cboe BZX Exchange, Inc. filed with the Securities
and Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
remove its Partial Post Only at Limit Order type. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 65879]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to remove its Partial Post Only at Limit
Order functionality and amend its rules in connection with the removal
of this functionality. Currently, Rule 21.1(d)(9) provides that Partial
Post Only at Limit Orders are orders that are to be ranked and executed
on the Exchange pursuant to Rule 21.8 (Order Display and Book
Processing) or cancelled, as appropriate, without routing away to
another options exchange except that the order will only remove
liquidity from the BZX Options Book under the circumstances
contemplated in subparagraphs (9)(A) and (9)(B). Specifically,
subparagraph (9)(A) provides that a Partial Post Only at Limit Order
will remove liquidity from the BZX Options Book up to the full size of
the order if, at the time of receipt, it can be executed at prices
better than its limit price (i.e., price improvement). Subparagraph
(9)(B) provides that, regardless of any liquidity removed from the BZX
Options Book under the circumstances described in subparagraph (9)(A),
a User may enter a Partial Post Only at Limit Order instructing the
Exchange to also remove liquidity from the BZX Options Book at the
order's limit price up to a designated percentage of the remaining size
of the order after any execution pursuant to subparagraph (9)(A)
(``Maximum Remove Percentage'') if, after removing such liquidity at
the order's limit price, the remainder of such order can then post to
the BZX Options Book. If no Maximum Remove Percentage is entered, such
order will only remove liquidity to the extent such order will obtain
price improvement as described in subparagraph (9)(A). Rule 21.1(h)(4)
and (i)(4) also provide for display-price slide functionality and price
adjust functionality, respectively, specific to Partial Post Only at
Limit Orders.
The Exchange proposes to remove the Partial Post Only at Limit
Order type in Rule 21.1(d)(9), and the relevant provisions (in Rules
21.1(h)(4) and 21.1(i)(4)) in connection with the order type.\3\ User
submission of this order type is infrequent. To illustrate, only one
User submitted Partial Post Only at Limit Orders in the last month.
Because so few Users submit Partial Post Only at Limit Orders, the
Exchange believes the current demand does not warrant the Exchange
resources necessary for ongoing System support of the order type (e.g.,
the System must maintain and apply a more complex matching algorithm
for Partial Post Only at Limit orders than for most other order types).
Finally, the Exchange notes that the use of Partial Post Only at Limit
Orders is voluntary and that Price Improving Order types,\4\ as well as
functionality that allows Post Only Orders subject to the display-price
sliding process to execute against resting orders at improved
prices,\5\ will continue to be available to Users.
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\3\ As a result, the proposed change also updates the subsequent
paragraph numbering.
\4\ See Rule 21.1(d)(6), which provides that Price Improving
Orders are orders to buy or sell an option at a specified price at
an increment smaller than the minimum price variation in the
security. Price Improving Orders may be entered in increments as
small as (1) one cent. Price Improving Orders shall be displayed at
the minimum price variation in that security and shall be rounded up
for sell orders and rounded down for buy orders.
\5\ See Rule 21.1(d)(8).
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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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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) \8\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
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In particular, the proposed rule change would remove impediments to
and perfect the mechanism of a free and open market and a national
market system and benefit investors, because it would delete from the
Rules an order type the Exchange will no longer offer. Rule 21.1(d),
which was previously filed with the Commission, permits the Exchange to
determine which order types, including the Partial Post Only at Limit
Order, are available. Therefore, it is consistent with Act to not offer
this order type. The Exchange believes it will promote transparency in
its Rules to delete order types that the Exchange does not make
available, and will not make available, in any class. The Exchange
notes other options exchanges do not offer this order type.\9\
Moreover, the Exchange does not believe that the proposed rule change
will affect the protection of investors or the maintenance of a fair
and orderly market because this order type is so infrequently
implemented. In addition to this, the Exchange notes that use of this
order type is voluntary and the Exchange will continue to offer other
price improving functionality. Also, the Exchange believes the low
usage rate for Partial Post Only at Limit Orders does not warrant the
continued resources necessary for System support of such orders
(including the application of a particularly complex matching algorithm
required for Partial Post Only at Limit Orders). As a result, the
Exchange believes the proposed rule change will also remove impediments
to and perfect the mechanism of a free and open market and national
market system by allowing the Exchange to reallocate System capacity
and resources to more frequently elected functionality.
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\9\ See Cboe C2 Exchange, Inc. Rule 6.10(b); Cboe EDGX Exchange,
Inc. Rule 21.1(d); Cboe BZX Exchange, Inc. Rule 21.1(d); and Nasdaq
BX, Inc. Options 3, Sec. 7(a).
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In addition to this, the Exchange also believes the proposed rule
change is consistent with Section 6(b)(1) of the Act,\10\ which
provides that the Exchange be organized and have the capacity to be
able to carry out the purposes of the Act and to enforce compliance by
the Exchange's Members and persons associated with its Members with the
Act, the rules and regulations thereunder, and the rules of the
Exchange. The Exchange believes that removing a rarely used order type,
and in turn, reallocating system capacity and resources would allow for
the Exchange to be better organized and able to carry out the purposes
of the Act and enforce compliance.
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\10\ 15 U.S.C. 78f(b)(1).
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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 rule change to
remove Partial Post Only at Limit Order types is not designed to
address any competitive issues but rather to remove an order type
rarely used on the Exchange, which
[[Page 65880]]
is also consistent with the availability of order types in the rules of
other option exchanges, which have been previously filed with the
Commission. Additionally, the current Rule permits the Exchange to not
make this order type available, which Rule was previously filed with
the Commission. As noted above, the use of this order type is voluntary
and the Exchange will continue to offer other price improving
functionality.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest
because the order type being eliminated is infrequently employed,\15\
and the Exchange will continue to offer other price improving
functionality.\16\ Therefore, the Commission hereby waives the
operative delay and designates the proposal as operative upon
filing.\17\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ According to the Exchange, only one User submitted Partial
Post Only at Limit Orders in the last month.
\16\ See supra notes 4 and 5 and accompanying text.
\17\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2019-100 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-2019-100. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2019-100 and should be submitted
on or before December 20, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-25833 Filed 11-27-19; 8:45 am]
BILLING CODE 8011-01-P