[Federal Register Volume 84, Number 230 (Friday, November 29, 2019)]
[Notices]
[Pages 65851-65853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25838]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87593; File No. SR-CboeEDGX-2019-070]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Subparagraph (a)(1) of Rule 11.1 To Allow the Exchange To Accept
Market Orders With a Stop Price Entered Between 6:00 and 7:00 a.m.
Eastern Time
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 19, 2019, Cboe EDGX Exchange, Inc. (``Exchange'') 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 EDGX Exchange, Inc. (``EDGX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to amend subparagraph (a)(1) of Rule 11.1 to allow
the Exchange to accept Market Orders with a Stop Price entered between
6:00 and 7:00 a.m. Eastern Time. 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/options/regulation/rule_filings/edgx/), 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 subparagraph (a)(1) of Rule 11.1 to
allow the Exchange to accept Market Orders \3\ with a Stop Price \4\ (a
``Stop Order'') entered between 6:00 and 7:00 a.m. Eastern Time.
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\3\ A Market Order is an order to buy or sell a stated amount of
a security that is to be executed at the NBBO or better when the
order reaches the Exchange. See Exchange Rule 11.8(a).
\4\ A Market Order ``may include a Stop Price which will convert
the order into a Market Order when the Stop Price is triggered. An
order to buy converts to a Market Order when the consolidated last
sale in the security occurs at, or above, the specified Stop Price.
An order to sell converts into a Market Order when the consolidated
last sale in the security occurs at, or below, the specified Stop
Price.'' See Exchange Rule 11.8(a)(1).
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Subparagraph (a)(1) of Rule 11.1 provides that orders entered
between 6:00 a.m. and 7:00 a.m. Eastern Time are not eligible for
execution until the start of the Early Trading Session,\5\ Pre-Opening
Session \6\ or Regular Trading Hours,\7\ depending on the Time in Force
selected by the User.\8\ Subparagraph (a)(1) also provides that the
Exchange will not accept certain orders \9\ entered prior to 7:00 a.m.
Eastern Time including Market Orders with a Time in Force other than
Regular Hours Only (``RHO'').\10\ Market Orders with a Time in Force
other than RHO are rejected by the Exchange prior to 7:00 a.m. Eastern
Time because Market Orders are not eligible to trade prior to the start
of Regular Trading Hours and such orders are generally not designated
to queue for later entry onto the Exchange's order book. Rather, Market
Orders with a Time in Force other than RHO are designed to immediately
execute at the NBBO when the order reaches the Exchange, and thus are
generally intended for entry during a trading session where continuous
trading is occurring. Alternatively, other order types and modifiers,
such as Market Orders with a Time in Force of RHO and Limit Orders,\11\
including Limit Orders with a Stop Limit Price (``Stop Limit
Orders''),\12\ are allowed for entry on the Exchange between 6:00 and
7:00 a.m. Eastern Time as those order types and modifiers are
consistent with an order designated to queue for later entry on to the
Exchange's order book. Specifically, Market Orders with a Time in Force
of RHO are effectively for use in the Opening Auction and are cancelled
if not executed in the Opening Auction. Therefore, Market Orders with a
Time in Force of RHO would be queued until the start of the regular
trading session for participation in the Opening Auction. Similarly,
the Stop Price of a Stop Limit Order can only be triggered by a
consolidated last sale eligible trade.\13\ Therefore, a Stop Limit
Order would be queued until the time the Stop Price of
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the order is triggered by a consolidated last sale eligible trade
occurring Regular Trading Hours.
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\5\ See Exchange Rule 1.5(ii).
\6\ See Exchange Rule 1.5(s).
\7\ See Exchange Rule 1.5(y).
\8\ See Exchange Rule 1.5(ee).
\9\ Specifically, Exchange Rule 11.1(a)(1) provides that orders
with a Post Only instruction, Intermarket Sweep Orders (``ISOs''),
Market Orders with a Time in Force instruction other that Regular
Hours Only, orders with a Minimum Execution Quantity instruction
that also include a Time in Force instruction of Regular Hours Only,
and all orders with a Time in Force of Immediate-or-Cancel (``IOC'')
or Fill-or-Kill (``FOK'') are not accepted if entered prior to 7:00
a.m. Eastern Time.
\10\ RHO is an ``instruction a User may attach to an order
designating it for execution only during Regular Trading Hours,
which includes the Opening Process and Re-Opening Process following
a halt suspension or pause.'' See Exchange Rule 11.6(q)(6).
\11\ A Limit Order is an ``order to buy or sell a stated amount
of a security at a specified price or better. A marketable Limit
Order is a Limit Order to buy (sell) at or above (below) the lowest
(highest) Protected Offer (Protected Bid) for the security.'' See
Exchange Rule 11.8(b).
\12\ A Stop Order ``may contain a Stop Limit Price which will
convert to a Limit Order once the Stop Limit Price is triggered. A
Limit Order to buy with a Stop Limit Price becomes eligible for
execution by the System when the consolidated last sale in the
security occurs at, or above, the specified Stop Price. A Limit
Order to sell with a Stop Limit Price becomes eligible for execution
by the System when the consolidated last sale in the security occurs
at, or below, the specified Stop Limit Price.'' See Exchange Rule
11.8(b)(1).
\13\ See supra note 12.
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As proposed, the amendment would allow the Exchange to accept Stop
Orders entered between 6:00 and 7:00 a.m. Eastern Time, which is
consistent with an order designated to queue for later entry on to the
Exchange's order book. Similar to a Stop Limit Order, the Stop Price of
a Stop Order can only be triggered by a consolidated last sale eligible
trade.\14\ Therefore, a Stop Order can only become a Market Order after
at least the start of Regular Trading Hours. Further, Stop Orders
entered on the Exchange between 6:00 and 7:00 a.m. Eastern Time would
behave similar to Stop Limit Orders between the time of entry up to at
least the start of Regular Trading Hours.
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\14\ See supra note 4.
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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.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \16\ requirements that the rules of an exchange be
designed 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.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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As discussed above, all Stop Orders are designed to queue until at
least the start of Regular Trading Hours as such orders are only
eligible to be elected based on the consolidated last sale set during
Regular Trading Hours. Therefore, the proposed amendment to allow the
entry of Stop Orders between 6:00 and 7:00 a.m. Eastern Time would not
allow such Stop Orders to be elected and execute prior to the start of
Regular Trading Hours. Prior to the start of Regular Trading Hours,
Stop Orders entered between 6:00 and 7:00 a.m. Eastern Time would
behave similar to Stop Limit Orders entered during that time.
Therefore, the Exchange believes the proposed amendment would
consistently allow order types and modifiers that are consistent with
orders designated to queue to be entered on the Exchange between 6:00
and 7:00 a.m. Eastern Time.
Additionally, the Exchange believes the proposed amendment would
allow Members the convenience to enter all Stop Orders and Stop Limit
Orders between 6:00 and 7:00 a.m. Eastern Time without those orders
being eligible for election, and consequently execution, until at least
the start of the Regular Trading Hours. Thus, the proposed amendment
would provide Members with both greater convenience and flexibility in
managing their Stop Orders and Stop Limit Orders without impacting how
those orders trade.
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. Rather, the proposed rule
change would consistently allow for the entry of order types and
modifiers that are designated to queue between 6:00 and 7:00 a.m.
Eastern Time. Stop Limit Orders are currently allowed for entry on the
Exchange between 6:00 and 7:00 a.m. Eastern Time and behave similar to
the manner in which a Stop Order would behave prior to the start of
Regular Trading Hours if allowed entry during that time. The Exchange
therefore believes that the proposed rule change would increase
consistency around the operation of the Exchange to the benefit of
Members and investors as well as provide greater flexibility to Members
in managing their Stop Orders, without imposing any significant burden
on competition.
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 \17\ and
Rule 19b-4(f)(6) \18\ thereunder.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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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 will 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-CboeEDGX-2019-070 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-CboeEDGX-2019-070. 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
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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-CboeEDGX-2019-070, and
should be submitted on or before December 20, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Deputy Secretary.
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\19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2019-25838 Filed 11-27-19; 8:45 am]
BILLING CODE 8011-01-P