
[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)]
[Notices]
[Pages 63932-63933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26834]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84738; File No. SR-CboeBZX-2018-079]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Granting Approval to a Proposed Rule Change, as Modified by Amendment 
No. 1, To Establish How the BZX Official Closing Price Would Be 
Determined for BZX-Listed Securities

December 6, 2018.

I. Introduction

    On October 18, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 how the BZX Official Closing price would 
be determined for BZX-listed securities that are not corporate 
securities if the Exchange does not conduct a Closing Auction or if a 
Closing Auction trade is less than a round lot.\3\ The proposed rule 
change was published for comment in the Federal Register on November 5, 
2018.\4\ The Commission received no comments on the proposal. This 
order approves the proposed rule change, as modified by Amendment No. 
1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On October 29, 2018, the Exchange filed Amendment No. 1 to 
the proposed rule change to specify the date upon which the 
Exchange's President (or designee) approved the proposed rule 
change, pursuant to delegated authority.
    \4\ See Securities Exchange Act Release No. 84507 (October 30, 
2018), 83 FR 55435 (``Notice'').
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II. Description of the Proposal, as Modified by Amendment No. 1

    The Exchange proposes to amend BZX Rule 11.23(c)(2)(B) to change 
how it would determine the BZX Official Closing Price \5\ for an 
Exchange-listed security that is not a corporate security (``Derivative 
Securities Product'') if the Exchange does not conduct a Closing 
Auction or if a Closing Auction trade is less than a round lot. Current 
Rule 11.23(c)(2)(B) provides that in the event that there is no Closing 
Auction for a BZX-listed security, the BZX Official Closing Price will 
be the price of the Final Last Sale Eligible Trade.\6\ The Exchange 
proposes to amend this provision to provide that for Derivative 
Securities Products only, in the event there is no Closing Auction, or 
if less than a round lost was executed in the Closing Auction, the BZX 
Official Closing Price will depend upon when the Final Last Sale 
Eligible Trade in that security occurred.
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    \5\ See BZX Rule 11.23(a)(3) (defining the term ``BZX Official 
Closing Price'' as the price disseminated to the consolidated tape 
as the market center closing trade).
    \6\ As defined in BZX Rule 11.23(a)(9), the term ``Final Last 
Sale Eligible Trade'' means the last trade occurring during Regular 
Trading Hours on the Exchange if the trade was executed within the 
last one second prior to either the Closing Auction or, for Halt 
Auctions, trading in the security being halted. Where the trade was 
not executed within the last one second, the last trade reported to 
the consolidated tape received by BZX Exchange during Regular 
Trading Hours and, where applicable, prior to trading in the 
security being halted will be used. If there is no qualifying trade 
for the current day, the BZX Official Closing Price from the 
previous trading day will be used.
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    Specifically, if the Final Last Sale Eligible Trade occurred within 
the final five minutes before the end of Regular Trading Hours, the 
Final Last Sale Eligible Trade will be the BZX Official Closing 
Price.\7\ However, if such trade occurred prior to the last five 
minutes before the end of Regular Trading Hours, the time-weighted 
average price of the NBBO midpoint measured over the last five minutes 
before the end of Regular Trading Hours will be the BZX Official 
Closing Price.\8\
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    \7\ See proposed BZX Rule 11.23(c)(2)(B)(ii)(a).
    \8\ See proposed BZX Rule 11.23(c)(2)(B)(ii)(b).
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    If the BZX Official Closing Price cannot be determined under 
proposed BZX Rule 11.23(c)(2)(B)(i) or (ii), the Final Last Sale 
Eligible Trade will be the BZX Official Closing Price.\9\ If there is 
no qualifying trade for the current day, the BZX Official Closing Price 
from the previous trading day will be used.\10\
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    \9\ See proposed BZX Rule 11.23(c)(2)(B)(iii).
    \10\ See BZX Rule 11.23(a)(9).
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    The Exchange states that it will implement the proposed rule change 
as soon as is practicable after the Commission's approval and will 
announce the implementation date via Trade Desk Notice.\11\
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    \11\ See Notice, supra note 4, at 55436.
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III. Discussion and Commission Findings

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of Section 6 of 
the Act \12\ and the rules and regulations thereunder applicable to a 
national securities exchange.\13\ In particular, the Commission finds 
that the proposed rule change is consistent with Sections 6(b)(5) the 
Act,\14\ which requires, among other things, that the rules of a 
national securities exchange be designed to

[[Page 63933]]

promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating 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, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Commission also finds that the proposed rule change is 
consistent with Section 6(b)(8) of the Act,\15\ which requires that the 
rules of a national securities exchange not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \12\ 15 U.S.C. 78f(b).
    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rules' impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(8).
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    The Commission notes that the primary listing market's official 
closing price for a security is relied upon by market participants for 
a variety of reasons, including, but not limited to, calculation of 
index values, calculation of the net asset value of mutual funds and 
exchange-traded products, the price of derivatives that are based on 
the security, and certain types of trading benchmarks such as volume 
weighted average price strategies. For Derivatives Securities Products, 
in circumstances where there is no Closing Auction, or the Closing 
Auction trade consists of less than one round lot, the Exchange 
proposes to utilize more recent firm quotations instead of less recent 
trades, as such trades may provide less information about the current 
value of a security. The Exchange asserts that by doing so, the BZX 
Official Closing Price for such a Derivative Securities Product would 
be more reflective of the true and current value of such security on 
that trading day than otherwise would under the Exchange's current 
rule, particularly for a Derivative Securities Product that is thinly 
traded.\16\ The Commission therefore believes that the Exchange's 
proposal is reasonably designed to achieve the Act's objectives to 
protect investors and the public interest. Accordingly, the Commission 
finds that the proposed rule change is consistent with the requirements 
of the Act.
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    \16\ See Notice, supra note 4, at 55437.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\17\ that the proposed rule change (SR-CboeBZX-2018-079), as modified 
by Amendment No. 1, be, and hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26834 Filed 12-11-18; 8:45 am]
 BILLING CODE 8011-01-P


