[Federal Register Volume 84, Number 225 (Thursday, November 21, 2019)]
[Notices]
[Pages 64375-64377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25208]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87547; File No. SR-CboeBZX-2019-095]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Definition of the Final Last Sale Eligible Trade

November 15, 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 12, 2019, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the definition of the Final Last Sale 
Eligible Trade (``FLSET'') such that odd lot trades executed on BZX 
would not be eligible to establish the FLSET for a security. 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.

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

1. Purpose
    The purpose of the proposed rule change is to amend the definition 
of the Final Last Sale Eligible Trade (``FLSET'') such that odd lot 
trades executed on BZX would not be eligible to establish the FLSET for 
a security. The FLSET is used by the Exchange for a number of important 
purposes related to auctions in BZX-listed securities. For example, the 
FLSET sets the Halt Auction Reference Price for Halt Auctions following 
Non-LULD Regulatory Halts,\3\ and, in some cases, becomes the BZX 
Official Closing Price for a security where there is no Closing 
Auction, or where there is a Closing Auction but only an odd lot 
quantity is executed.\4\ Today, pursuant to BZX Rule 11.23(a)(9), the 
last trade occurring during Regular Trading Hours on the Exchange sets 
the FLSET 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. The last trade executed on BZX during Regular 
Trading Hours could be for a round lot or odd lot quantity. The 
Exchange believes, however, that it is undesirable for an odd lot 
execution that may be for an economically insignificant notional value 
to set the FLSET. The Exchange therefore proposes to amend BZX Rule 
11.23(a)(9) such that the FLSET would be set by the last round lot 
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.
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    \3\ See BZX Rule 11.23(d)(2)(C)(i)(B).
    \4\ See BZX Rule 11.23(c)(2)(B), (B)(ii)(a). For BZX-listed 
corporate securities, the FLSET would be the BZX Official Closing 
price if there is no Closing Auction. If there is no round lot 
Closing Auction in a BZX-listed ETP, the FLSET would be the BZX 
Official Closing Price if a trade that would qualify as the FLSET 
occurred within the last five minutes before the end of Regular 
Trading Hours, or if there is no such qualifying trade but a time-
weighted average price of the NBBO midpoint cannot be determined 
pursuant to BZX Rule 11.23(c)(2)(B)(ii)(b).
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    In addition, BZX Rule 11.23(a)(9) further provides that 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. The Exchange proposes two changes 
to this language. First, the Exchange proposes to replace language that 
references ``BZX Exchange'' with simply ``the Exchange'' consistent 
with the defined term codified in BZX Rule 1.5(k) and used throughout 
the rulebook. Second, the Exchange proposes to amend the rule such that 
the last round lot trade reported to the consolidated tape received by 
the Exchange during Regular Trading Hours and, where applicable, prior 
to trading in the security being halted will be used. Although the 
Exchange has generally interpreted this requirement to convey that the 
last round lot trade reported to the consolidated tape, i.e., 
consolidated last sale eligible trade, would set the FLSET, it is 
currently possible for an odd lot trade that was executed in the 
Exchange's Opening Auction to set the FLSET in limited circumstances 
where the opening print was the last reported trade. Thus, adding this 
language to the rule would both increase clarity now that odd lot 
trades are reported to the consolidated tape,\5\ and ensure that odd 
lot Opening Auctions would no longer be used to set the FLSET. Further, 
the proposed change would assist in conforming the descriptions in the 
rule given the changes previously discussed to the FLSET definition to 
explicitly reference round lot trades in the first part of the rule. As 
is the case today, if there is no qualifying trade for the current day, 
the BZX Official Closing Price from the previous trading day would 
continue to be used.
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    \5\ Historically, odd lot trades were not reported to the 
consolidated tape. In 2013, the CTA and UTP Plans were amended such 
that odd lot trades would be reported but would continue to be 
ineligible to set the consolidated last sale. See Securities 
Exchange Act Release Nos. 70794 (October 31, 2013), 78 FR 66789 
(November 6, 2013) (SR-CTA-2013-05), 70793 (October 31, 2013), 78 FR 
66788 (November 6, 2013) (S7-24-89).

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[[Page 64376]]

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, to promote just and equitable principles of 
trade, and, in general, to protect investors and the public interest 
and not 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).
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    The FLSET is the last sale formulation designed for use in BZX 
auctions pursuant to BZX Rule 11.23, and is used for a number of 
purposes including to set various reference prices, and in some cases 
to set the BZX Official Closing Price in the absence of a Closing 
Auction where sufficient size is executed to set the closing price. 
Given the importance of the FLSET to the Exchange's auction processes, 
the Exchange believes that it is consistent with the public interest 
and the protection of investors to eliminate odd lot executions from 
the FLSET determination. Today, as discussed in the purpose section of 
this proposed rule change, only round lot executions from other 
exchanges are eligible to establish the FLSET used by BZX but an odd 
lot trade on BZX would nevertheless be FLSET eligible if executed in 
the last one second, or in limited circumstances where an odd lot 
Opening Auction sets the last reported trade. Further, this may be true 
whether or not there is a round lot execution on the Exchange or 
another exchange that would otherwise have set the FLSET, and that 
would have been for a more economically significant notional value. The 
consolidated last sale price disseminated pursuant to the CTA and UTP 
Plans similarly disregard odd lot executions in an effort to ensure 
that such last sale prices remain economically significant, even though 
the CTA and UTP Plans otherwise provide transparency into odd lot 
executions. The Exchange believes that it is similarly appropriate to 
limit the Exchange's last sale calculation, i.e., the FLSET, to round 
lot executions to ensure that this value represents an economically 
significant last sale price to be utilized for the Exchange's auction 
processes. With this change, the Exchange's FLSET calculation will also 
be more aligned with other equities exchanges, such as NYSE Arca, Inc. 
(``Arca'') that also disregard odd lot executions in similar 
situations. \8\ Arca's auction processes are not identical to those of 
the Exchange--e.g., Arca uses a weighting of the consolidated last sale 
eligible trade and the time weighted average price of the NBBO midpoint 
to set the official closing price in certain circumstances.\9\ 
Nevertheless, Arca similarly excludes odd lot executions from its last 
sale formulation where relevant to its auction process. The Exchange 
believes that a similar restriction would be appropriate for its FLSET 
formulation, notwithstanding any differences in the auction processes 
employed by each exchange.
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    \8\ For example, the last consolidated round lot price is 
ordinarily used to set the reference price for trading halt auctions 
on Arca. See Arca Rule 7.35-E(a)(8)(A). Similarly, the consolidated 
last sale eligible trade, which as previously explained must be for 
a round lot, may be used in determining the official closing price 
on Arca. See Arca Rule 1.1(ll)(1).
    \9\ See Arca Rule 1.1(ll)(1).
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    The Exchange also notes that clarifying change to replace the term 
``BZX Exchange'' with ``the Exchange'' as defined pursuant to the 
Exchange's rules is non-substantive and is being made to enhance the 
readability of the Exchange's rules. The Exchange therefore believes 
that this change is consistent with the protection of investors and the 
public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
designed to ensure that the FLSET continues to be a meaningful value to 
be used for auctions in BZX-listed securities. The Exchange believes 
the proposed changes would improve the experience of members and 
investors trading on the Exchange without imposing any significant 
burden on competition. In today's highly competitive market, the 
Exchange must continually refine its offerings to ensure the best 
trading experience for members and investors. Rather than burden 
competition, the Exchange believes that the proposed rule change is 
evidence of robust competition between equities markets that benefits 
the industry.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No comments were solicited or received on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposed rule change may become operative immediately. In its 
request, the Exchange states that it currently uses a combination of 
both round lot and odd lot trades in calculating the FLSET while other 
exchanges disregard odd lot executions in similar situations, and 
expresses its belief that it is desirable to limit the FLSET to round 
lot executions as it would help to ensure that the FLSET represents an 
economically significant last sale price to be utilized for its auction 
processes. The Exchange states that waiver of the operative delay would 
allow it to promptly amend its rules to ensure that only round lot 
trades are eligible to set the FLSET, to the benefit of members and 
investors, and is therefore consistent with the protection of investors 
and the public interest. The Commission believes that waiving the 30-
day operative delay is consistent with the protection of investors and 
the

[[Page 64377]]

public interest, and therefore hereby waives the 30-day operative delay 
and designates the proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission 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 rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2019-095 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 No. SR-CboeBZX-2019-095. 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 No. SR-CboeBZX-2019-095, and should be submitted 
on or before December 12, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12), (59).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25208 Filed 11-20-19; 8:45 am]
 BILLING CODE 8011-01-P


