[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 rule-comments@sec.gov. 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


