[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

[[Page 65852]]

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 rule-comments@sec.gov. 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

[[Page 65853]]

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


