[Federal Register Volume 86, Number 92 (Friday, May 14, 2021)]
[Notices]
[Pages 26594-26597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10169]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91801; File No. SR-CboeBZX-2021-035]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change Relating to the Exchange's Process for 
Re-Opening Securities Listed on Other National Securities Exchanges 
Following the Resumption of Trading After a Halt, Suspension, or Pause 
During the Early Trading Session, Pre-Opening Session, or After Hours 
Trading Session

May 10, 2021.
    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 April 26, 2021, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes a rule change is to amend the Exchange's 
process for re-opening securities listed on other national securities 
exchanges following the resumption of trading after a halt, suspension, 
or pause during the Early Trading Session, Pre-Opening Session, or 
After Hours Trading Session.
    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 Exchange's 
process for re-opening securities listed on other national securities 
exchanges following the resumption of trading after a halt, suspension, 
or pause during the Early Trading Session,\3\ Pre-Opening Session,\4\ 
or After Hours Trading Session.\5\ BZX Rule 11.24 describes the 
Exchange's opening process for securities listed on other national 
securities exchanges, including the process for re-opening such 
securities following the resumption of trading after a halt, 
suspension, or pause. On November 5, 2020, the Exchange filed a

[[Page 26595]]

proposed rule change to amend its re-opening process pursuant to BZX 
Rule 11.24 for securities listed on the New York Stock Exchange LLC 
(``NYSE'') following the resumption of trading after a halt, 
suspension, or pause during the Early Trading Session, Pre-Opening 
Session, or After Hours Trading Session.\6\ That filing was approved by 
the Commission on December 28, 2020.\7\ The Exchange now proposes to 
further amend BZX Rule 11.24 to adopt a harmonized re-opening process 
for securities listed on NYSE (``Tape A''), securities listed on 
exchanges other than The Nasdaq Stock Market LLC (``Nasdaq'') and NYSE 
(``Tape B''); and securities listed on Nasdaq (``Tape C'') following 
the resumption of trading after a halt, suspension, or pause during the 
Early Trading Session, Pre-Opening Session, or After Hours Trading 
Session. The Exchange believes that the proposed harmonized process for 
Tape A, B, and C securities would simplify its procedures and provide a 
more effective re-opening process for securities that resume trading 
outside of Regular Trading Hours.\8\
---------------------------------------------------------------------------

    \3\ The term ``Early Trading Session'' means the time between 
7:00 a.m. and 8:00 a.m. Eastern Time. See BZX Rule 1.5(ee).
    \4\ The term ``Pre-Opening Session'' means the time between 8:00 
a.m. and 9:30 a.m. Eastern Time. See BZX Rule 1.5(r).
    \5\ The term ``After Hours Trading Session'' means the time 
between 4:00 p.m. and 8:00 p.m. Eastern Time. See BZX Rule 1.5(c).
    \6\ See Securities Exchange Act Release No. 90420 (November 13, 
2020), 85 FR 73832 (November 19, 2020) (SR-CboeBZX-2020-083).
    \7\ See Securities Exchange Act Release No. 90804 (December 28, 
2020), 86 FR 158 (January 4, 2021) (Approval Order).
    \8\ The term ``Regular Trading Hours'' means the time between 
9:30 a.m. and 4:00 p.m. Eastern Time. See BZX Rule 1.5(w).
---------------------------------------------------------------------------

    As amended pursuant to SR-CboeBZX-2020-083, BZX Rule 11.24(e)(3) 
provides that during the Early Trading Session, Pre-Opening Session, or 
After Hours Trading Session, Tape A securities that resume trading 
after a halt, suspension, or pause will be automatically re-opened 
pursuant to the Exchange's contingent open procedures, as described in 
BZX Rule 11.24(d), after one second has passed following the Exchange's 
receipt of the first NBBO following such resumption of trading. This 
rule was adopted to automate the prior manual process that would 
otherwise be used to initiate the re-opening of Tape A securities when 
NYSE was not open for trading. Consistent with that intent, the 
Exchange proposed to continue to re-open Tape A securities using the 
same contingent open procedures that would apply when the Exchange 
manually initiated its re-opening process pursuant to BZX Rule 
11.24(e)(2). As a result, when the Exchange re-opens Tape A securities 
during pre- and post-market trading sessions today, orders are handled 
in time sequence and placed on the BZX Book, routed, cancelled, or 
executed in accordance with the terms of the order. This differs from 
the standard processed used by the Exchange during Regular Trading 
Hours, where the Exchange seeks to execute queued orders at the 
midpoint of the national best bid or offer (``NBBO'').\9\ After 
additional consideration, the Exchange believes that market 
participants and investors would be better served by utilizing its 
standard midpoint re-opening in these circumstances as doing so would 
promote greater consistency with the process used by the Exchange in 
other circumstances and may generally provide executions that better 
reflect the applicable market for the security.
---------------------------------------------------------------------------

    \9\ See BZX Rule 11.24(e)(1).
---------------------------------------------------------------------------

    The Exchange therefore proposes to amend BZX Rule 11.24(e) such 
that the process for re-opening Tape A securities after the Exchange 
has determined to initiate a re-opening would generally mirror the 
standard process described in BZX Rule 11.24(e)(1), which as discussed 
is designed to provide an execution at the midpoint of the NBBO. The 
determination of whether to re-open such Tape A securities would, 
however, continue to follow the process discussed in SR-CboeBZX-2020-
083. Thus, during the Early Trading Session, Pre-Opening Session, or 
After Hours Trading Session, the re-opening process for Tape A 
securities would occur at the midpoint of the NBBO after one second has 
passed following the Exchange's receipt of the first NBBO following the 
resumption of trading after a halt, suspension, or pause. Although the 
Exchange has determined to use a midpoint re-opening process similar to 
that currently described in BZX Rule 11.24(e)(1), for the reasons 
discussed in SR-CboeBZX-2020-083, it remains important that the trigger 
for initiating this process outside of Regular Trading Hours not be 
tied to the resumption of trading on the primary listing market as NYSE 
does not trade its listed securities at times when the Exchange is open 
for pre- and post-market trading.
    In addition, the Exchange proposes to amend the process for re-
opening Tape B and C securities to mirror the proposed process for Tape 
A securities, except that the Exchange would require the primary 
listing market to have begun quoting the security before it initiates 
its own re-opening process. As explained in SR-CboeBZX-2020-083, the 
Exchange amended BZX Rule 11.24 to permit Tape A securities listed on 
NYSE to re-open based on quoting activity on other national securities 
exchanges during pre- and post-market trading when NYSE does not trade 
its listed securities. However, this limitation does not exist for Tape 
B or C securities as the applicable primary listing markets for those 
securities each offer pre- and post-market trading sessions where 
market participants can trade their listed securities.\10\ As a result, 
the Exchange believes that it is desirable for Tape B and C securities 
to be opened on the Exchange only after the primary listing exchange 
has begun trading its listed securities, consistent with the current 
BZX Rule 11.24(e), which would continue to be applied during Regular 
Trading Hours. However, similar to the proposed process for re-opening 
Tape A securities, the Exchange would simplify the triggers for re-
opening trading pursuant to BZX Rule 11.24(e)(1) such that its re-
opening process for Tape B and C securities during the Early Trading 
Session, Pre-Opening Session, and After Hours Trading Session would 
occur at the midpoint of the NBBO after one second has passed following 
the publication of the first two-sided quotation by the listing 
exchange following the resumption of trading after a halt, suspension, 
or pause. In its effort to simplify the re-opening process employed 
during these timeframes, the Exchange would not retain a separate 
trigger to allow the re-opening process to be initiated immediately 
when the Exchange receives both a two-sided quotation and a trade from 
the listing exchange.
---------------------------------------------------------------------------

    \10\ See Nasdaq Rules, Equity 1, Section 1(a)(9); NYSE Arca, 
Inc. Rule 7.34-E(a); NYSE American LLC Rule 7.34E(a).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to make a number of structural 
changes to BZX Rule 11.24(e) to facilitate the amendments described 
above. First, the Exchange proposes to structure BZX Rule 11.24(e)(1) 
such that it would contain subparagraphs (A), (B), and (C), which each 
would describe applicable differences between the Exchange's opening 
process at the beginning of the Regular Trading Session, as described 
in BZX Rule 11.24(a)(2) and (b), and the re-opening process employed by 
the Exchange after a halt. As amended, (1) BZX Rule 11.24(e)(1)(A) 
would describe the types of orders that are eligible for participation 
in the re-opening process; (2) BZX Rule 11.24(e)(2)(B) would describe 
the Exchange's current re-opening process, which the Exchange now 
proposes to limit to Regular Trading Hours; and (3) BZX Rule 
11.24(e)(2)(C) would contain language discussed above that describes 
the Exchange's re-opening process during the Early Trading Session, 
Pre-Opening Session, or After Hour Trading Session,

[[Page 26596]]

i.e., for Tape A, B, and C securities.\11\ Second, the Exchange 
proposes to amend BZX Rule 11.24(e)(2) to reflect the changes discussed 
above. As amended, the lead in to BZX Rule 11.24(e)(2) would state that 
this section applies where the conditions required to establish the 
price of the re-opening process in the now restructured BZX Rule 
11.24(e)(1)(B) or (C) have not occurred, which reflects the now 
renumbered sections of the rule, including language that is in current 
BZX Rule 11.24(e)(1) and BZX Rule 11.24(e)(3).\12\
---------------------------------------------------------------------------

    \11\ The Exchange would also eliminate BZX Rule 11.24(e)(3), 
which currently addresses the re-opening of Tape A securities listed 
on NYSE during pre- and post-market trading. As discussed, the 
Exchange is proposing to harmonize the process for re-opening Tape 
A, B, and C securities outside of Regular Trading Hours, and the 
harmonized process discussed in this proposed rule change would be 
described in BZX Rule 11.24(e)(2)(C).
    \12\ The Exchange would also eliminate language that states that 
this section applies when the security has not otherwise been re-
opened for trading on the Exchange pursuant to BZX Rule 11.24(e)(3). 
As discussed, the content of BZX rule 11.24(e)(3) would be moved to 
BZX Rule 11.24(e)(1)(C) with further amendments as discussed herein.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\13\ in general, and 
Section 6(b)(5) of the Act,\14\ 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. The Exchange believes that the 
proposed rule change is consistent with the protection of investors and 
the public interest as it would implement a streamlined process for re-
opening Tape A, B, and C securities during the Early Trading Session, 
Pre-Opening Session, or After Hours Trading Session.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange currently employs different processes for re-opening 
Tape A, B, and C securities during pre- and post-market trading. The 
Exchange believes, however, that market participants would be better 
served by a harmonized process that: (1) Ensures that the Exchange's 
automated re-opening process executes orders at the midpoint of the 
NBBO; and (2) eliminates unnecessary distinctions between the process 
utilized for Tape A, B, and C securities. Executing the Exchange's re-
opening process during pre- and post-market trading at the midpoint of 
the NBBO is beneficial to market participants as the NBBO midpoint may 
more closely reflect market prices and conditions for the security 
being re-opened. As a result, the Exchange believes that using the NBBO 
midpoint to price its re-opening process for all securities would help 
to promote a fair and orderly market. In addition, using generally 
consistent triggers for initiating the Exchange's re-opening process in 
Tape A, B, and C securities that resume trading during pre- and post-
market trading sessions would reduce the overall complexity of the re-
opening process employed during these timeframes. The Exchange notes, 
however, that it would nevertheless require the primary listing market 
to begin trading its own securities prior to re-opening trading on the 
Exchange in Tape B and C securities. This limitation would not apply to 
Tape A securities that NYSE does not trade outside of its regular 
trading session as doing so would require unnecessary and inefficient 
manual intervention by the Exchange to manually initiate trading, as 
was the case prior to the filing and Commission approval of SR-CboeBZX-
2020-083. The Exchange believes that this distinction continues to be 
appropriate as it is based on applicable differences between each 
primary listing market's hours of operation and would continue to 
promote a more streamlined automated process for initiating the re-
opening process in Tape A securities at times when NYSE does not trade 
its own listed securities.

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 facilitate a more efficient and harmonized re-opening 
process for all securities that resume trading outside of Regular 
Trading Hours, and is not designed to address any competitive issues. 
All members would have their orders handled in the same manner based on 
the proposed changes to the Exchange's re-opening process, and other 
national securities exchanges are free to adopt the same or similar 
processes if they believe that the proposed process is beneficial for 
their own members. The Exchange therefore does not believe that the 
proposed rule change would have any significant impact on competition.

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

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

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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-2021-035 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-2021-035. 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

[[Page 26597]]

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-2021-035 and should 
be submitted on or before June 4, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10169 Filed 5-13-21; 8:45 am]
BILLING CODE 8011-01-P


