[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44090-44092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17080]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92575; File No. SR-CboeBZX-2021-054]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
the Bulk Message Fat Finger Check

August 5, 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 July 28, 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 Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Options'') 
proposes to modify the bulk message fat finger check. 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

[[Page 44091]]

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 modify the bulk message \5\ fat finger 
check in Rule 21.17(a)(6). In accordance with the fat finger check, the 
System cancels or rejects any bulk message bid (offer) above (below) 
the national best offer (``NBO'') (national best bid (``NBB'')) by more 
than a specified amount determined by the Exchange.\6\ The proposed 
rule change indicates that the Exchange may also determine a minimum 
and maximum dollar value for the bulk message fat finger check.\7\ The 
Exchange believes Market-Makers may be willing to accept an execution 
at a price beyond the NBBO at the time of order entry, but not too far 
away. The purpose of the fat finger check is intended to reject bulk 
message bids and offers that on their face are likely to be entered at 
erroneous prices and thus prevent potentially erroneous executions. The 
proposed rule change to permit the Exchange to set a minimum and 
maximum value will provide the Exchange with the opportunity to set a 
meaningful buffer that is not ``too close'' to the NBBO (in other 
words, a de minimis buffer) but not ``too far'' from the NBBO (in other 
words, a buffer that is more likely to accept erroneously priced bulk 
messages). The proposed rule change also permits the Exchange to set 
the relevant amounts for the bulk message fat finger check on a class-
by-class basis. Option classes have different characteristics and 
trading models, and the proposed flexibility will permit the Exchange 
to apply different parameters to address those differences.
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    \5\ The term ``bulk message'' means a bid or offer included in a 
single electronic message a User submits with an M Capacity to the 
Exchange in which the User may enter, modify, or cancel up to an 
Exchange-specified number of bids and offers (which number the 
Exchange announces via Exchange notice or publicly available 
technical specifications). A User may submit a bulk message through 
a bulk port as set forth in Rule 21.1(j)(3). The System handles a 
bulk message in the same manner as it handles an order or quote, 
unless the Rules specify otherwise. See Rule 16.1.
    \6\ This check does not apply to bulk messages submitted prior 
to the conclusion of the opening process or when no NBBO is 
available.
    \7\ The proposed rule change also makes a nonsubstantive change 
to say the System cancels or rejects any bulk message bid (offer) 
more than a buffer amount above (below) the NBO (NBB) to align the 
language with other rules.
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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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    In particular, the proposed change to the bulk message fat finger 
check will protect investors and the public interest as the check will 
continue to mitigate potential risks associated with Market-Makers 
submitting bulk message bids and offers at unintended prices, and risks 
associated with orders and quotes trading at prices that are extreme 
and potentially erroneous, which may likely have resulted from human or 
operational error. The proposed enhancement that the Exchange will 
apply a minimum and maximum to the fat finger check will permit the 
Exchange to apply the fat finger check to bulk messages in a more 
meaningful way. The Exchange believes class flexibility is appropriate 
to permit the Exchange to apply reasonable buffers to classes, which 
may exhibit different trading characteristics and have different market 
models. The Exchange has other price checks and risk controls that 
permit it to set a minimum and maximum, as well as apply parameters on 
a class basis.\11\
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    \11\ See, e.g., Rule 21.17(a)(1) (market order NBBO width 
protection).
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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 Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition, as the proposed changes will apply in the same manner to 
all bulk messages submitted through a bulk port. The Exchange does not 
believe the proposed rule change will impose any burden on intermarket 
competition, as the proposed rule change applies to functionality that 
applies to incoming interest that may only rest or execute on the 
Exchange's book.

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:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. 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 \12\ and 
Rule 19b-4(f)(6) \13\ thereunder. 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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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.

[[Page 44092]]

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-2021-054 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-2021-054. 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-2021-054 and should be submitted 
on or before September 1, 2021.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17080 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P


