3592 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 

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). 

engineering discipline. Historically, 

awards have been made for such diverse 

projects as accelerators, telescopes, 

research vessels and aircraft, and 

geographically distributed but 

networked sensors and instrumentation. 

The growth and diversification of 

large facility projects require that NSF 

remain attentive to the ever-changing 

issues and challenges inherent in their 

planning, construction, operation, 

management and oversight. Most 

importantly, dedicated, competent NSF 

and awardee staff are needed to manage 

and oversee these projects; giving the 

attention and oversight that good 

practice dictates and that proper 

accountability to taxpayers and 

Congress demands. To this end, there is 

also a need for consistent, documented 

requirements and procedures to be 

understood and used by NSF program 

managers and awardees for all such 

large projects. 

Use of the Information: Facilities are 

an essential part of the science and 

engineering enterprise and supporting 

them is one major responsibility of the 

National Science Foundation (NSF). 

NSF makes awards to external entities— 

primarily universities, consortia of 

universities or non-profit 

organizations—to undertake 

construction, management and 

operation of facilities. Such awards 

frequently take the form of cooperative 

agreements. NSF does not directly 

construct or operate the facilities it 

supports. However, NSF retains 

responsibility for overseeing their 

development, management, and 

successful performance. 

Business Systems Reviews (BSR) of 

NSF’s Major Facilities are designed to 

provide reasonable assurance that the 

business systems (people, processes, 

and technologies) of NSF Recipients are 

effective in meeting administrative 

responsibilities and satisfying Federal 

regulatory requirements, including 

those listed in NSF’s Proposal & Award 

Policies & Procedures Guide (PAPPG). 

These reviews are not considered 

audits but are intended to be assistive in 

nature; aiding the Recipient in following 

good practices where appropriate and 

bringing them into compliance, if 

needed. A team of BSR participants is 

assembled to assess the Recipient’s 

policies, procedures, and practices to 

determine whether, taken collectively, 

these administrative business systems 

used in managing the Facility meet NSF 

award expectations and comply with 

Federal regulations. 

The BSR Guide is designed for use by 

both our customer community and NSF 

staff for guidance in executing these 

reviews. The BSR Guide defines the 

overall framework and structure and 

summarizes the details outlined in the 

internal operating guidelines and 

procedures used by BSR Participants to 

execute the review process. 

Management principles and practices 

are specified for seven core functional 

areas (CFA) and are used by BSR 

participants in performing these 

evaluations. Roles and responsibilities 

of the NSF stakeholders involved in the 

process are outlined in the BSR Guide 

as well as the expectations of the 

Recipient. 

This version of the Business Systems 

Guide aligns with the Uniform 

Guidance and the NSF Research 

Infrastructure Guide. This Guide will be 

updated periodically to reflect changes 

in requirements, policies and/or 

procedures. Award Recipients are 

expected to monitor and adopt the 

requirements and good practices 

included in the Guide. 

The submission of Award Recipient 

and Project administrative business 

process and procedural documentation 

used in support of operations of the 

Major Facilities is part of the collection 

of information. This information is used 

to help NSF fulfill this responsibility in 

supporting merit-based research and 

education projects in all the scientific 

and engineering disciplines. The 

Foundation also has a continuing 

commitment to provide oversight on 

facilities through their full life cycle 

which must be balanced against 

monitoring its information collection so 

as to identify and address any excessive 

review and reporting burdens. 

NSF has approximately twenty (20) 

Major Facilities in various stages of 

design, construction, operations, and 

divestment. The need for a BSR and 

review scope is based on NSF’s internal 

annual Major Facility Portfolio Risk 

Assessment and the assessment of 

various risks factors. 

Burden to the Public: The Foundation 

estimates that approximately one and 

half (1.5) Full Time Equivalents (FTEs) 

are necessary for a major facility to 

respond to the requirements of a BSR; 

or 3,120 hours. With an average of four 

(4) BSRs conducted a year, this equates 

to roughly 12,000 public burden hours 

annually. 

Dated: January 19, 2022. 

Suzanne H. Plimpton, 

Reports Clearance Officer,National Science 

Foundation. 

[FR Doc. 2022–01249 Filed 1–21–22; 8:45 am] 

BILLING CODE 7555–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–93990; SR–CBOE–2022– 

003] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Rule 6.5 To 

Improve the Operation of the Rule 

January 18, 2022. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

11, 2022, Cboe Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe Options’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Exchange filed the proposal as a ‘‘noncontroversial’’ 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe Exchange, Inc. (the ‘‘Exchange’’ 

or ‘‘Cboe Options’’) proposes to amend 

Rule 6.5 to improve the operation of the 

Rule. The text of the proposed rule 

change is provided below. 

(additions are italicized; deletions are 

[bracketed]) 

* * * * * 

Rules of Cboe Exchange, Inc. 

* * * * * 

Rule 6.5. Nullification and Adjustment of 

Option Transactions Including Obvious 

Errors 

* * * * * 

(b) Theoretical Price. Upon receipt of a 

request for review and prior to any review of 

a transaction execution price, the 

‘‘Theoretical Price’’ for the option must be 

determined. For purposes of this Rule, if the 

applicable option series is traded on at least 

one other options exchange, then the 

Theoretical Price of an option series is the 

last NBB just prior to the trade in question 

with respect to an erroneous sell transaction 

or the last NBO just prior to the trade in 

question with respect to an erroneous buy 

transaction unless one of the exceptions in 

sub-paragraphs (b)(1) through (3) below 

exists. For purposes of this provision, when 


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Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 3593 

5See Securities Exchange Act Release No. 93818 

(December 17, 2021), 86 FR 73009 (December 23, 

2021) (SR–NYSEArca–2021–91). 

6See Securities Exchange Act Release Nos. 74898 

(May 7, 2015), 80 FR 27354 (May 13, 2015) (SR– 

CBOE–2015–039); and 80040 (February 14, 2017), 

82 FR 11248 (February 21, 2017) (SR–CBOE–2016– 

088). 

7See Securities Exchange Act Release No. 81516 

(August 31, 2017), 82 FR 42375 (September 7, 2017) 

(SR–CBOE–2017–058). 

8See Securities Exchange Act Release No. 74898 

(May 7, 2015), 80 FR 27354 (May 13, 2015) (SR– 

CBOE–2015–039). 

a single order received by the Exchange is 

executed at multiple price levels, the last 

NBB and last NBO just prior to the trade in 

question would be the last NBB and last NBO 

just prior to the Exchange’s receipt of the 

order. The Exchange will rely on this 

paragraph (b) and Interpretation and Policy 

.08 of this Rule when determining 

Theoretical Price. 

(1)–(2) No change. 

(3) Wide Quotes. 

(A) The Exchange will determine the 

Theoretical Price if the bid/ask differential of 

the NBB and NBO for the affected series just 

prior to the erroneous transaction was equal 

to or greater than the Minimum Amount set 

forth below and there was a bid/ask 

differential less than the Minimum Amount 

during the 10 seconds prior to the 

transaction. If there was no bid/ask 

differential less than the Minimum Amount 

during the 10 seconds prior to the transaction 

then the Theoretical Price of an option series 

is the last NBB or NBO just prior to the 

transaction in question, as set forth in 

paragraph (b) above. 

Bid price at time of trade Minimum 

amount 

Below $2.00 ............................................ $0.75 

$2.00 to $5.00 ......................................... 1.25 

Above $5.00 to $10.00 ............................ 1.50 

Above $10.00 to $20.00 .......................... 2.50 

Above $20.00 to $50.00 .......................... 3.00 

Above $50.00 to $100.00 ........................ 4.50 

Above $100.00 ........................................ 6.00 

(B) Customer Transactions Occurring Within 

10 Seconds or Less After an Opening or 

Reopening 

(i) The Exchange will determine the 

Theoretical Price if the bid/ask differential of 

the NBB and NBO for the affected series just 

prior to the Customer’s erroneous transaction 

was equal to or greater than the Minimum 

Amount set forth in subparagraph (A) above 

and there was a bid/ask differential less than 

the Minimum Amount during the 10 seconds 

prior to the transaction. 

(ii) If there was no bid/ask differential less 

than the Minimum Amount during the 10 

seconds prior to the transaction, then the 

Exchange will determine the Theoretical 

Price if the bid/ask differential of the NBB 

and NBO for the affected series just prior to 

the Customer’s erroneous transaction was 

equal to or greater than the Minimum 

Amount set forth in subparagraph (A) above 

and there was a bid/ask differential less than 

the Minimum Amount anytime during the 10 

seconds after an opening or re-opening. 

(iii) If there was no bid/ask differential less 

than the Minimum Amount during the 10 

seconds following an opening or reopening, 

then the Theoretical Price of an option series 

is the last NBB or NBO just prior to the 

Customer transaction in question, as set forth 

in paragraph (b) above. 

(iv) Customer transactions occurring more 

than 10 seconds after an opening or reopening are subject to subparagraph (A) 

above. 

(c) Obvious Errors 

(1)–(3) No change. 

(4) Adjust or Bust. If it is determined that 

an Obvious Error has occurred, the Exchange 

shall take one of the actions listed below. 

Upon taking final action, the Exchange shall 

promptly notify both parties to the trade 

electronically or via telephone. 

(A) No change. 

(B) Customer Transactions. Where at least 

one party to the Obvious Error is a Customer, 

the execution price of the transaction will be 

adjusted by the Official pursuant to the table 

immediately above. Any Customer Obvious 

Error exceeding 50 contracts will be subject 

to the Size Adjustment Modifier defined in 

subparagraph (a)(4) above. However, if such 

adjustment(s) would result in an execution 

price higher (for buy transactions) or lower 

(for sell transactions) than the Customer’s 

limit price, the trade will be nullified, subject 

to subparagraph (4)(C) below. 

* * * * * 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegal

RegulatoryHome.aspx), 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 this rule change is to 

amend Rule 6.5, ‘‘Nullification and 

Adjustment of Options Transactions 

including Obvious Errors,’’ to improve 

the operation of the Rule. Following 

discussions with other exchanges and a 

cross-section of industry participants 

and in coordination with the Listed 

Options Market Structure Working 

Group (‘‘LOMSWG’’) (collectively, the 

‘‘Industry Working Group’’), the 

Exchange proposes: (1) To amend 

subsection (b)(3) of Rule 6.5 to permit 

the Exchange to determine the 

Theoretical Price of a Customer option 

transaction in a wide market so long as 

a narrow market exists at any point 

during the 10-second period after an 

opening or re-opening; and (2) to amend 

subsection (c)(4)(B) of Rule 6.5 to adjust, 

rather than nullify, Customer 

transactions in Obvious Error situations, 

provided the adjustment does not 

violate the limit price. The Commission 

recently approved an identical proposed 

rule change of NYSE Arca, LLC (‘‘NYSE 

Arca’’).5 The Exchange understands that 

other options exchanges will also 

submit substantively identical proposals 

to the Commission. 

Proposed Change to Subsection (b)(3) 

Rule 6.5 has been part of various 

harmonization efforts by the Industry 

Working Group.6 These efforts have 

often centered around the Theoretical 

Price for which an options transaction 

should be compared to determine 

whether an Obvious Error has occurred. 

For instance, all options exchanges have 

adopted language comparable to Rule 

6.5, Interpretation and Policy .08,7

which explains how an exchange is to 

determine Theoretical Price at the open, 

when there are no valid quotes, and 

when there is a wide quote. This 

includes at times the use of a singular 

third-party vendor, known as a TP 

Provider (currently CBOE Livevol, LLC). 

Similarly, subsection (b)(3) of Rule 6.5 

was previously harmonized across all 

options exchanges to handle situations 

where executions occur in markets that 

are wide (as set forth in the Rule).8

Under that subsection, the Exchange 

determines the Theoretical Price if the 

NBBO for the subject series is wide 

immediately before execution and a 

narrow market (as set forth in the Rule) 

existed ‘‘during the 10 seconds prior to 

the transaction.’’ The Rule goes on to 

clarify that, should there be no narrow 

quotes ‘‘during the 10 seconds prior to 

the transaction,’’ the Theoretical Price 

for the affected series is the NBBO that 

existed at the time of execution 

(regardless of its width). 

In recent discussions, the Industry 

Working Group has identified proposed 

changes to subsection (b)(3) of Rule 6.5 

that the Industry Working Group 

believes would improve the Rule’s 

functioning. Currently, subsection (b)(3) 

does not permit the Exchange to 

determine the Theoretical Price unless 

there is a narrow quote 10 seconds prior 


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3594 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 

9Specifically, the current Rule provides at 

subsection (c)(4)(C) that if a TPH has 200 or more 

Customer transactions under review concurrently 

and the orders resulting in such transactions were 

submitted during the course of two minutes or less, 

where at least one party to the Obvious Error is a 

non-Customer, then the Exchange will apply the 

non-Customer adjustment criteria found in 

subsection (c)(4)(A). 

to the transaction. However, in the first 

seconds of trading, there is no 10- 

second period ‘‘prior to the 

transaction.’’ Further, the Industry 

Working Group has observed that prices 

in certain series can be disjointed at the 

start of trading. Accordingly, the 

Exchange proposes to provide 

additional protections to trading in 

certain circumstances immediately after 

the opening before liquidity has had a 

chance to enter the market. The 

Exchange proposes to amend subsection 

(b)(3) to allow the Exchange to 

determine the Theoretical Price in a 

wide market so long as a narrow market 

exists at any point during the 10-second 

period after an opening or re-opening. 

Specifically, the Exchange proposes 

that the existing text of subsection (b)(3) 

would become subparagraph ‘‘(A).’’ The 

Exchange proposes to add the following 

heading and text as subparagraph ‘‘(B)’’: 

(B) Customer Transactions Occurring Within 

10 Seconds or Less After an Opening or 

Reopening 

(i) The Exchange will determine the 

Theoretical Price if the bid/ask differential of 

the NBB and NBO for the affected series just 

prior to the Customer’s erroneous transaction 

was equal to or greater than the Minimum 

Amount set forth in subparagraph (A) above 

and there was a bid/ask differential less than 

the Minimum Amount during the 10 seconds 

prior to the transaction. 

(ii) If there was no bid/ask differential less 

than the Minimum Amount during the 10 

seconds prior to the transaction, then the 

Exchange will determine the Theoretical 

Price if the bid/ask differential of the NBB 

and NBO for the affected series just prior to 

the Customer’s erroneous transaction was 

equal to or greater than the Minimum 

Amount set forth in subparagraph (A) above 

and there was a bid/ask differential less than 

the Minimum Amount anytime during the 10 

seconds after an opening or re-opening. 

(iii) If there was no bid/ask differential less 

than the Minimum Amount during the 10 

seconds following an opening or reopening, 

then the Theoretical Price of an option series 

is the last NBB or NBO just prior to the 

Customer transaction in question, as set forth 

in paragraph (b) above. 

(iv) Customer transactions occurring more 

than 10 seconds after an opening or reopening are subject to subparagraph (A) 

above. 

The following examples illustrate the 

functioning of the proposed rule change. 

Consider that the NBBO of a series 

opens as $0.01 at $4.00. A marketable 

limit order to buy one contract arrives 

one second later and is executed at 

$4.00. In the third second of trading, the 

NBBO narrows from $0.01 at $4.00 to 

$2.00 at $2.10. While the execution 

occurred in a market with wide widths, 

there was no tight market within the 10 

seconds prior to execution. Accordingly, 

under the current rule, the trade would 

not qualify for obvious error review, in 

part due to the fact that there was only 

a single second of trading before the 

execution. Under the proposal, since a 

tight market existed at some point in the 

first 10 seconds of trading (i.e., in the 

third second), the Exchange would be 

able to determine the Theoretical Price 

as provided in Interpretation and Policy 

.08. 

As another example, the NBBO for a 

series opens as $0.01 at $4.00. In the 

seventh second of trading, a marketable 

limit order is received to buy one 

contract and is executed at $4.00. Five 

seconds later (i.e., in the twelfth second 

of trading), the NBBO narrows from 

$0.01 at $4.00 to $2.00 at $2.10. While 

the execution occurred in a market with 

wide widths, there was no tight market 

within 10 seconds prior to execution. 

Accordingly, under the current Rule, the 

trade would not qualify for obvious 

error review. Under the proposal, since 

no tight market existed at any point 

during the first 10 seconds of trading 

(i.e., the narrow market occurred in the 

twelfth second), the trade would not 

qualify for obvious error review. 

The proposed rule change would also 

better harmonize subsection (b)(3) with 

subsection (b)(1) of Rule 6.5. Under 

subsection (b)(1), the Exchange is 

permitted to determine the Theoretical 

Price for transactions occurring as part 

of the Opening Process (as defined in 

Rule 5.31) if there is no NBB or NBO for 

the affected series just prior to the 

erroneous transaction. However, under 

the current version of subsection (b)(3), 

a core trading transaction could occur in 

the same wide market but the Exchange 

would not be permitted to determine the 

Theoretical Price. Consider an example 

where, one second after the Exchange 

opens a selected series, the NBBO is 

$1.00 at $5.00. At 9:30:03, a customer 

submits a marketable buy order to the 

Exchange and pays $5.00. At 9:30:03, a 

different exchange runs an opening 

auction that results in a customer 

paying $5.00 for the same selected 

series. At 9:30:06, the NBBO changes 

from $1.00 at $5.00 to $1.35 at $1.45. 

Under the current version of subsection 

(b)(3), the Exchange would not be able 

to determine the Theoretical Price for 

the trade occurring during core trading. 

However, the trade on the other 

exchange could be submitted for review 

under subsection (b)(1) and that 

exchange would be able to determine 

the Theoretical Price. If the proposed 

change to subsection (b)(3) were 

approved, both of the trades occurring at 

9:30:03 (on the Exchange during core 

trading and on another exchange via 

auction) would also be entitled to the 

same review regarding the same 

Theoretical Price based upon the same 

time. 

The proposal would not change any 

obvious error review beyond the first 10 

seconds of an opening or re-opening. 

Proposed Change to Subsection (c)(4)(B) 

The Exchange proposes to amend 

subsection (c)(4)(B) of Rule 6.5—the 

‘‘Adjust or Bust’’ rule for Customer 

transactions in Obvious Error 

situations—to adjust rather than nullify 

such orders, provided the adjustment 

does not violate the Customer’s limit 

price. Currently, the Rule provides that 

in Obvious Error situations, transactions 

involving non-Customers should be 

adjusted, while transactions involving 

Customers are nullified, unless a certain 

condition applies.9 The Industry 

Working Group has concluded that the 

treatment of these transactions should 

be harmonized under the Rule, such 

that transactions involving Customers 

may benefit from adjustment, just as 

non-Customer transactions currently do, 

except where such adjustment would 

violate the Customer’s limit price; in 

that instance, the trade would be 

nullified. 

Specifically, the Exchange proposes to 

amend the text of subsection (c)(4)(B) to 

add that where at least one party to the 

Obvious Error is a Customer, ‘‘the 

execution price of the transaction will 

be adjusted by the Official pursuant to 

the table immediately above. Any 

Customer Obvious Error exceeding 50 

contracts will be subject to the Size 

Adjustment Modifier defined in 

subparagraph (a)(4) of the Rule. 

However, if such adjustment(s) would 

result in an execution price higher (for 

buy transactions) or lower (for sell 

transactions) than the Customer’s limit 

price,’’ the trade will be nullified. The 

‘‘table immediately above’’ referenced in 

the proposed text refers to the table at 

current subsection (c)(4)(A), which 

provides for the adjustment of prices a 

specified amount away from the 

Theoretical Price, rather than adjusting 

the Theoretical Price. 

The Exchange proposes no other 

changes at this time. 

Implementation Date 

The Exchange will announce the 

operative date of the proposed changes 


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10Pursuant to Rule 1.5, the Exchange announces 

to TPHs all determinations it makes pursuant to the 

Rules via: (1) Specifications, notices, or regulatory 

circulars with appropriate advanced notice, which 

are posted on the Exchange’s website, or as 

otherwise provided in the Rules; (2) electronic 

message; or (3) other communication method as 

provided in the Rules. 

11See Securities Exchange Act Release No. 93818 

(December 17, 2021), 86 FR 73009 (December 23, 

2021) (SR–NYSEArca–2021–91). 

12 15 U.S.C. 78f(b). 

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

14 Id. 

15See Securities Exchange Act Release No. 74898 

(May 7, 2015), 80 FR 27354 (May 13, 2015) (SR– 

CBOE–2015–039). 

16See ‘‘Retail Traders Adopt Options En Masse’’ 

by Dan Raju, available at https://www.nasdaq.com/ 

articles/retail-traders-adopt-options-en-masse-2020- 

12-08. 

in accordance with Rule 1.5.10 The 

proposed changes will become operative 

no sooner than six months from the date 

the Commission approved the identical 

NYSE Arca filing 11 in order for the 

Exchange’s implementation of the 

proposed rule changes to coincide with 

the implementation of the same changes 

on all other options exchanges. 

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.12 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 13 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) 14 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the Exchange believes 

that the proposed change to subsection 

(b)(3) of Rule 6.5 would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest because it provides a method for 

addressing Obvious Error Customer 

transactions that occur in a wide market 

at the opening of trading. Generally, a 

wide market is an indication of a lack 

of liquidity in the market such that the 

market is unreliable. Current subsection 

(b)(3) recognizes that a persistently wide 

quote (i.e., more than 10 seconds) 

should be considered the reliable 

market regardless of its width but does 

not address transactions that occur in a 

wide market in the first seconds of 

trading, where there is no preceding 10- 

second period to reference. Accordingly, 

in the first 10 seconds of trading, there 

is no opportunity for a wide quote to 

have persisted for a sufficiently lengthy 

period such that the market should 

consider it a reliable market for the 

purposes of determining an Obvious 

Error transaction. 

The proposed change would rectify 

this disparity and permit the Exchange 

to consider whether a narrow quote is 

present at any time during the 10- 

second period after an opening or reopening. The presence of such a narrow 

quote would indicate that the market 

has gained sufficient liquidity and that 

the previous wide market was 

unreliable, such that it would be 

appropriate for the Exchange to 

determine the Theoretical Price of an 

Obvious Error transaction. In this way, 

the proposed rule harmonizes the 

treatment of Customer transactions that 

execute in an unreliable market at any 

point of the trading day, by making 

them uniformly subject to Exchange 

determination of the Theoretical Price. 

The Exchange believes that the 

proposed change to subsection (c)(4)(B) 

of the Rule would remove impediments 

to and perfect the mechanism of a free 

and open market and a national market 

system and enhance the protection of 

investors by harmonizing the treatment 

of non-Customer transactions and 

Customer transactions under the Rule. 

Under the current Rule, Obvious Error 

situations involving non-Customer 

transactions are adjusted, while those 

involving Customer transactions are 

generally nullified, unless they meet the 

additional requirements of subsection 

(c)(4)(C) (i.e., where a TPH has 200 or 

more Customer transactions under 

review concurrently and the orders 

resulting in such transactions were 

submitted during the course of two 

minutes or less). The proposal would 

harmonize the treatment of nonCustomer and Customer transactions by 

providing for the adjustment of all such 

transactions, except where such 

adjustment would violate the 

Customer’s limit price. 

When it proposed the current rule in 

2015, the Exchange believed there were 

sound reasons for treating non-Customer 

transactions and Customer transactions 

differently. At the time, the Exchange 

stated its belief that ‘‘Customers are not 

necessarily immersed in the day-to-day 

trading of the markets, are less likely to 

be watching trading activity in a 

particular option throughout the day, 

and may have limited funds in their 

trading accounts,’’ and that nullifying 

Obvious Error transactions involving 

Customers would give Customers 

‘‘greater protections’’ than adjusting 

such transactions by eliminating the 

possibility that a Customer’s order will 

be adjusted to a significantly different 

price. The Exchange also noted its belief 

that ‘‘Customers are . . . less likely to 

have engaged in significant hedging or 

other trading activity based on earlier 

transactions, and thus, are less in need 

of maintaining a position at an adjusted 

price than non-Customers.’’ 15

Those assumptions about Customer 

trading and hedging activity no longer 

hold. The Exchange and the Industry 

Working Group believe that over the 

course of the last five years, Customers 

that use options have become more 

sophisticated, as retail broker-dealers 

have enhanced the trading tools 

available. Pursuant to OCC data, 

volumes clearing in the Customer range 

have expanded from 12,022,163 ADV in 

2015 to 35,081,130 ADV in 2021. This 

increase in trading activity underscores 

the greater understanding of options by 

Customers as a trading tool and its use 

in the markets. Customers who trade 

options today largely are more educated, 

have better trading tools, and have 

better access to financial news than any 

time prior.16 The proposed rule would 

extend the hedging protections 

currently enjoyed by non-Customers to 

Customers, by allowing them to 

maintain an option position at an 

adjusted price, which would in turn 

prevent a cascading effect by 

maintaining the hedge relationship 

between the option transaction and any 

other transactions in a related security. 

The Exchange believes that extending 

such hedging protections to Customer 

transactions would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and 

enhance the protection of investors by 

providing greater certainty of execution 

for all participants to options 

transactions. Under the current Rule, a 

Customer that believes its transaction 

was executed pursuant to an Obvious 

Error may be disincentivized from 

submitting the transaction for review, 

since during the review process, the 

Customer would be uncertain whether 

the trade would be nullified, and if so, 

whether market conditions would still 


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3596 Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 

17See Securities Exchange Act Release No. 93818 

(December 17, 2021), 86 FR 73009 (December 23, 

2021) (SR–NYSEArca–2021–91). 

18 15 U.S.C. 78s(b)(3)(A). 

19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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. 

permit the opportunity to execute a 

related order at a better price after the 

nullification ruling is finalized. In 

contrast, under the proposed rule, the 

Customer would know that the only 

likely outcomes of submitting a trade to 

Obvious Error review would be that the 

trade would stand or be re-executed at 

a better price; the trade would only be 

nullified if the adjustment would violate 

the order’s limit. Similarly, under the 

current Rule, during the review period, 

a market maker who traded contra to the 

Customer would be uncertain if it 

should retain any position executed to 

hedge the original trade, or attempt to 

unwind it, possibly at a significant loss. 

Under the proposed rule change, this 

uncertainty is largely eliminated, and 

the question would be whether the 

already executed and hedged trade 

would be adjusted to a better price for 

the Customer, or if it would stand as 

originally executed. In this way, the 

proposed rule enhances the protection 

of investors and removes impediments 

to and perfects the mechanism of a free 

and open market and a national market 

system. 

The proposed rule also addresses the 

concern the Exchange cited in its 2015 

filing that adjusting, rather than 

nullifying, Customer transactions could 

lead to a Customer’s order being 

adjusted to a significantly different 

price. To address that concern, the 

proposed rule would prevent Customer 

transactions from being adjusted to a 

price that violates the order’s limit; if 

the adjustment would violate a 

Customer’s limit, the trade would 

instead be nullified. The Exchange 

believes it is in the best interest of 

investors to expand the availability of 

adjustments to Customer transactions in 

all Obvious Error situations except 

where the adjustment would violate the 

Customer’s limit price. 

Further, the Exchange believes that, 

with respect to such proposed 

adjustments to Customer transactions, it 

is appropriate to use the same form of 

adjustment as is currently in place with 

respect to non-Customer transactions as 

laid out in the table in subsection 

(c)(4)(A). That is, the Exchange believes 

that it is appropriate to adjust to prices 

a specified amount away from the 

Theoretical Price rather than to adjust 

the Theoretical Price, even though the 

Exchange has determined a given trade 

to be erroneous in nature, because the 

parties in question should have had 

some expectation of execution at the 

price or prices submitted. Also, it is 

common that by the time it is 

determined that an Obvious Error has 

occurred, additional hedging and 

trading activity has already occurred 

based on the executions that previously 

happened. The Exchange believes that 

providing an adjustment to the 

Theoretical Price in all cases would not 

appropriately incentivize market 

participants to maintain appropriate 

controls to avoid potential errors, while 

adjusting to prices a specified amount 

away from the Theoretical Price would 

incentivize such behavior. 

The Exchange believes that the 

proposal is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The proposed change to subsection 

(b)(3) would apply to all instances of a 

wide market occurring within the first 

10 seconds of trading followed by a 

narrow market at any point in the 

subsequent 10-second period, regardless 

of the types of market participants 

involved in such transactions. The 

proposed change to subsection (c)(4)(B) 

would harmonize the treatment of 

Obvious Error transactions involving 

Customers and non-Customers, no 

matter what type of market participants 

those parties may be. 

For these reasons, the Exchange 

believes that the proposal is consistent 

with the Act. 

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 is identical to a 

NYSE Arca proposed rule change 

recently approved by the Commission.17

The Exchange anticipates that the other 

options exchanges will adopt 

substantively similar proposals, such 

that there would be no burden on 

intermarket competition from the 

Exchange’s proposal. Accordingly, the 

proposed change is not meant to affect 

competition among the options 

exchanges. For these reasons, the 

Exchange believes that the proposed 

rule change reflects this competitive 

environment and does not impose any 

undue burden on intermarket 

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: 

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 18 and Rule 19b–4(f)(6) 19

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. 

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– 

CBOE–2022–003 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Vanessa Countryman, Secretary, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2022–003. 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 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices 3597 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Cboe Aggregated Market (‘‘Cboe One’’) Feed 

is a data feed that contains the aggregate best bid 

and offer of all displayed orders for securities 

traded on the Exchange and its affiliated exchanges 

(i.e., BYX, BZX, and EDGX). See Exchange Rule 

13.8(b). The Cboe One Feed contains optional 

functionality which enables recipients to receive 

aggregated two-sided quotations from the Cboe 

Equities Exchanges for up to five (5) price levels 

(‘‘Cboe One Premium Feed’’). See Exchange Rule 

13.8(b)(i). The Cboe One Premium external 

distribution fee is equal to the aggregate EDGA 

Summary Depth, BYX Summary Depth, EDGA 

Summary Depth, and BZX Summary Depth external 

distribution fees. 

4An External Distributor of an Exchange Market 

Data product is a Distributor that receives the 

Exchange Market Data product and then distributes 

that data to a third party or one or more Users 

outside the Distributor’s own entity. 

5See Exchange Rule 13.8(b). 

6The Exchange notes that when it first adopted 

the New External Distributor Credit for Cboe One 

Summary, it similarly applied for a new External 

Distributor’s first three (3) months. See Securities 

Exchange Act Release No. 74283 (February 18, 

2015), 80 FR 9809 (February 24, 2015) (SR–EDGA– 

2015–09). 

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–CBOE–2022–003 and 

should be submitted on or before 

February 14, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01222 Filed 1–21–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–93995; File No. SR– 

CboeEDGA–2022–001] 

Self-Regulatory Organizations; Cboe 

EDGA Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

Fees Applicable to Various Market 

Data Products 

January 18, 2022. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 4, 

2022, Cboe EDGA Exchange, Inc. 

(‘‘Exchange’’ or ‘‘EDGA’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe EDGA Exchange, Inc. (‘‘EDGA’’ 

or the ‘‘Exchange’’) is filing with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) a proposed rule 

change to amend the fees applicable to 

various market data products. 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/edga/), 

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 the 

Market Data section applicable to its 

equities trading platform (‘‘EDGA 

Equities’’). Particularly, the Exchange 

proposes to (i) adopt a New External 

Distributor Credit applicable to Cboe 

One Premium, and (ii) extend the New 

External Distributor Credit applicable to 

EDGA Summary Depth Feed from one 

(1) month to three (3) months. 

By way of background, Cboe One 

Premium is a data feed that 

disseminates, on a real-time basis, the 

aggregate best bid and offer (‘‘BBO’’) of 

all displayed orders for securities traded 

on EDGA and its affiliated exchanges 

(i.e., Cboe BYX Exchange, Inc. (‘‘BYX’’), 

Cboe EDGX Exchange, Inc. (‘‘EDGX’’), 

and Cboe BZX Exchange, Inc. (‘‘BZX’’)) 

and contains optional functionality 

which enables recipients to receive 

aggregated two-sided quotations from 

EDGA and its affiliated equities 

exchanges for up to five (5) price levels.3

Currently, the Exchange charges an 

external distribution fee of $12,500 per 

month to External Distributors 4 of Cboe 

One Premium. The Exchange now 

proposes to adopt a New External 

Distributor Credit which provide that 

new External Distributors of the Cboe 

One Premium Feed will not be charged 

an External Distributor Fee for their first 

three (3) months in order to allow them 

to enlist new Users to receive the Cboe 

One Summary[sic] Feed. The Exchange 

believes the proposal will incentivize 

External Distributors to enlist new users 

to receive Cboe One Premium. To 

ensure consistency across the Cboe 

Equity Exchanges, BZX, BYX, and 

EDGX will be filing companion 

proposals to reflect this proposal in 

their respective fee schedules. 

The Exchange notes that it offers 

similar credits for other market data 

products. For example, the Exchange 

currently offers a one (1) month New 

External Distributor Credit applicable to 

Cboe One Summary,5 which is a data 

feed that disseminates, on a real-time 

basis, the aggregate BBO of all displayed 

orders for securities traded on EDGA 

and its affiliated equities exchanges and 

also contains individual last sale 

information for the EDGA and its 

affiliated equities exchanges.6 It also 

offers a New External Distributor Credit 

of one (1) month for subscribers of 

EDGA Summary Depth, which is a data 

feed that offers aggregated two-sided 

quotations for all displayed orders 

entered into the System for up to five (5) 

price levels. EDGA Summary Depth also 

contains the individual last sale 

information, Market Status, Trading 


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