Federal Register / Vol. 87, No. 43 / Friday, March 4, 2022 / Notices 12521 

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). 

5The term ‘‘User’’ shall mean any Member or 

Sponsored Participant who is authorized to obtain 

access to the System pursuant to Rule 11.3. See 

Rule 1.5(ee). 

6A Stop Order is order is an order that becomes 

a Market Order when the stop price is elected. A 

Stop Order to buy is elected when the consolidated 

last sale in the option occurs at or above, or the 

NBB is equal to or higher than, the specified stop 

price. A Stop Order to sell is elected when the 

consolidated last sale in the option occurs at or 

below, or the NBO is equal to or lower than, the 

specified stop price. Users may not designate bulk 

messages as Stop Orders. See 21.1(d)(11). 

7A ‘‘Stop-Limit’’ Order is an order that becomes 

a limit order when the stop price is elected. A Stop 

Limit Order to buy is elected and becomes a buy 

limit order when the consolidated last sale in the 

option occurs at or above, or the NBB is equal to 

or higher than, the specified stop price. A Stop 

Limit Order to sell is elected and becomes a sell 

limit order when the consolidated last sale in the 

option occurs at or below, or the NBO is equal to 

or lower than, the specified stop price. Users may 

not designate a Stop Limit Order as All Sessions. 

Users may not designate bulk messages as Stop 

Limit Orders. See 21.1(d)(12). 

8See Rule 21.17(a)(4). 

9 ‘‘System’’ means the electronic communications 

and trading facility designated by the Board through 

which securities orders of Users are consolidated 

for ranking, execution and, when applicable, 

routing away. See Rule 1.5(cc). 

10 ‘‘EDGX Options Book’’ means the System’s 

electronic file of orders. See Rule 1.5.(e). 

11See Rule 21.17(a)(4). 

12The Exchange determines the buffer amount on 

a premium and class basis. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94329; File No. SR– 

CboeEDGX–2022–007] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Modify How 

Drill-Through Price Protection Applies 

to Users’ Orders When Multiple Stop 

Orders and Stop-Limit Orders Are 

Triggered by the Same Price 

February 28, 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 February 

17, 2022, Cboe EDGX Exchange, Inc. 

(the ‘‘Exchange’’ or ‘‘‘‘EDGX’’’’) 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 EDGX Exchange, Inc. (‘‘EDGX’’ 

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

Securities and Exchange Commission 

(the ‘‘Commission’’) a proposal to 

modify how Drill-Through Price 

protection applies to Users’ 5 orders 

when multiple Stop Orders and StopLimit Orders are triggered by the same 

price. 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 purpose of this rule filing is to 

amend current Rule 21.17, Additional 

Price Protection Mechanisms and Risk 

Controls, to add new Rule 

21.17(a)(4)(C), which modifies what the 

Drill-Through Price will be for Stop 

Orders 6 and Stop-Limit Orders 7 when 

multiple Stop Orders Stop-Limit Orders 

are triggered by the same stop price 

specified by Users. 

Drill-through price protection is 

currently described in Exchange Rule 

21.17(a)(4). Rule 21.17(a)(4) provides 

that if a buy (sell) order enters the EDGX 

Options Book at the conclusion of the 

opening auction process or would 

execute or post to the EDGX Options 

Book at the time of order entry. The 

System executed the order up to a buffer 

amount (the Exchange determines the 

buffer amount on a class and premium 

basis) above (below) the offer (bid) limit 

of the Opening Collar or NBO (NBB) 

that existed at the time of order entry, 

respectively (the, ‘‘Drill-Through 

Price’’).8

Currently, when multiple Stop Orders 

and Stop-Limit Orders are triggered by 

the same price, the System 9 considers 

them separate orders received in 

sequence and enters them sequentially 

into the EDGX Options Book.10 As such, 

when determining the Drill-Through 

Price for each order, the System uses the 

contra side NBBO that existed at the 

time each of the orders was entered into 

the EDGX Options Book.11 By applying 

drill-through price protection in this 

manner, the Exchange has observed, 

particularly in thinly traded markets, 

that the first order triggered will trade 

with the best priced contra-side order, 

while the second triggered order can 

trade at prices that may be multiple 

price levels away, as it is using the 

NBBO that existed after the first 

triggered order executed. Accordingly, 

the Exchange seeks to enhance the drillthrough price functionality as it relates 

to Stop Orders and Stop-Limit Orders, 

through the addition of proposed Rule 

21.17(a)(4)(C). Under proposed Rule 

21.17(a)(4)(C), rather than using separate 

Drill-Through Prices for each individual 

Stop Order and Stop-Limit Order, the 

System will instead use the contra-side 

NBBO that existed at the time the first 

order in sequence was entered into the 

EDGX Options Book as the DrillThrough Price, for all orders. This is the 

Drill-Through Price that would apply to 

each Stop Order or Stop-Limit Order if 

it was the only one triggered at that 

price. By way of illustration, consider 

the following examples: 

Example 1—Current Functionality 

Assume that the Drill-Through Price 

buffer 12 for a certain option series is 

$0.25, and that the following quotes are 

in the EDGX Options Book: Quote 1 

(NBBO): 5.00 × 7.00; Quote 2: 4.00 × 

8.00. Each quote has a size of 1. 

Additionally, the following Stop 

Orders/Stop Limit Orders are being held 

in the System when the Quote 1 offer is 

updated to $6.50 (they were received by 

the System in sequence): 

Order 1: Sell 1 @Market, Stop Price = 

$6.50 

Order 2: Sell 1 @Market, Stop Price = 

$6.55 

Order 3: Sell 1 @Market, Stop Price = 

$6.50 


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12522 Federal Register / Vol. 87, No. 43 / Friday, March 4, 2022 / Notices 

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

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

Per current Rule 21.17(d), the 

following will occur: 

1. Orders 1, 2 and 3 are held in the 

System, and handled as separate orders 

received in sequence. Each have stop 

prices less than the NBO, and are 

therefore triggered by the 6.50 quote, 

and enter the EDGX Options Book for 

execution or posting. Under today’s 

functionality, the System assigns each 

order a separate Drill-Through Price, 

equal to the contra-side NBBO in 

existence at the time each order 

separately entered the EDGX Options 

Book for execution. 

2. Order 1 will execute against Quote 

1 @$5.00. Using the NBB of $5.00 as the 

Drill-Through Price, the System would 

prevent execution beyond $4.75. 

3. When Order 1 executes against 

Quote 1 @5.00, that NBB will no longer 

be in the EDGX Options Book. Instead 

Order 2 will execute against Quote 2 @

4.00 and use the NBB of 4.00 as the 

Drill-Through Price and prevent 

execution beyond $3.75. 

4. Order 3 will cancel due to no 

liquidity left at the drill-through price of 

$3.75. 

Example 2—Proposed Functionality 

Again, assume that the Drill-Through 

Price buffer for a certain option series is 

$0.25, and that the following quotes are 

in the EDGX Options Book: Quote 1 

(NBBO): 5.00 × 7.00; Quote 2: 4.00 × 

8.00. Each quote has a size of 1. 

Additionally, the following Stop 

Orders/Stop Limit Orders are being held 

in the System when the Quote 1 offer is 

updated to $6.50 (they were received by 

the System in sequence): 

Order 1: Sell 1 @Market, Stop Price = 

$6.50 

Order 2: Sell 1 @Market, Stop Price = 

$6.55 

Order 3: Sell 1 @Market, Stop Price = 

$6.50 

Per proposed Rule 21.17(d), the 

following will occur: 

1. Orders 1, 2 and 3 each have stop 

prices less than the NBO, and will 

therefore be triggered by the 6.50 quote, 

and enter the EDGX Options Book for 

execution or posting. A Drill-Through 

Price for all three orders is set at the 

contra-side NBB of 5.00. 

2. Order 1 will execute against Quote 

1 @$5.00. 

3. Orders 2 and 3 will cancel due to 

no liquidity left at the drill-through 

price of $4.75. 

The Exchange notes that aside from 

the difference in Drill-Through Price, 

the drill-through mechanism will apply 

in the same manner to these orders. The 

Exchange is not proposing wholly new 

drill-through protection behavior, but 

rather only seeks to modify the 

reference price utilized by the drillthrough price protection for Stop Orders 

and Stop-Limit Orders if multiple such 

orders are triggered and entered into the 

EDGX Options Book for execution due 

to the same price event. By using the 

same Drill-Through Price for all 

triggered orders eligible for execution, 

the proposed modification will help the 

drill-through protection prevent 

executions too far away from the NBBO 

when multiple Stop Orders and Stop 

Limit Orders become eligible for 

execution. In doing so, Stop Orders and 

Stop Limit Orders will receive 

executions at prices more closely 

aligned to the stop prices specified by 

Exchange Users. 

2. Statutory Basis 

The Exchange believes the proposed 

rule amendment 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 prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

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. 

Specifically, the Exchange believes 

that proposed Rule 21.17(a)(4)(C) does 

not unfairly discriminate amongst 

Users. Under proposed Rule 

21.17(a)(4)(C), all Users with Stop 

Orders and Stop-Limit Orders triggered 

by the same price event will have the 

same drill-through reference price. The 

primary purpose of the drill-through 

price protection is to prevent orders 

from executing at prices ‘‘too far away’’ 

from the market when they enter the 

EDGX Options Book for potential 

execution. The Exchange believes the 

proposed rule change is consistent with 

this purpose, and thus will promote just 

and equitable principles of trade and 

protect investors, because Users who 

submit Stop Orders and Stop-Limit 

Orders will receive the same level of 

drill-through price protection against 

execution at potentially erroneous 

prices, regardless of the sequence in 

which they enter the EDGX Options 

Book. As a result of the proposed rule 

change, all Users’ Stop Orders and StopLimit Orders will receive protection 

based on the NBBO at the time those 

orders were triggered to enter the EDGX 

Options Book for potential execution, 

which is consistent with the drillthrough protection as well as Stop Order 

functionality. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on intramarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

Under the current drill-through price 

protection functionality, the System’s 

use of separate Drill-Through Prices can 

result in Stop Orders executed later in 

sequence being filled at prices several 

levels away from the NBBO in existence 

at the time they are triggered and 

entered into the EDGX Options Book for 

execution merely because those orders 

were submitted after another Stop 

Order. As discussed above, the 

proposed rule change will apply the 

same Drill-Through Price (and thus the 

same level of drill-through price 

protection) to Stop Orders and StopLimit Orders that become eligible for 

potential execution at the same time due 

to the same price triggering event. 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on intermarket competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act 

because it relates solely to how an 

Exchange price protection applies to 

Stop Orders and Stop Limit Orders. The 

proposed enhancement to the drillthrough protection is consistent with 

the current protection and provides 

orders subject to drill-through price 

protection with improved protection 

against execution at potentially 

erroneous prices. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposal. 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 

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 after the date of 

the filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 


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Federal Register / Vol. 87, No. 43 / Friday, March 4, 2022 / Notices 12523 

15 15 U.S.C. 78s(b)(3)(A). 16 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. 17 17 CFR 240.19b–4(f)(6)(iii). 18For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule change’s impact on efficiency, 

competition, and capital formation. 15 U.S.C. 78c(f). 19 17 CFR 200.30–3(a)(12). 

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). 

5The Term ‘‘User’’ shall mean any Trading 

Privilege Holder (TPH) or Sponsored User who is 

authorized to obtain access to the System pursuant 

to Rule 5.5. 

19(b)(3)(A) of the Act 15 and Rule 19b– 

4(f)(6) 16 thereunder. 

The Exchange has asked the 

Commission to waive the 30-day 

operative delay such that Exchange 

Users will be able to more quickly 

benefit from the proposed Drill through 

protections that are designed to: (1) 

Prevent potentially erroneous 

executions and (2) more closely align 

the execution prices of Stop Orders and 

Stop Limit Orders that become eligible 

for potential execution at the same time 

due to the same price triggering event.17

The Commission finds that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. Specifically, waiver of 

the operative delay should allow 

Exchange Users to utilize Stop Orders 

and Stop Limit Orders with an 

increased likelihood that the execution 

price of such orders will be more closely 

related to the market at the time the 

order is triggered for entry onto the 

EDGX Book. Accordingly, the 

Commission designates the proposal 

operative upon filing.18

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

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–2022–007 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–2022–007. 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; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

CboeEDGX–2022–007 and should be 

submitted on or before March 25, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–04566 Filed 3–3–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94325; File No. SR–C2– 

2022–005] 

Self-Regulatory Organizations; Cboe 

C2 Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating To Modify How 

Drill-Through Price Protection Applies 

to Users’ Orders When Multiple Stop 

(Stop-Loss) and Stop-Limit Orders Are 

Triggered by the Same Price 

February 28, 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 February 

17, 2022, Cboe C2 Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘C2’’) 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 ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe C2 Exchange, Inc. (‘‘C2’’ or the 

‘‘Exchange’’) is filing with the Securities 

and Exchange Commission (the 

‘‘Commission’’) a proposal to modify 

how drill-through price protection 

applies to Users’ 5 orders when multiple 

Stop (Stop-Loss) and Stop-Limit orders 

are triggered by the same price. 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/ctwo/), 

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 


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