12518 Federal Register / Vol. 87, No. 43 / Friday, March 4, 2022 / Notices 

77 15 U.S.C. 78s(b)(3)(C). 

78 17 CFR 200.30–3(a)(57) and (58). 

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. 

6A ‘‘Stop (Stop-Loss)’’ order is an order to buy 

(sell) that becomes a market order when the 

consolidated last sale price (excluding prices from 

complex order trades if outside of the NBBO) or 

NBB (NBO) for a particular option contract is equal 

to or above (below) the stop price specified by the 

User. Users may not designate a Stop Order as All 

Sessions. Users may not designate bulk messages as 

Stop Orders. A User may not designate a Stop order 

as Direct to PAR. See Rule 5.6(c) (definition of 

‘‘Stop (Stop-Loss)’’ order). 

7A ‘‘Stop-Limit’’ order is an order to buy (sell) 

that becomes a limit order when the consolidated 

last sale price (excluding prices from complex order 

trades if outside the NBBO) or NBB (NBO) for a 

particular option contract is equal to or above 

(below) the stop price specified by the User. A User 

may not designate a Stop-Limit Order as All 

Sessions. Users may not designate bulk messages as 

Stop-Limit Orders. A User may not designate a 

Stop-Limit order as Direct to PAR. See Rule 5.6(c) 

(definition of ‘‘Stop-Limit’’ order). 

8See Rule 5.34(a)(4)(A). 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File No. SR– 

MEMX–2021–22 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–MEMX–2021–22. 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 (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

changes that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule changes 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 

filings also will be available for 

inspection and copying at the principal 

office of each 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–MEMX–2021–22 and 

should be submitted on or before March 

25, 2022. Rebuttal comments should be 

submitted by April 8, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,77 that File 

Number SR–MEMX–2021–22 be, and 

hereby is, temporarily suspended. In 

addition, the Commission is instituting 

proceedings to determine whether the 

proposed rule change should be 

approved or disapproved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.78

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–04568 Filed 3–3–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94327; File No. SR–CBOE– 

2022–006] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Modify How DrillThrough 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 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. (‘‘C1’’ 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://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 filing is to 

amend current Rule 5.34(a)(4), Order 

and Quote Price Protection Mechanisms 

and Risk Controls, to add new Rule 

5.34(a)(4)(E), which modifies what the 

drill-through price will be for Stop 

(Stop-Loss) 6 and Stop-Limit 7 orders 

when multiple Stop and Stop-Limit 

orders are triggered by the same stop 

price specified by Users. 

Drill-through price protection is 

currently described in Exchange Rule 

5.34(a)(4)(A). Rule 5.34(a)(4)(A) equates 

the drill-through reference price for a 

buy (sell) order to a price 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 the NBO (NBB) 

that existed at the time of order entry, 

respectively (the, ‘‘drill-through 

price’’).8


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Federal Register / Vol. 87, No. 43 / Friday, March 4, 2022 / Notices 12519 

9 ‘‘System’’ means the Exchange’s hybrid trading 

platform that integrates electronic and open outcry 

trading of option contracts on the Exchange and 

includes any connectivity to the foregoing trading 

platform that is administered by or on behalf of the 

Exchange, such as a communications hub. See Rule 

1.1. (definition of, ‘‘System’’). 

10 ‘‘Book’’ means the electronic book of simple 

orders and quotes maintained by the System, which 

single book is used during both the regular trading 

hours and global trading hours trading sessions. See 

Rule 1.1 (definition of, ‘‘Book’’). 

11See Rule 5.34(a)(4)(A). 

12The Exchange determines the buffer amount on 

a premium and class basis. 

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

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

Currently, when multiple Stop (StopLoss) or 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 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 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 drill-through price 

functionality as it relates to Stop (StopLoss) and Stop Limit Orders, through 

the addition of proposed Rule 

5.34(a)(4)(E). Under proposed Rule 

5.34(a)(4)(E), rather than using separate 

drill-through prices for each individual 

Stop 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 Book as 

the drill-through price, for all orders. 

This is the drill-through price that 

would apply to each Stop 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 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-Loss/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 current Rule 5.34(a)(4), 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 Book for execution or 

posting. Under today’s functionality, the 

System assigns each order a separate 

drill-through price, equal to the contraside NBBO in existence at the time each 

order separately entered the 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 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 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-Loss/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 5.34(a)(4)(E), 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 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 (StopLoss) and Stop Limit orders if multiple 

such orders are triggered and entered 

into the 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 (Stop-Loss) and 

Stop Limit orders become eligible for 

execution. In doing so, Stop (Stop-Loss) 

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 5.34(a)(4)(E) does 

not unfairly discriminate amongst 

Users. Under proposed Rule 

5.34(a)(4)(E), all Users with Stop (StopLoss) 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 

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 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 Book. 

As a result of the proposed rule change, 

all Users’ Stop and Stop-Limit Orders 

will receive protection based on the 

NBBO at the time those orders were 

triggered to enter the Book for potential 


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12520 Federal Register / Vol. 87, No. 43 / Friday, March 4, 2022 / Notices 

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

16 17 CFR 240.19b–4(f)(6). In addition, Rule 19b4(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). 

execution, which is consistent with the 

drill-through 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 Book for execution 

merely because those orders were 

submitted after another Stop Order. As 

discussed above, the proposed rule 

change will apply the same drillthrough price (and thus the same level 

of drill-through price protection) to Stop 

and Stop-Limit 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 (Stop-Loss) 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 

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 

Exchange 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– 

CBOE–2022–006 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–CBOE–2022–006. 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–CBOE– 

2022–006 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. 2022–04563 Filed 3–3–22; 8:45 am] 

BILLING CODE 8011–01–P 


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