Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 33425 

36The Exchange’s proposal to add the word 

‘‘Routing’’ to the rule text will merely clarify that 

the existing holding practice will continue for 

certain MOO and LOO Orders. 

37 15 U.S.C. 78s(b)(3)(A). 

38 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

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

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of 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. 

39 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 91689 

(April 27, 2021), 86 FR 23453 (‘‘Notice’’). 

4 In Amendment No. 1, the Exchange updated 

Exhibit 5 of the proposed rule change to reflect 

another proposed rule change unrelated to this 

proposed rule change. Because Amendment No. 1 

is a technical amendment that does not materially 

alter the substance of the proposed rule change or 

raise unique or novel regulatory issues, it is not 

subject to notice and comment. Amendment No. 1 

to the proposed rule change is available on the 

Commission’s website at: https://www.sec.gov/ 

rules/sro/cboe.htm#SR-CBOE-2021-025. 

Routing Attributes assigned to them). 

The proposed changes will streamline 

the handling of such Orders, thereby 

reducing the potential for confusion 

about the Exchange’s practice for 

holding these Order Types in these 

circumstances. The Exchange proposes 

to maintain its existing practice of 

holding Market Pegged MOO Orders 

with Routing Attributes and LOO 

Orders with Routing Attributes 36

entered near the time of the Opening 

Cross because the Exchange is not yet 

prepared to handle such Orders 

similarly to how it proposes to handle 

such Orders without Routing Attributes, 

although it contemplates submitting a 

rule filing proposal to do so in the near 

future. Moreover, any impact of the 

proposed changes is expected to be 

minimal, as very few MOO and LOO 

Orders have historically been subject to 

holding. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the 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 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 37 and Rule 19b– 

4(f)(6) thereunder.38

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 

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– 

NASDAQ–2021–044 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–NASDAQ–2021–044. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2021–044, and 

should be submitted on or before July 

15, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.39

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13285 Filed 6–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92203; File No. SR–CBOE– 

2021–025] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change, 

as Modified by Amendment No. 1, To 

Amend Cboe Rules 5.37 and 5.38 in 

Connection With Allocations at the 

Conclusion of the Exchange’s 

Automated Improvement Mechanism 

(‘‘AIM’’) and Complex AIM (‘‘C–AIM’’) 

Auctions 

June 17, 2021. 

I. Introduction 

On April 14, 2021, Cboe Exchange, 

Inc. (the ‘‘Exchange’’ or ‘‘Cboe 

Options’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposed rule change to adopt a Priority 

Order Plus status in connection with the 

allocation of exclusively listed index 

option classes at the conclusion of the 

Exchange’s Automated Improvement 

Mechanism (‘‘AIM’’ or ‘‘AIM Auction’’) 

and Complex AIM (‘‘C–AIM’’ or ‘‘C– 

AIM Auction’’) auctions. The proposed 

rule change was published for comment 

in the Federal Register on May 3, 2021.3

The Commission received no comments 

regarding the proposal. On June 8, 2021, 

the Exchange submitted Amendment 

No. 1 to the proposed rule change.4 The 

Commission is approving the proposed 

rule change. 


khammond on DSKJM1Z7X2PROD with NOTICES
33426 Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 

5See Rules 5.38 (AIM) and 5.38 (C–AIM). 6The term ‘‘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. 7See Rules 5.37(e) and 5.38(e). 8 Id. 

9The term ‘‘Initial NBBO’’ means the national 

best bid or national best offer at the time an Auction 

is initiated. See Rule 5.37. 

10The term ‘‘Priority Order’’ refers to displayed 

resting quotes and orders that were at a price equal 

to the Initial NBBO on the opposite side of the 

market form the Agency Order. See Rule 5.37(e)(4). 

See also Securities Exchange Release No. 87972 

(September 24, 2019), 84 FR 51673, 51678 

(September 30, 2019) (defining the term ‘‘Priority 

Order’’ and providing that these orders will have 

priority at each price level). 

11The term ‘‘User’’ means any TPH or Sponsored 

User who is authorized to obtain access to the 

System pursuant to Rule 5.5. See Rule 1.1. 

12The term ‘‘Priority Customer’’ means a person 

or entity that is a Public Customer and is not a 

Professional. See Rule 1.1. 

13Priority Orders receive priority pursuant to the 

order of allocation as set forth in Rule 5.37(e)(1) (if 

the Auction results in no price improvement), Rule 

5.37(e)(2) (if the Auction results in price 

improvement for the Agency Order and the 

Initiating TPH selected a single-price submission) 

or Rule 5.37(e)(3) (if the Auction results in price 

improvement for the Agency Order and the 

Initiating TPH selected auto-match). 

14The Exchange states that Priority Order status 

is currently activated for numerous classes in AIM. 

15See Notice, supra note 3, at 23453, n.3. The 

Exchange states that an exclusively listed option is 

different than a ‘‘singly listed option,’’ which is an 

option that is not an ‘‘exclusively listed option’’ but 

that is listed by one exchange and not by any other 

national securities exchange. See id. 

16See Proposed Rule 5.37(e)(4). 

17See id. 

18See id. 

19The proposed rule change also updates Rule 

5.39(e)(2)(C), which provides for generally similar 

order of allocations at the conclusion of a 

Solicitation Auction Mechanism (‘‘SAM’’ or ‘‘SAM 

Auction’’), to likewise reflect that non-Priority 

Customer non-displayed Reserve Quantity is 

allocated in a pro-rata manner. 

20See proposed Rule 5.38(e)(4). 

21The proposed rule change also updates the 

numbering of current Rule 5.38(e)(1)(B) through 

(e)(1)(D) and current Rule 5.38(e)(2)(B) to reflect the 

addition of new Rules 5.38(e)(1)(B) and (e)(2)(B). 

II. Description of the Proposed Rule 

Change 

The AIM and C–AIM are electronic 

auctions intended to provide an Agency 

Order with the opportunity to receive 

price improvement (over the National 

Best Bid or Offer (‘‘NBBO’’) in AIM, or 

the synthetic best bid or offer (‘‘SBBO’’) 

on the Exchange in C–AIM).5 Upon 

submitting an Agency Order into one of 

these auctions, the initiating Trading 

Permit Holder (‘‘Initiating TPH’’) must 

also submit a contra-side second order 

(‘‘Initiating Order’’) for the same size as 

the Agency Order. The Initiating Order 

guarantees that the Agency Order will 

receive an execution. Upon 

commencement of an auction, market 

participants may submit responses to 

trade against the agency order. At the 

conclusion of the auction, the System 6

allocates the Agency Order, taking into 

account all auction responses, unrelated 

orders, and quotes.7 Depending on the 

contra-side interest available, the 

Initiating Order may be allocated a 

certain percentage of the Agency Order.8

Any execution prices at the conclusion 

of an AIM Auction must be at or better 

than both sides of the BBO existing at 

the conclusion of the AIM Auction and 

at or better than both sides of the Initial 

NBBO,9 and any execution prices at the 

conclusion of a C–AIM Auction must be 

at or between the SBBO and the best 

prices of any complex orders resting on 

each side of the Complex Order Book 

(‘‘COB’’) at the conclusion of the C–AIM 

Auction. 

Currently, the Exchange may offer 

Priority Order 10 status to Users 11 for 

allocations at the conclusion of an AIM 

Auction. If the Exchange designates a 

class as eligible for Priority Order status, 

then at the conclusion of an AIM 

Auction, Users with Priority Orders 

receive executions against the Agency 

Order after Priority Customers 12 and the 

Initiating TPH have received their 

Agency Order allocations.13 Priority 

Order status is only valid for the 

duration of the particular AIM 

Auction.14

The Exchange proposes to adopt a 

new Priority Order Plus status in 

connection with the allocation of 

exclusively listed index option classes 

at the conclusion of the Exchange’s AIM 

and C–AIM auctions. An ‘‘exclusively 

listed option’’ is an option that trades 

exclusively on an exchange because the 

exchange has an exclusive license to list 

and trade the option or has the 

proprietary rights in the interest 

underlying the option.15

A. Priority Order Plus and Priority Order 

Status in AIM 

Proposed Rule 5.37(e)(4) would 

provide that the Exchange may 

designate any exclusively listed index 

option class as eligible for Priority Order 

Plus status and any class as eligible for 

Priority Order status. A class designated 

as eligible for one status would not be 

eligible for the other status.16 If the 

Exchange designates a class as eligible 

for Priority Order Plus or Priority Order 

status, Users would have priority for 

their contra-side interest Priority Orders 

up to their size in the Initial NBBO at 

each price level at or better than the 

Initial NBBO.17 Each status is only valid 

for the duration of the particular AIM 

Auction.18

The proposed rule change amends 

Rule 5.37(e)(1)(B), which describes the 

allocation priority where the AIM 

results in no price improvement to the 

Agency Order, to provide that Users 

with Priority Order Plus status may be 

allocated directly following Priority 

Customer allocations but prior to 

Initiating TPH allocations. The 

proposed rule change also amends Rule 

5.37(e)(2)(B), which sets forth the 

allocation priority where the AIM 

results in price improvement and the 

Initiating TPH has selected a singleprice submission, to provide that Users 

with Priority Order status or Priority 

Order Plus status (as designated by the 

Exchange) may be allocated directly 

following Priority Customer allocations. 

Additionally, proposed Rule 

5.37(e)(1)(B) would provide that Priority 

Orders eligible for Priority Order Plus 

status are allocated in a pro-rata 

manner. Likewise, the proposed rule 

change updates Rules 5.37(e)(1)(C) and 

(D) and (e)(2)(B), (C) and (D) to reflect 

that Priority Orders, all other contraside interest (including AIM responses 

and orders and quotes on the Book) and 

non-Priority Customer non-displayed 

Reserve Quantity pursuant to these 

Rules are allocated in a pro-rata 

manner.19

B. Priority Complex Order Plus Status in 

C–AIM 

With respect to allocation priority in 

C–AIM, the proposed Rule 5.38(e)(4) 

would permit the Exchange to designate 

any exclusively listed index option class 

as eligible for Priority Complex Order 

Plus status, pursuant to which proposed 

Priority Complex Orders may receive 

Agency Order executions after Priority 

Customers at the conclusion of a C–AIM 

Auction. Specifically, proposed Rule 

5.38(e)(4) provides that, if the Exchange 

designates a class as eligible for Priority 

Complex Order Plus status, Users with 

contra-side complex interest at the 

conclusion of the C–AIM Auction and 

displayed resting quotes and orders that 

were at a price equal to the BBO on the 

opposite side of the market from any of 

the components of the Agency Order at 

the time the C–AIM Auction 

commenced (‘‘Priority Complex 

Orders’’), have priority in their contraside complex interest up to their largest 

size in a BBO in a pro-rata manner (after 

Priority Customers have received 

allocations, as set forth in 

subparagraphs (e)(1) through (3) above). 

Priority Complex Order Plus status is 

only valid for the duration of the 

particular C–AIM Auction.20 The 

proposed change also adopts new Rules 

5.38(e)(1)(B) and 5.38(e)(2)(B),21 which 

provide for the allocation of Priority 


khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 33427 

22 15 U.S.C. 78f(b). In approving this proposed 

rule change, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

23 15 U.S.C. 78f(b)(5). 

24See Letter to Brett Redfearn, Director, Division 

of Trading & Markets, from Cboe Global Markets, 

Inc. the Listed Options Trading Committee of the 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), and the Listed Options 

Committee of the Security Traders Association 

(‘‘STA’’), dated June 4, 2018, available at http://

cdn.batstrading.com/resources/comment_letters/ 

Cboe-Joint-Letter-with-SIFMA-and-The-STA-onOptions-Market-Structure.pdf. 

25See Securities Exchange Act Release No. 91609 

(April 19, 2021), 86 FR 21773 (April 23, 2021) (SR– 

CBOE–2021–024). 

26See Nasdaq ISE Options 3, Section 13(d)(3), 

which governs allocations at the conclusion of ISE’s 

price improvement mechanism and allocates an 

agency order across non-Priority Customer interest 

‘‘based upon the percentage of the total number of 

contracts available at the price that is represented 

by the size of such interest’’; and MIAX Options 

Rule 515A(a)(2)(iii), which governs allocations at 

the conclusion of MIAX’s price improvement 

mechanism and allocates an agency order across 

Professional interest on a pro-rata basis. 

27See Nasdaq ISE Options 3, Section 11(d)(3), 

which governs the allocations at the conclusion of 

ISE’s solicitation mechanism and allocates an 

agency order across non-Priority Customer interest 

‘‘based upon the percentage of the total number of 

contracts available at the best price that is 

represented by the size of the non-Priority Customer 

[interest]’’. 

28Pursuant to EDGX Options Rules 

21.19(e)(1)(C)–(D) and (e)(2)(B)–(C), Priority Orders 

or all other contra-side interest, as applicable, are 

allocated pursuant to EDGX Options Rule 21.8(c), 

which provides that all option classes on EDGX 

Options have a pro-rata base algorithm for orders 

resting at the same best price. 

29 15 U.S.C. 78s(b)(2). 

30 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Complex Orders (in a pro-rata manner), 

if the Exchange has designated the class 

as eligible for Priority Complex Order 

Plus status, immediately following 

Priority Customer allocations and prior 

to any Initiating TPH allocations, 

pursuant to Rule 5.38(e)(1)(A) (if the C– 

AIM Auction results in no price 

improvement) and Rule 5.38(e)(2) (if the 

C–AIM Auction results in price 

improvement for the Agency Order and 

the Initiating TPH selected a singleprice submission). 

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b) of the Act.22 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,23 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, 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, and 

that the rules of a national securities 

exchange not be designed to permit 

unfair discrimination between 

customers, issuers, brokers or dealers. 

The Commission believes that the 

proposed new Priority Order Plus 

allocation status may encourage further 

competition in the AIM and C–AIM in 

exclusively listed classes, by 

encouraging aggressive quoting from 

Users. According to the Exchange, price 

improvement auctions have provided 

the market with benefits (such as 

providing an efficient manner of access 

to liquidity for customers), however, the 

options industry overall has observed 

that quoted liquidity on the book has 

decreased, quotes have widened, and 

options market makers have reduced 

their participation in the market, which 

the Exchange believes has impacted 

market quality.24 By providing market 

participants, particularly Market-Makers 

and other liquidity providers, the 

opportunity to receive priority over the 

Initiating TPH in exclusively listed 

index classes if they post more 

aggressive markets, the Commission 

believes the potential for increased 

competition within an individual AIM 

or C–AIM auction may enhance 

displayed liquidity, provide for tighter 

markets, and ultimately provide better 

execution prices for all market 

participants in classes available 

exclusively for trading on the Exchange. 

While the Commission recognizes that 

the loss of Initiating TPH priority to 

Users with Priority Order Plus status 

may potentially result in fewer auctions 

being initiated, the Commission believes 

that those individual auctions should be 

more competitive, as Users may be 

encouraged by the prospect of Priority 

Order Plus status to submit competitive 

orders/quotes. This may benefit the 

Agency Order by providing more 

opportunity for price improvement 

within an individual auction. The AIM 

Auction in particular should benefit 

from potentially increased competition, 

especially since the AIM Auction no 

longer provides guaranteed price 

improvement for smaller orders (except 

where the NBBO spread is $0.01).25

The Commission also believes that 

updating the allocation of Priority 

Orders and other contra-side interest 

(including non-Priority Customer nondisplayed Reserve Quantity) to be prorata for all AIM- or SAM-eligible classes 

(as applicable), as opposed to pricetime, may enhance competition by 

encouraging market participants to bring 

more liquidity into the auctions and 

provide competitive bids and offers 

throughout an auction. The Commission 

notes that pro-rata allocation is 

consistent with the manner in which 

other options exchanges allocate agency 

orders at the conclusion of comparable 

price improvement auctions 26 and 

solicitation auctions on those 

exchanges.27 Further, the proposed prorata allocation for Priority Orders and 

all other contra-side interest at the 

conclusion of an AIM Auction is 

consistent with the manner in which the 

same orders currently receive 

allocations at the conclusion of an AIM 

auction on the Exchange’s affiliated 

options exchange, Cboe EDGX 

Exchange, Inc. (‘‘EDGX Options’’).28

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,29 that the 

proposed rule change (SR–CBOE–2021– 

025), is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13244 Filed 6–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92183; File No. SR–FINRA– 

2021–015] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend 

FINRA Rules 1210 (Registration 

Requirements) and 1240 (Continuing 

Education Requirements) 

June 15, 2021. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on June 3, 

2021, the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 


khammond on DSKJM1Z7X2PROD with NOTICES