34334 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Notices 

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

2See proposed 24X Rule 11.1 (describing the 

hours of trading and trading days for 24X). 

3For example, see proposed 24X Rule 11.16 

(describing what orders are eligible for execution 

outside of regular trading hours). 

4See proposed 24X Rule 11.16(q) (defining the 

unit of trading in stocks as one thousandth of a 

share). 5 17 CFR 200.30–3(a)(16) and (a)(71)(i). 

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). 

regulations thereunder with respect to 

24X are satisfied.1

24X’s Form 1 application states that 

24X would be wholly-owned by its 

parent company, 24X US Holdings LLC 

(‘‘US Holdings’’), which in turn is 

wholly-owned by 24X Bermuda 

Holdings LLC (‘‘Bermuda Holdings’’). 

The Form 1 application provides that 

24X would operate a fully automated 

electronic trading platform for the 

trading of listed equities and would not 

maintain a physical trading floor. It also 

provides that liquidity would be derived 

from quotes as well as orders to buy and 

orders to sell submitted to 24X 

electronically by Members from remote 

locations. 24X proposes to have one 

class of membership open to registered 

broker-dealers. One novel feature of 

24X’s proposed trading rules is that 24X 

intends to allow equities trading 24 

hours a day, 7 days per week, 365 days 

a year.2 24X has proposed specific rules 

to govern trading outside of regular 

trading hours.3 Another notable feature 

in 24X’s Form 1 application is that it 

contemplates allowing market 

participants to trade fractional shares.4

A more detailed description of the 

manner of operation of 24X’s proposed 

system can be found in Exhibit E to 

24X’s Form 1 application. The proposed 

rulebook for the proposed exchange can 

be found in Exhibit B to 24X’s Form 1 

application, and the governing 

documents for 24X, US Holdings and 

Bermuda Holdings can be found in 

Exhibit A and Exhibit C to 24X’s Form 

1 application. A listing of the officers 

and directors of 24X can be found in 

Exhibit J to 24X’s Form 1 application. A 

complete set of forms concerning 

membership and access can be found in 

Exhibit F to 24X’s Form 1 application. 

24X’s Form 1 application, including 

all of the Exhibits referenced above, is 

available online at www.sec.gov/rules/ 

other.shtml as well as in the 

Commission’s Public Reference Room. 

Interested persons are invited to submit 

written data, views, and arguments 

concerning 24X’s Form 1, including 

whether the application is consistent 

with the Exchange 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 10– 

239 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 10–239. 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/other.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to 24X’s Form 1 filed with 

the Commission, and all written 

communications relating to the 

application 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. 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 publicly 

available. All submissions should refer 

to File Number 10–239 and should be 

submitted on or before July 21, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.5

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12010 Filed 6–3–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95006; File No. SR–CBOE– 

2022–024] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Rules 

Regarding Complex Orders 

May 31, 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 May 23, 

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 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 

its Rules regarding complex orders. 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. 


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Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Notices 34335 

5See Securities Exchange Act Release No. 94204 

(February 9, 2022), 87 FR 8625 (February 15, 2022) 

(SR–CBOE–2021–046). The Exchange has not yet 

implemented this change and intends to after this 

proposed rule change becomes operative. 

6For the purpose of applying these ratios to 

complex orders comprised of legs for both minioptions and standard options, ten mini-option 

contracts represent one standard option contract. 

For the purpose of applying these ratios to complex 

orders comprised of legs for both micro-options and 

standard options, 100 micro-option contracts 

represent one standard option contract. 

7See Securities Exchange Act Release No. 94204 

(February 9, 2022), 87 FR 8625 (February 15, 2022) 

(SR–CBOE–2021–046). 

8See Securities Exchange Act Release No. 94204 

(February 9, 2022), 87 FR 8625 (February 15, 2022) 

(SR–CBOE–2021–046). 

9Similarly, the Exchange proposes to delete the 

reference to Rule 5.85(b)(1), as the ratios relevant 

for purposes of open outcry priority as described in 

Rule 5.85(b)(1) are already set forth in that 

provision, making this reference redundant and 

thus unnecessary. 

10An ‘‘Index Combination’’ is a purchase (sale) of 

an index option call and sale (purchase) of an index 

option put with the same underlying index, 

expiration date, and strike price, and a ‘‘delta’’ is 

the positive (negative) number of Index 

Combinations that must be sold (purchased) to 

establish a market neutral hedge with one or more 

series of the same index option. An Index Combo 

order may not have a ratio greater than eight 

options to one Index Combination (8.00) and will 

be subject to all provisions applicable to complex 

orders (excluding the one-to-three/three-to-one 

ratio) in the Rules. Rule 5.33(b)(3). 

11See Securities Exchange Act Release No. 94204 

(February 9, 2022), 87 FR 8625 (February 15, 2022) 

(SR–CBOE–2021–046). The Exchange has yet to 

implement this change and plans to do so after this 

proposed rule change is operative. 

12The proposed rule change also makes 

conforming changes to Rules 5.6 (definition of 

complex order), 5.30(a)–(c), 5.33, and 5.83(b). 

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 its 

Rules regarding complex orders. 

Specifically, the Exchange proposes to 

clarify certain provisions, codify certain 

functionality, and correct certain 

language, as well as to retain class-byclass flexibility to keep complex order 

electronic eligibility for complex orders 

with ratios less than one-to-three and 

greater than three-to-one in classes 

determined by the Exchange (i.e., the 

same as it currently is with respect to 

those classes). 

In February of 2022, the Commission 

approved the Exchange’s proposal to 

permit complex orders with ratios less 

than one-to-three and greater than threeto-one to trade in penny increments and 

be eligible for electronic processing.5

Prior to that, complex orders with these 

ratios were only able to trade on the 

Exchange’s trading floor in open outcry 

(and in the standard increments for the 

applicable class). 

The proposed rule change makes 

three changes to the definition of 

complex order in Rule 1.1: (1) It deletes 

the sentence that narrows the definition 

of complex orders for purposes of 

electronic processing to those with 

ratios greater than or equal to one-tothree and less than or equal to three-toone; (2) it clarifies that the term 

complex order includes Index Combo 

orders unless the context otherwise 

requires; and (3) it provides the 

Exchange with flexibility to determine 

on a class basis whether to permit 

complex orders with ratios less than 

one-to-three and greater than three-toone to be eligible for electronic 

processing. First, currently, the 

definition of complex order indicates 

that for purposes of Rules 5.33 (which 

relates to electronic trading of complex 

orders) and 5.85(b)(1) (which relates to 

open outcry trading of complex orders), 

the term ‘‘complex order’’ means a 

complex order with any ratio equal to or 

greater than one-to-three (.333) and less 

than or equal to three-to-one (3.00), an 

Index Combo order, a stock-option 

order, or a security future-option order. 

Pursuant to this provision, only 

complex orders with a ratio equal to or 

greater than one-to-three (.333) and less 

than or equal to three-to-one (3.00) (in 

addition to Index Combo Orders, stockoption orders, and security futureoption orders) may trade electronically.6

The Exchange proposes to delete this 

sentence because, in accordance with a 

rule filing previously approved by the 

Commission,7 the Exchange intends to 

modify its System to permit complex 

orders of any ratio to trade 

electronically (except in classes 

determined by the Exchange, as further 

discussed below), so the term complex 

order generally will have the same 

meaning with respect to both open 

outcry and electronic trading, which 

eliminates the need to have a separate 

definition for electronic trading.8

Therefore, the Exchange proposes to 

delete the provision that indicates 

complex order means complex orders 

with that ratio restriction for purposes 

of Rule 5.33.9

Second, the complex order definition 

currently states that unless the context 

otherwise requires, the term complex 

order includes stock-option orders and 

security future-option orders. 

Specifically, the proposed rule change 

provides that ‘‘[u]nless the context 

otherwise requires, the term complex 

order includes Index Combo orders,10

stock-option orders and security futureoption orders.’’ The proposed rule 

change adds ‘‘Index Combo orders’’ to 

that sentence, because as discussed 

above the proposed rule change is 

deleting the immediately following 

sentence. That sentence includes the 

term ‘‘Index Combo’’ as a type of 

complex order for purposes of electronic 

and open outcry processing. Despite 

deletion of that sentence, an Index 

Combo is still a type of complex order 

(as set forth in Rule 5.33) and thus this 

proposed change retains that concept in 

the complex order definition. This 

change merely clarifies in the definition 

of complex order that an Index Combo 

order will generally be considered a 

‘‘complex order’’ for purposes of the 

Rules. 

Third, as noted above, the 

Commission previously approved a 

proposed rule change that would permit 

complex orders with all ratios to be 

eligible for electronic processing, as 

opposed to just complex orders with 

ratios greater than or equal to one-tothree (.333) or less than or equal to 

three-to-one (3.00).11 Prior to 

implementing that change, the Exchange 

believes it is appropriate to retain 

flexibility to determine on a class-byclass basis whether to maintain the 

status quo—specifically whether to 

permit complex orders with ratios less 

than one-to-three (.333) or greater than 

three-to-one (3.00) to be eligible for 

electronic processing. Certain classes 

have significant volume executed in 

open outcry trading on the Exchange’s 

trading floor. The Exchange and its 

customers continue to believe the 

trading floor is an important source of 

liquidity, which is provided efficiently 

by a large pool of accessible MarketMakers and floor brokers. However, 

Market-Makers and floor brokers expend 

resources to have a presence on the 

trading floor, which they do because a 

certain level of order flow routes to the 

floor. The Exchange believes it is 

beneficial to provide investors with 

flexibility to have their complex order 

interest execute either electronically or 

in open outcry. However, the Exchange 

also believes it is important to balance 

that flexibility with the need to ensure 

significant order flow continues to route 

to the trading floor, providing an 

ongoing incentive for liquidity 

providers to populate the floor. This is 

particularly important in classes with 

high open outcry volume. Therefore, the 

proposed rule change adds to the 

definition of complex order in Rule 1.1 

that the Exchange determines on a classby-class basis whether complex orders 

with ratios less than one-to-three (.333) 

or greater than three-to-one (3.00) are 

eligible for electronic processing.12

The proposed rule change next 

corrects an error in the definition of 


lotter on DSK11XQN23PROD with NOTICES1
34336 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Notices 

13Specifically, Rule 5.33(d)(3) provides that the 

COA response time interval terminates early (a) 

when the System receives a non-COA-eligible order 

on the same side as the COA-eligible order that 

initiated the COA but with a price better than the 

COA price, in which case the System terminates the 

COA and processes the COA-eligible order pursuant 

to Rule 5.33(d)(5) and enters the new order in the 

COB; (b) when the System receives a non-Priority 

Customer Order in a leg of the complex order that 

would improve the SBBO on the same side as the 

COA-eligible order that initiated the COA to a price 

better than the COA price, in which case the System 

terminates the COA and processes the COA-eligible 

order pursuant to Rule 5.33(d)(5), enters the new 

order in the Simple Book, and updates the SBBO; 

or (c) if the System receives a Priority Customer 

Order in a leg of the complex order that would join 

or improve the SBBO on the same side as the COAeligible order that initiated the COA to a price equal 

to or better than the COA price, in which case the 

System terminates the COA and processes the COAeligible order pursuant to Rule 5.33(d)(5), enters the 

new order in the Simple Book, and updates the 

SBBO. 

14See Cboe C2 Exchange, Inc. Rule 5.33(b)(2). 

15The proposed rule change makes other 

nonsubstantive changes to the sentence structure as 

a result of the combination of provisions. 

16Complex order priority with respect to complex 

orders with ratios less than one-to-three (.333) and 

greater than three-to-one (3.00) (except for Index 

Combo orders) is the same in both electronic and 

open outcry trading. Therefore, the proposed rule 

change adds to Rule 5.85(b)(2) the same language 

from proposed Rule 5.33(f)(2)(iv)(b), which states 

that for complex order with those ratios, if there is 

a Priority Customer order on any leg(s) comprising 

the SBBO, the component(s) of the complex order 

for the leg(s) with a Priority Customer order at the 

BBO must execute at a price that improves the price 

of that Priority Customer order(s) on the Simple 

Book by at least one minimum increment. 

COA-eligible and Do-Not-COA orders in 

rule 5.33(c)(5). The Exchange’s System 

currently determines whether an order 

is ‘‘COA-eligible’’ by comparing the 

price of an order to resting interest on 

the same side as the order in the Simple 

Book and in the Complex Order Book 

(‘‘COB’’). However, the current 

definition inadvertently inversed the 

relevant terms and compares the price 

of a buy complex order to the synthetic 

best offer (‘‘SBO’’) and sell complex 

orders and compares the price of a sell 

complex order to the synthetic best bid 

(‘‘SBB’’) and buy complex orders, which 

would be opposite-side interest. The 

proposed rule change corrects this error 

and revises the definition to provide 

that whether a complex order is COAeligible will be determined by 

comparing the order’s price to same-side 

interest, which is consistent with 

current System functionality. 

Specifically, a ‘‘COA-eligible’’ complex 

order is a buy (sell) complex order with 

User instructions to (or which default 

to) initiate a COA that is priced (i) equal 

to or higher (lower) than the SBB (SBO) 

(provided that if any of the bids or offers 

on the Simple Book that comprise the 

SBB (SBO) is represented by a Priority 

Customer order, the complex order must 

be priced at least one minimum 

increment higher (lower) than the SBB 

(SBO) and (ii) higher (lower) than the 

price of buy (sell) complex orders 

resting at the top of the COB. This is 

consistent with the provisions that will 

cause a COA to terminate early, 

pursuant to which a COA will end early 

because of incoming same-side 

interest.13 Additionally, the proposed 

rule change is consistent with another 

exchange’s definition of ‘‘COA-eligible’’ 

order.14

The proposed rule change also makes 

non-substantive changes to Rule 

5.33(f)(2)(A). Specifically, the proposed 

rule change combines subparagraph (ii) 

with (v) (and renumbers the 

subparagraphs), as the provisions 

ultimately mean the same thing. 

Specifically, Rule 5.33(f)(2)(A)(i) 

provides that the System does not 

execute a complex order pursuant to 

Rule 5.33 at a net price worse than the 

SBBO or equal to the SBBO when there 

is a Priority Customer order at the 

SBBO, except all-or-none (‘‘AON’’) 

complex orders may only execute at 

prices better than the SBBO. Therefore, 

if there is a Priority Customer Order 

comprising part of the SBBO, a complex 

order could only execute by improving 

the SBBO, which would require 

improvement of component prices. This 

is what current Rule 5.33(f)(2)(A)(v) 

requires. Specifically, that provision 

states that the System does not execute 

a complex order pursuant to Rule 5.33 

at a net price that would cause any 

component of the complex strategy to be 

executed at a price ahead of a Priority 

Customer Order on the Simple Book 

without improving the BBO of (a) at 

least one component of the complex 

strategy, if the complex order has a ratio 

equal to or greater than one-to-three 

(.333) and less than or equal to three-toone (3.00), or is an Index Combo order; 

or (b) each component of the complex 

strategy with a Priority Customer Order 

at the BBO, if the complex order has a 

ratio less than one-to-three (.333) or 

greater than three-to-one (3.00). Because 

these two provisions are interrelated, 

the Exchange believes it is appropriate 

to combine them into proposed Rule 

5.33(f)(2)(A)(iv).15 The proposed rule 

change has no impact on complex order 

priority. 

The proposed rule change also 

clarifies that for complex order priority 

for complex orders with ratios equal to 

or greater than one-to-three and less 

than or equal to three-to-one, complex 

order priority in open outcry is slightly 

different than complex order priority for 

these complex orders in electronic 

trading. Specifically, in electronic 

trading, these complex orders may not 

execute when there is a Priority 

Customer order on any leg on the SBBO 

while in open outcry trading, these 

orders can trade at the SBBO unless 

there is a Priority Customer order on 

every leg comprising the SBBO. Current 

Rule 5.85(b)(1) states that a complex 

order with any ratio equal to or greater 

than one-to-three (.333) and less than or 

equal to three-to-one (3.00) or that is an 

Index Combo order may be executed at 

a net debit or credit price without giving 

priority to equivalent bids (offers) in the 

individual series legs that are 

represented in the trading crowd or in 

the Book if the price of at least one leg 

of the order improves the corresponding 

bid (offer) of a Priority Customer 

order(s) in the Book by at least one 

minimum trading increment as set forth 

in Rule 5.4(b). The proposed rule 

change clarifies that this provision 

means that one component of the 

complex order must improve the price 

of one component leg in the Book if 

there is a Priority Customer order at the 

top of the Book for each leg of the 

Priority Customer order (rather than just 

at least one leg, which is the case for 

electronic trading complex order 

priority, as discussed above). Because 

open outcry and electronic complex 

order priority differ with respect to 

complex orders with any ratio equal to 

or greater than one-to-three (.333) and 

less than or equal to three-to-one (3.00) 

and Index Combo orders, the Exchange 

believes it is appropriate to clarify that 

in the Rules. Therefore, the proposed 

rule change adds to Rule 5.85(b)(1) a 

sentence stating that, in other words, if 

there is a Priority Customer order at the 

top of the Simple Book on each leg 

comprising the SBBO for the complex 

strategy, at least one component of the 

complex order must execute at a price 

that improves the price of the Priority 

Customer order on the Simple Book for 

that component.16 The proposed rule 

change has no impact on open outcry 

complex order priority. 

Finally, the proposed rule change 

updates Rule 5.33(g) to reflect that the 

System accepts for electronic processing 

complex orders with more than four 

legs. Current Rule 5.33(g) states that a 

complex order may execute against 

orders and quotes resting in the Simple 

Book pursuant to Rule 5.33(d)(5)(A) and 

(e) if it can execute in full or in a 

permissible ratio and if it has no more 

than a maximum number of legs, which 

the Exchange determines on a class-byclass basis and may be two, three or 

four, subject to certain restrictions, 

including that non-Customer complex 

orders with two option legs that are both 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Notices 34337 

17See Cboe Notice C2021060800, Cboe Options 

Introduces 16-Leg Maximum for Non-FLEX 

Complex Orders (June 8, 2021), available at Cboe 

Options Introduces 16-Leg Maximum for Non-FLEX 

Complex Orders; see also Cboe US Options 

Complex Book Process (technical specifications last 

updated April 20, 2022), Section 2.3.2, available at 

US Options Complex Book Process. 18 15 U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(5). 20 Id. 

21See Securities Exchange Act Release No. 94204 

(February 9, 2022), 87 FR 8625 (February 15, 2022) 

(SR–CBOE–2021–046). The Exchange has yet to 

implement this change and plans to do so after this 

proposed rule change is operative. 

22See Securities Exchange Act Release No. 94204 

(February 9, 2022), 87 FR 8625 (February 15, 2022) 

(SR–CBOE–2021–046). 

23See proposed Rule 1.1 (definition of complex 

order) and corresponding changes in Rules 5.6(c) 

(definition of complex order), 5.30(a)(4), (b)(4), and 

(c)(4), 5.33(a) (definition of complex order), and 

5.83(b). 

24The Exchange would announce any changes to 

classes in which complex orders with ratios less 

than one-to-three or greater than three-to-one were 

eligible or no longer eligible for electronic 

processing in accordance with Rule 1.5, providing 

Trading Permit Holders with sufficient advanced 

notice of any such change. 

25Specifically, Rule 5.33(d)(3) provides that the 

COA response time interval terminates early (a) 

when the System receives a non-COA-eligible order 

on the same side as the COA-eligible order that 

initiated the COA but with a price better than the 

COA price, in which case the System terminates the 

COA and processes the COA-eligible order pursuant 

to Rule 5.33(d)(5) and enters the new order in the 

COB; (b) when the System receives a non-Priority 

Customer Order in a leg of the complex order that 

would improve the SBBO on the same side as the 

COA-eligible order that initiated the COA to a price 

better than the COA price, in which case the System 

terminates the COA and processes the COA-eligible 

order pursuant to Rule 5.33(d)(5), enters the new 

order in the Simple Book, and updates the SBBO; 

or (c) if the System receives a Priority Customer 

Order in a leg of the complex order that would join 

or improve the SBBO on the same side as the COAeligible order that initiated the COA to a price equal 

to or better than the COA price, in which case the 

System terminates the COA and processes the COAeligible order pursuant to Rule 5.33(d)(5), enters the 

new order in the Simple Book, and updates the 

SBBO. 

26See Cboe C2 Exchange, Inc. Rule 5.33(b)(2). 

buy or both sell and that are both calls 

or both puts may not leg into the Simple 

Book and all complex orders with three 

or four option legs that are all buy or all 

sell may not leg into the Simple Book. 

The proposed rule change modifies the 

parenthetical regarding legging 

restrictions to indicate that the 

maximum number the Exchange may 

determine on a class-by-class basis may 

be up to 16, as the Exchange’s System 

currently accepts complex orders with 

up to that many legs for electronic 

processing.17 The proposed rule change 

makes no changes to which or how 

complex orders may leg into the Simple 

Book but rather updates this provision 

to reflect current functionality. 

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.18 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 19 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) 20 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the proposed rule 

change makes no changes to how 

complex orders are processed or 

executed, but rather updates the Rules 

to reflect more accurately current 

System functionality and to make 

clarifying and simplifying changes, 

which the Exchange believes will 

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. As noted above, the 

Commission previously approved a 

proposed rule change that would permit 

complex orders with all ratios to be 

eligible for electronic processing, as 

opposed to just complex orders with 

ratios greater than or equal to one-tothree (.333) or less than or equal to 

three-to-one (3.00).21 The proposed rule 

change to delete the part of the complex 

order definition in Rule 1.1 that restricts 

electronic processing to complex orders 

with ratios greater than or equal to oneto-three and less than or equal to threeto-one is consistent with the Exchange’s 

prior proposed rule change to permit 

complex orders of all ratios to be 

eligible for electronic processing—this 

language was previously inadvertently 

not deleted.22

Additionally, the proposed rule 

change to permit the Exchange to 

determine on a class basis whether to 

permit these larger/smaller ratio 

complex orders to be eligible for 

electronic processing 23 will further 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

permitting the Exchange to balance the 

flexibility of permitting complex orders 

to trade in open outcry or electronically 

with the need to ensure that significant 

order flow continues to route to the 

trading floor, providing an ongoing 

incentive for liquidity providers to 

populate the floor. The Exchange 

believes this will further protect 

investors who rely on liquidity on the 

trading floor, particularly for complex 

orders. While the Exchange generally 

believes any increase in electronic order 

flow will not be significant enough to 

impact liquidity available on the trading 

floor, the Exchange believes it is still 

appropriate to retain this flexibility in 

the Rules to provide it with authority to 

act swiftly if it appears floor liquidity 

has been or may be impacted.24 With 

respect to any class for which the 

Exchange does not permit larger/smaller 

ratio complex orders to be eligible for 

electronic processing, that results in no 

change for these orders, as these orders 

currently can only trade in open outcry. 

The proposed change to the definition 

of COA-eligible order in Rule 

5.33(b)(5)(A) merely conforms the 

provision to the System, which 

compares the price of the order to sameside interest rather than opposite-side 

interest. The current language 

inadvertently inverted the terms; the 

proposed rule change corrects this, 

which makes the rule text consistent 

with the System and thus provides 

additional transparency, ultimately 

benefiting investors. This is consistent 

with the provisions that will cause a 

COA to terminate early, pursuant to 

which a COA will end early because of 

incoming same-side interest.25

Additionally, the proposed rule change 

is consistent with another exchange’s 

definition of ‘‘COA-eligible’’ order.26

The proposed rule change to update 

the provisions regarding complex order 

priority in Rules 5.33(f)(2) and 5.85(b)(1) 

is a nonsubstantive change intended to 

simplify the rule text regarding when 

legs of complex orders must improve 

prices of orders on the Simple Book. 

Similarly, the proposed rule change to 

clarify complex order priority in open 

outcry is merely a clarification of the 

current priority. The Exchange believes 

this will benefit investors, particularly 

since it is different than electronic 

complex order priority with respect to 

complex orders with ratios greater than 

or equal to one-to-three (.333) and less 

than or equal to three-to-one (3.00). 

These proposed rule changes have no 

impact on electronic or open outcry 

complex order priority. 


lotter on DSK11XQN23PROD with NOTICES1
34338 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Notices 

27 15 U.S.C. 78s(b)(3)(A). 

28 17 CFR 240.19b–4(f)(6). 

29 17 CFR 240.19b–4(f)(6). 

30 17 CFR 240.19b–4(f)(6)(iii). 

31For purposes only of accelerating the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

Finally, the proposed rule change to 

the provision regarding complex order 

legging in Rule 5.33(g) will protect 

investors, as it merely updates the 

provision to reflect that the System 

accepts for electronic processing 

complex orders with more than four 

legs. The proposed rule change makes 

no changes to which or how complex 

orders may leg into the Simple Book but 

rather updates this provision to reflect 

current functionality. 

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 not intended for 

competitive purposes, but rather to 

clarify certain provisions, codify certain 

functionality, and correct certain 

language, as well as to retain class-byclass flexibility to keep complex order 

electronic eligibility the same as it 

currently. 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on intramarket competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act, 

because all changes will apply in the 

same manner to all investors. To the 

extent the Exchange determines to not 

permit higher/lower ratio complex 

orders to be eligible for electronic 

processing in any class, that will result 

in maintaining the status quo for 

complex orders in that class, as the 

Exchange currently does not permit 

complex orders with those ratios to be 

processed electronically. Additionally, 

manual handling and open outcry 

processing will be available for all 

complex orders with such ratios from all 

investors. The other proposed rule 

changes have no impact on trading and 

thus will not change how any investors’ 

complex orders are processed or 

executed on the Exchange. As noted 

above, the proposed rule change makes 

no changes to electronic or open outcry 

complex order priority, which orders 

can initiate a COA, or how complex 

orders may leg into the Simple Book. 

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 the proposed rule change has 

no impact on how complex orders trade, 

as it makes primarily clarifying updates, 

corrections, and other nonsubstantive 

changes. The Exchange is unaware of 

any other options exchanges that permit 

complex orders with ratios less than 

.333 or greater than 3.00 to trade 

electronically. Therefore, to the extent 

the Exchange does not make complex 

orders with those ratios in a class 

eligible for electronic processing, the 

Exchange would be permitting complex 

orders to trade in the same manner as 

other options exchanges. Other options 

exchanges are welcome to modify their 

systems to permit higher/lower ratio 

orders to execute electronically or on 

their trading floors. 

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 27 and Rule 19b– 

4(f)(6) 28 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. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 29 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),30 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay. As discussed above, the 

proposal will allow the Exchange to 

determine on a class-by-class basis 

whether complex orders with ratios less 

than one-to-three and greater than threeto-one will be eligible for electronic 

processing. The Exchange states that 

this flexibility will allow the Exchange 

to balance the benefits of permitting the 

electronic processing of these complex 

orders with the need to ensure that 

significant order flow continues to route 

to the Exchange’s trading floor, thereby 

providing an ongoing incentive for 

liquidity providers to maintain a 

presence on the floor. The Exchange 

further states that waiver of the 

operative delay will benefit investors by 

allowing the Exchange to broaden the 

availability of electronic complex order 

processing in many option classes as 

soon as possible. In addition, the 

Exchange states that the proposed 

amendments to the complex order 

priority provisions in Exchange Rules 

5.33(f)(2) and 5.85(b)(1) are nonsubstantive changes designed to simply 

and clarify those rules. The proposal 

also corrects errors in the definition of 

COA-eligible order and updates 

Exchange Rule 5.33(g) to reflect that the 

Exchange’s System accepts for 

electronic processing complex orders 

with up to 16 legs. The Commission 

finds that waiving the operative delay is 

consistent with the protection of 

investors and the public interest 

because it will allow the Exchange to 

make available without delay the 

electronic processing of complex orders 

with ratios less than one-to-three and 

greater than three-to-one in classes 

determined by the Exchange. The ability 

to trade these orders electronically, as 

well as on the trading floor, will provide 

investors with additional flexibility in 

determining how their complex orders 

are executed. The proposed changes to 

correct, update, and add clarity to the 

Exchange’s rules will benefit investors 

by helping to ensure that the Exchange’s 

rules are clear and accurate. For these 

reasons, the Commission designates the 

proposal operative upon filing.31

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. 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Notices 34339 

32 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 94694 

(April 12, 2022), 87 FR 23372 (April 19, 2022) (SR– 

NSCC–2022–003) (‘‘Notice of Filing’’). NSCC also 

filed the proposal contained in the Proposed Rule 

Change as advance notice SR–NSCC–2022–801 

(‘‘Advance Notice’’) with the Commission pursuant 

to Section 806(e)(1) of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act entitled the 

Payment, Clearing, and Settlement Supervision Act 

of 2010 (‘‘Clearing Supervision Act’’). 12 U.S.C. 

5465(e)(1); 17 CFR 240.19b–4(n)(1)(i). Notice of 

filing of the Advance Notice was published for 

comment in the Federal Register on April 19, 2022. 

Securities Exchange Act Release No. 94695 (April 

12, 2022), 87 FR 23328 (April 19, 2022) (SR–NSCC– 

2022–801). On May 27, 2022, the Commission 

published a notice of no objection to the Advance 

Notice. Securities Exchange Act Release No. 94998 

(May 27, 2022). The proposal contained in the 

Proposed Rule Change and the Advance Notice 

shall not take effect until all regulatory actions 

required with respect to the proposal are 

completed. 

4The Options Clearing Corporation (‘‘OCC’’) 

operates a stock loan program as a CCP. NSCC’s 

new service is similar to OCC’s service with one key 

difference: Unlike OCC’s service, which only covers 

transactions between OCC’s direct members (i.e., 

broker to broker), NSCC’s new service would allow 

indirect participation by buy-side clients. See 

Section II.B.(2). 

5A short sale is any sale of securities that a seller 

does not own or has borrowed. See 17 CFR 

242.200(a). 

6Capitalized terms not defined herein are defined 

in the NSCC Rules & Procedures (‘‘Rules’’), 

available at http://www.dtcc.com/∼/media/Files/ 

Downloads/legal/rules/nscc_rules.pdf. 

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–2022–024. 

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–2022–024. 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–CBOE–2022–024, and 

should be submitted on or before June 

27, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–12012 Filed 6–3–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95011; File No. SR–NSCC– 

2022–003] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Order Approving 

Proposed Rule Change To Introduce 

Central Clearing for Securities 

Financing Transaction Clearing 

Service 

May 31, 2022. 

I. Introduction 

On March 28, 2022, National 

Securities Clearing Corporation 

(‘‘NSCC’’) 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

proposed rule change SR–NSCC–2022– 

003. The proposed rule change was 

published for comment in the Federal 

Register on April 19, 2022.3 For the 

reasons discussed below, the 

Commission is approving the proposed 

rule change. 

II. Description of the Proposed Rule 

Change 

A. Overview of Proposal 

NSCC proposes to expand its central 

counterparty (‘‘CCP’’) services to 

include securities financing transactions 

(‘‘SFTs’’), also referred to generally as 

securities lending.4 SFTs are 

transactions in which a securities lender 

loans securities to a securities borrower, 

for a fee. The borrowers typically use 

the borrowed securities to cover short 

sales or fails to deliver that may result 

from either short or long sales.5 A 

lender typically lends securities to 

generate income through the fees that it 

charges. 

As a CCP, NSCC would interpose 

itself between the securities lender and 

borrower and become the counterparty 

to each entity. NSCC would then be 

obligated to complete the transaction, 

that is, to return loaned securities to the 

lender and collateral to the borrower, 

even if a lender or borrower in an SFT 

fails to satisfy its obligations, thereby 

assuming the risk of each entity’s failure 

to perform to each other. 

Specifically, NSCC would novate and 

guarantee SFTs that involve eligible 

securities, meaning equity securities 

(including ETFs) cleared at NSCC with 

a particular per share price, initially set 

at $5 or greater. The service would be 

limited to overnight SFTs (i.e., with a 

one business day term), with the ability 

for the parties to extend an expiring SFT 

into a new transaction. 

The SFT service would be available to 

existing NSCC members.6 In addition, 

NSCC would create two new 

membership categories that would be 

able to submit SFTs for central clearing: 

Sponsoring Members that would 

sponsor institutional clients into NSCC 

and act as a principal to SFTs with their 

clients, and Agent Clearing Members 

that submit SFTs on behalf of 

institutional customers strictly as an 

agent. These two new types of 

membership would allow the proposed 

service to meet the existing market 

practices for SFTs, where different types 

of entities employ different trading 

strategies and relationships to 

accommodate their regulatory and other 

requirements. 

Consistent with its risk management 

for all other transactions in equity 

securities, NSCC would collect margin 

from the lender and borrower for 


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