Document ID: SEC-2019-1790-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-11-29T05:00Z

[Federal Register Volume 84, Number 230 (Friday, November 29, 2019)]
[Notices]
[Pages 65872-65874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25839]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87600; File No. SR-CboeBZX-2019-098]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Paragraph (a) of Rule 11.1 To Allow the Exchange To Accept Stop Orders 
Entered Between 6:00 and 7:00 a.m. Eastern Time

November 22, 2019.
    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 November 19, 2019, Cboe BZX Exchange, Inc. (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared

[[Page 65873]]

by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend paragraph (a) of Rule 11.1 to allow the 
Exchange to accept Stop Orders entered between 6:00 and 7:00 a.m. 
Eastern Time. The text of the proposed rule change is provided in 
Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend paragraph (a) of Rule 11.1 to allow 
the Exchange to accept Stop Orders \3\ entered between 6:00 and 7:00 
a.m. Eastern Time.
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    \3\ A Stop Order is an order that becomes a BZX market order 
when the stop price is elected. A Stop Order to buy is elected when 
the consolidated last sale in the security occurs at, or above, the 
specified stop price. A Stop Order to sell is elected when the 
consolidated last sale in the security occurs at, or below, the 
specified stop price. See Exchange Rule 11.9(c)(16).
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    Paragraph (a) of Rule 11.1 provides that orders entered between 
6:00 a.m. and 7:00 a.m. Eastern Time are not eligible for execution 
until the start of the Early Trading Session,\4\ Pre-Opening Session 
\5\ or Regular Trading Hours,\6\ depending on the Time in Force 
selected by the User.\7\ Paragraph (a) also provides that the Exchange 
will not accept certain orders \8\ entered prior to 7:00 a.m. Eastern 
Time including BZX Market Orders \9\ that are not Eligible Auction 
Orders as defined in Rule 11.23(a)(8).\10\ BZX Market Orders that are 
not Eligible Auction Orders are rejected by the Exchange prior to 7:00 
a.m. Eastern Time because BZX Market Orders are not eligible to trade 
prior to the start of Regular Trading Hours and such orders are 
generally not designated to queue for later entry onto the Exchange's 
order book. Rather, BZX Market Orders that are not Eligible Auction 
Orders are designed to immediately execute at the NBBO when the order 
reaches the Exchange, and thus are generally intended for entry during 
a trading session where continuous trading is occurring. Alternatively, 
other order types and modifiers, such as BZX Market Orders with a Time 
in Force of RHO and Limit Orders,\11\ including Stop Limit Orders,\12\ 
are allowed for entry on the Exchange between 6:00 and 7:00 a.m. 
Eastern Time as those order types and modifiers are consistent with an 
order designated to queue for later entry on to the Exchange's order 
book. Specifically, any RHO order entered prior to the Opening Auction 
meets the definition of an Eligible Auction Order,\13\ and BZX Market 
Orders with a Time in Force of RHO are effectively for use in the 
Opening Auction and are cancelled if not executed in the Opening 
Auction.\14\ Therefore, BZX Market Orders with a Time in Force of RHO 
would be queued until the start of the regular trading session for 
participation in the Opening Auction. Similarly, the stop price of a 
Stop Limit Order can only be triggered by a consolidated last sale 
eligible trade.\15\ Therefore, a Stop Limit Order would be queued until 
the time the stop price of the order is triggered by a consolidated 
last sale eligible trade occurring Regular Trading Hours.
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    \4\ See Exchange Rule 1.5(ee).
    \5\ See Exchange Rule 1.5(r).
    \6\ See Exchange Rule 1.5(w).
    \7\ See Exchange Rule 1.5(cc).
    \8\ Specifically, Exchange Rule11.1(a) provides that BZX Post 
Only Orders, Partial Post Only at Limit Orders, Intermarket Sweep 
Orders (``ISOs''), BZX Market Orders that are not Eligible Auction 
Orders as defined in Rule 11.23(a)(8), Minimum Quantity Orders that 
also include a Time in Force of Regular Hours Only, and all orders 
with a Time in Force of Immediate-or-Cancel (``IOC'') or Fill-or-
Kill (``FOK'') are not accepted if entered prior to 7:00 a.m. 
Eastern Time.
    \9\ A BZX Market Order is an ``order to buy or sell a stated 
amount of a security that is to be executed at the NBBO when the 
order reaches the Exchange. BZX market orders shall not trade 
through Protected Quotations. . .BZX Market Orders are not eligible 
for execution during the Early Trading Session, Pre-Opening Session 
or the After Hours Trading Session.'' See Exchange Rule 11.9(a)(2).
    \10\ Exchange Rule 11.23(a)(8) provides that the term `Eligible 
Auction Order' means any Market on Open (``MOO''), Limit on Open 
(``LOO''), Late Limit on Open (``LLOO''), Market on Close (``MOC''), 
Limit on Close (``LOC''), or Late Limit on Close (``LLOC'') order 
that is entered in compliance with its respective cutoff for an 
Opening or Closing Auction, any Regular Hours Only (``RHO'') order 
prior to the Opening Auction, any limit or market order not 
designated to exclusively participate in the Closing Auction entered 
during the Quote-Only Period of an IPO Auction subject to the below 
restrictions, and any limit or market order not designated to 
exclusively participate in the Opening or Closing Auction entered 
during the Quote-Only Period of a Halt Auction.''
    \11\ A Limit Order is an ``order to buy or sell a stated amount 
of a security at a specified price or better.'' See Exchange Rule 
11.9(a)(1).
    \12\ A Stop Limit Order is ``an order that becomes a limit order 
when the stop price is elected. A Stop Limit Order to buy is elected 
when the consolidated last sale in the security occurs at, or above, 
the specified stop price. A Stop Limit Order to sell becomes a sell 
limit order when the consolidated last sale in the security occurs 
at, or below, the specified stop price.'' See Exchange Rule 
11.9(c)(17).
    \13\ See supra note 12.
    \14\ An order with a Time in Force of RHO is a limit or market 
order that is designated for execution only during Regular Trading 
Hours, which includes the Opening Auction and Closing Auction. See 
Exchange Rule 11.9(b)(7).
    \15\ See supra note 11.
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    As proposed, the amendment would allow the Exchange to accept Stop 
Orders entered between 6:00 and 7:00 a.m. Eastern Time, which is 
consistent with an order designated to queue for later entry on to the 
Exchange's order book. Similar to a Stop Limit Order, the stop price of 
a Stop Order can only be triggered by a consolidated last sale eligible 
trade.\16\ Therefore, a Stop Order can only become a BZX Market Order 
after at least the start of Regular Trading Hours. Further, Stop Orders 
entered on the Exchange between 6:00 and 7:00 a.m. Eastern Time would 
behave similar to Stop Limit Orders between the time of entry up to at 
least the start of Regular Trading Hours.
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    \16\ See supra note 3.
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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.\17\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \18\ requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating,

[[Page 65874]]

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.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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    As discussed above, all Stop Orders are designed to queue until at 
least the start of Regular Trading Hours as such orders are only 
eligible to be elected based on the consolidated last sale set during 
Regular Trading Hours. Therefore, the proposed amendment to allow the 
entry of Stop Orders between 6:00 and 7:00 a.m. Eastern Time would not 
allow such Stop Orders to be elected and execute prior to the start of 
Regular Trading Hours. Prior to the start of Regular Trading Hours, 
Stop Orders entered between 6:00 and 7:00 a.m. Eastern Time would 
behave similar to Stop Limit Orders entered during that time. 
Therefore, the Exchange believes the proposed amendment would 
consistently allow order types and modifiers that are consistent with 
orders designated to queue to be entered on the Exchange between 6:00 
and 7:00 a.m. Eastern Time.
    Additionally, the Exchange believes the proposed amendment would 
allow Members the convenience to enter all Stop Orders and Stop Limit 
Orders between 6:00 and 7:00 a.m. Eastern Time without those orders 
being eligible for election, and consequently execution, until at least 
the start of the Regular Trading Hours. Thus, the proposed amendment 
would provide Members with both greater convenience and flexibility in 
managing their Stop Orders and Stop Limit Orders without impacting how 
those orders trade.

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. Rather, the proposed rule 
change would consistently allow for the entry of order types and 
modifiers that are designated to queue between 6:00 and 7:00 a.m. 
Eastern Time. Stop Limit Orders are currently allowed for entry on the 
Exchange between 6:00 and 7:00 a.m. Eastern Time and behave similar to 
the manner in which a Stop Order would behave prior to the start of 
Regular Trading Hours if allowed entry during that time. The Exchange 
therefore believes that the proposed rule change would increase 
consistency around the operation of the Exchange to the benefit of 
Members and investors as well as provide greater flexibility to Members 
in managing their Stop Orders, without imposing any significant burden 
on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (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 \19\ and 
Rule 19b-4(f)(6) \20\ thereunder.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2019-098 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-CboeBZX-2019-098. 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-CboeBZX-2019-098, and should be 
submitted on or before December 20, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-25839 Filed 11-27-19; 8:45 am]
 BILLING CODE 8011-01-P