Document ID: SEC-2019-0520-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-04-18T04:00Z

[Federal Register Volume 84, Number 75 (Thursday, April 18, 2019)]
[Notices]
[Pages 16304-16309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07826]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85642; File No. SR-CboeBZX-2019-025]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Chapter 22 of the Exchange's Rulebook

April15, 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 April 8, 2019, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'') 
proposes to amend Chapter 22 of the Exchange's rulebook. The text of 
the proposed rule change is provided in Exhibit 5. [sic]
    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 harmonize its rules within Chapter 22 
(Market Participants) that pertain to Options Market Maker requirements 
to that of its affiliated exchange, Cboe C2 Exchange, Inc. (``C2'').\5\ 
Specifically, the Exchange proposes to conform its Rule 22.3 
(Continuing Options Market Maker Registration) to C2 Rule 8.2 (Market-
Maker Class Appointments), which allows for Market Makers to select a 
class appointment. In doing so, the Exchange also proposes to amend its 
definition of ``class of options'' under Rule 16.1 to be consistent 
with C2's definition under C2 Rule 1.1. Additionally, the Exchange 
wishes to amend language in Rules 22.2 (Options Market Maker 
Registration), 22.4 (Good Standing for Market Makers), 22.5 
(Obligations of Market Makers) and 22.6 (Market Maker Quotations) to be 
substantially similar to the language of the corresponding rules within 
C2 Chapter 8 (Market Makers), retaining only intended differences 
between it and C2. The Exchange also proposes other various non-
substantive changes to Rules 22.2 through 22.6 which will serve to 
harmonize its rules with the corresponding C2 rules, as well as 
simplify or clarify its Market Maker rules, delete duplicative rule 
provisions, conform paragraph numbering and lettering throughout the 
rules. Additionally, the Exchange proposes a substantive change to its 
current continuous quoting requirement for Market Makers under Rule 
22.6(d), which is described in detail below. This proposed rule change 
to the continuous quoting requirement is based on existing Nasdaq PHLX 
LLC (``Phlx''), Nasdaq ISE, LLC (``ISE''), Nasdaq MRX, LLC (``MRX'') 
and Nasdaq GEMX, LLC (``GEMX'') rules \6\ previously filed with the 
Commission. It also intends to harmonize the proposed quoting 
requirements across BZX Options and its affiliated exchanges, C2 and 
Cboe EDGX Exchange, Inc. (``EDGX Options'').\7\ Overall, the Exchange 
believes that having substantially the same Market Maker rules and 
requirements across exchanges will reduce the compliance burden and 
confusion for Market Makers that are members of multiple exchanges.
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    \5\ The Exchange notes that its affiliated exchange, Cboe EDGX 
Exchange, Inc. (``EDGX Options'') is simultaneously proposing to 
harmonize its Options Market Maker rules with that of C2.
    \6\ See Phlx Rule 1081(c); ISE Rule 804(e); MRX Rule 804(e); and 
GEMX Rule 804(e). See also Securities Exchange Act Release No. 83209 
(May 10, 2018), 83 FR 22717 (May 16, 2018) (SR-Phlx-2018-22) (Order 
Granting Approval of Proposed Rule Change to Amend Phlx's Quoting 
Requirements, Among Other Changes) (SR-Phlx-2018-22).
    \7\ The Exchange notes that C2 and EDGX Options are 
simultaneously proposing the same continuous quoting requirements.
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    In particular, the proposed rule change amends Rule 22.2(c), which 
permits the Exchange to impose limits to the number of Members that may 
become Market Makers based on objective factors, including system 
constraints and capacity restrictions. Under the proposed rule, the 
Exchange may not impose such limits until the proposed limits and 
objective standards for the limits are reviewed and approved by the 
Commission. This provision is the same as C2 Rule 8.1(c). The proposed 
rule change adds Rule 22.2(d), which states that a Member or 
prospective Member adversely affected by an Exchange determination 
under this Chapter 22, including the Exchange's termination or 
suspension of a Member's status as a Market Maker or of a Market 
Maker's appointment to a class, may obtain a review of such 
determination in accordance with the provisions of Chapter 10 (Adverse 
Action). The Exchange notes that because the remaining rules in Chapter 
22 contain various provisions that permit the Exchange to make 
determinations which would be subject to review under Chapter 10, it is 
appropriate to explicitly reference Chapter 10 in proposed Rule 
22.2(d), applicable to the entire Chapter 22. This provision is the 
same as C2 Rule 8.1(d).
    The proposed rule change modifies rule provisions throughout 
Chapter 22 to clarify the distinction between Market Maker registration 
and appointment. This harmonizes the Exchange's rules with the 
registration and appointment requirement rules under Chapter 8 of C2. 
In particular, an

[[Page 16305]]

Options Member may already register as a Market Maker pursuant to Rule 
22.2(a). Proposed Rule 22.3(a) allows a registered Market Maker to 
select appointments to classes, rather than registering \8\ for a 
series. Under the proposed class appointments, a Market Maker obtains 
Market Maker treatment by agreeing to and satisfying obligations in its 
appointed classes. This proposed change is consistent with C2 Rule 
8.2(a). The proposed rule change makes corresponding changes to reflect 
the application of Market Maker obligations to appointed classes to 
Rule 22.4 (Good Standing for Market Makers), Rule 22.5 (Obligations of 
Market Makers) and Rule 22.6 (Market Maker Quotations). The proposed 
change also makes corresponding changes within Rule 21.1(l) to reflect 
that a Market Maker with an appointment in a class may designate a bulk 
message for that class as Post Only or Book Only, as well as a 
reference to that same class regarding User designation. This update is 
consistent with C2's corresponding Rule 6.8(c). The proposed rule 
change also renames Rule 22.3 to be ``Market Maker Class 
Appointments'', reflecting the fact that the rule generally describes 
how, as proposed, a Market Maker may obtain appointments to classes, 
rather than continuing Market Maker registration. Under proposed Rule 
22.3(b) Market Makers may select their own class appointments through 
the same electronic interface process in which they currently register 
for series of options. This is the same appointment process as 
prescribed in C2 Rule 8.2(b). Proposed Rule 22.3(c) references the 
Exchange's ability to limit Market Maker appointments pursuant to 
proposed Rule 22.2(c), as described above. This corresponds to C2 Rule 
8.2(d). The Exchange is not proposing to adopt a provision that 
corresponds to C2 Rule 8.2(c), which provides that a ``Market Maker's 
appointment in a class confers the right of the Market Maker to quote 
(using order functionality) in that class'', as BZX rules do not 
provide for separate quoting functionality in an appointed class. BZX 
offers order and bulk message functionality (similar to quoting 
functionality), which may be used by all Users.\9\ Therefore, the 
Exchange believes the adoption of this paragraph to be unnecessary. 
Additionally, the Exchange is not proposing to adopt a provision that 
corresponds to C2 Rule 8.3 (Market-Maker Class Appointment Costs), 
which describes the appointment costs per Trading Permit, as Trading 
Permits and appointment costs are specific to C2 and do not apply to 
BZX Options.
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    \8\ The Exchange notes that the term ``registering'' to make 
markets in a series currently corresponds to the manner in which C2 
uses and applies the term ``appointment'' to make markets in 
classes.
    \9\ The Exchange notes that C2 is simultaneously proposing to 
delete its Rule 8.2(c) as it has recently implemented quoting 
functionality available to all Users, including Market-Makers.
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    In order to provide for consistency across the Exchange and C2 
regarding Market Maker obligations and appointment to classes, the 
Exchange proposes to amend its definitions under Rule 16.1(a)(14) for 
the term ``class of options'', and under Rule 16.1(a)(56) for the term 
``series'' or ``series of options'' to be the same as C2's definitions. 
Currently, the Exchange defines a class of options as options of the 
same type. Type is defined as either a put or a call. However, the term 
class is generally understood to include both puts and calls, which are 
types of series, not separate classes, making this definition outdated. 
Specifically, it is understood that options with the same exercise 
price and expiration date that are puts constitute one series, and 
options with the same exercise price and expiration date that are calls 
constitute another series. The Exchange thus proposes to amend the 
definition of class to mean all options contracts with the same unit of 
trading covering the same underlying security or index. The proposed 
amendment also adds that options may cover an index, which are 
currently provided for on the Exchange, and that the term ``class'' may 
be used interchangeably with ``class of options'' because references to 
``class'' are already made throughout the Exchange's rules, which 
inherently refers to ``class of options'' as this definition pertains 
only to activity on BZX Options. This amended definition is consistent 
with the definition of class under C2 Rule 1.1 (Definitions). The 
Exchange thus believes that this change will serve to provide clarity 
and reduce confusion across the affiliated exchanges' rules, 
particularly regarding a Market Maker's understanding of its 
obligations to its proposed appointed classes. In line with this 
change, the Exchange also amends its definition of ``series of 
options'' to clarify that a series consists of options of the same 
type, as described in detail above. This is consistent with the 
definition under C2 Rule 1.1.
    The proposed rule change deletes current Rule 22.4(a)(2), which 
states a Market Maker must continue to satisfy the Market Maker 
qualification requirements specified by the Exchange. The Exchange 
notes that this is redundant of the language in subparagraph (a)(1). 
Subparagraph (a)(1) states that a Market Maker must continue to meet 
the general requirements for Members set forth in Chapter 2 and Market 
Maker requirements set forth in Rule 22.2 (which is a proposed 
amendment replacing reference to Rule 11.5 as Rule 22.2 covers BZX 
Options Market Maker registration, relevant to Chapter 22, whereas Rule 
11.5 covers Market Maker registration for BZX Equities). These are 
generally the only requirements applicable to qualify as a Market 
Maker. C2 Rule 8.4(a) similarly does not contain this provision. The 
proposed changes to Rule 22.4(b) are non-substantive modifications that 
mirror language in C2's corresponding Rule 8.4 (Good Standing for 
Market-Makers). As stated above, the proposed changes to Rule 22.5 
consist of amending language to reflect a Market Maker's class 
appointment, rather than registration to a series, as well as non-
substantive changes to reflect the language of C2 Rule 8.5.
    Current Rule 22.6 (Market Maker Quotations) describes requirements 
applicable to Market Maker quotes. The proposed rule change moves Rule 
22.6(c) to proposed Rule 22.6(a), which mirrors the order of 
corresponding provisions under C2 Rule 8.6, and adds exceptions to firm 
quotes under proposed Rule 22.6(a) that are the same as the exceptions 
under corresponding C2 Rule 8.6(a). These proposed exceptions to a 
Market Maker's firm quote include system malfunction, unusual market 
conditions, and quotes during the pre-open. The proposed rule change 
adjusts the lettering of current Rule 22.6(a) through Rule 22.6(b) 
accordingly.
    The Exchange also proposes to amend a Market Maker's continuous 
quoting obligations under Rule 22.6 based on existing Phlx, ISE, MRX 
and GEMX rules,\10\ previously filed with the Commission. The proposed 
amendments to Rule 22.2(d) are consistent with the continuous quoting 
requirement provisions on other exchanges.\11\ Specifically, current 
Rule 22.6(d)(1) provides that a Market Maker must make markets on a 
continuous basis in at least 75% of the option series in which it is 
registered while current Rule 22.6(d)(3) provides that a Market Maker 
fulfills the requirement if the Market Maker provides two-sided quotes 
90% of the time in an appointed series on a given trading day, or such 
higher percentage as the Exchange may announce in advance. The proposed 
rule change to 22.6(d) requires a Market Maker to continuously enter 
bids and offers in series in its appointed classes

[[Page 16306]]

in 60% of the cumulative number of seconds, or such higher percentage 
as the Exchange may announce in advance, for which that Market Maker's 
appointed classes are open, excluding any adjusted series, any intra-
day add-on series on the day during which such series are added for 
trading, any Quarterly Option Series and any series with an expiration 
of greater than 270 days. Additionally, the proposed change amends 
current subparagraph (d)(3) (proposed paragraph (d)(1)) to provide for 
the way in which the Exchange calculates this requirement and is 
explicit in stating that quoting is not required in every appointed 
class. An example of the proposed calculation is presented below:
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    \10\ See supra note 6.
    \11\ Id.
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    Market-Maker A (``Firm A'') \12\ has selected an appointment to 
quote option class U, in which options U1, U2, U3, U4, and U5 are open 
for trading. Firm A also has selected appointments in options classes V 
and W.
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    \12\ The Exchange notes that a Market-Maker may use multiple 
Executing Firm IDs (``EFIDs'') to submit quotes in a class. The 
quoting time from all of a Market-Maker EFIDs' will be considered 
together when determining compliance with this obligation.

Option U1 opened at 09:30:00 \13\ and closed at 16:00:00
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    \13\ All times in example calculation in Eastern Time.
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Firm A quoted U1 at 09:35:30 @13.00(10)-15.00(10)
Firm A updated quote in U1 at 09:50:31 @10.00(10)-15.00(20)
Firm A purged quote at 15:55:40
Total quoted time for U1 is: 15:55:40-09:35:30 = (15-9)*3600 + (55-
35)*60 + (40-30) = 22810 (seconds)
Total available quote time for U1 is: 16:00:00-09:30:00 = (16-9)*3600 + 
(60-30)*60 + (00-00) = 270000 (seconds)

Option U2 opened at 09:30:00 and closed at 16:00:00
Firm A quoted U2 at 10:05:30 @13.00(10)-15.00(10)
Firm A updated quote in U2 at 11:00:01 @11.00(10)-16.00(20)
Firm A purged quote at 15:05:40
Total quoted time for U2 is: 15:05:40-10:05:30 = (15-10)*3600 + (65-
05)*60 + (40-30)= 21610 (seconds)

Total available quote time for U2 is: 16:00:00-09:30:00 = (16-9)*3600 + 
(60-30)*60 + (00-00) = 27000 (seconds)

Option U3 opened at 09:30:00 and closed at 16:15:00
Firm A quoted U3 at 11:10:21 @21.00(10)-24.00(20)
Firm A purged quote at 15:15:05
Total quoted time for U3 is: 15:15:05-11:10:21 = (15-11)*3600 + (75-
10)*60 + (65-21) = 18344 (seconds)
Total available quote time for U3 is: 16:01:20-09:40:02 = (16-9)*3600 + 
(75-30)*60 + (00-00) = 27900 (seconds)

Option U4 opened at 9:30:00 and closed at 16:00:00
Firm A quoted U4 at 09:34:29 @35.00(10)-37.00(10)
Firm A updated quote in U4 at 10:30:21 @31.00(10)-37.00(20)
Firm A purged quote in U4 at 15:59:34
Total quoted time for U4 is: 15:59:34-09:34:29 = (15-09)*3600 + (59-
34)*60 + (34-29) = 23105 (seconds)
Total available quote time is: 16:00:00-09:30:00 = (16-9)*3600 + (60-
30)*60 + (00-0) = 27000 (seconds)

Option U5 opened at 9:30:00 and closed at 16:00:00
Firm A did not quote U5 thus, the total quoted time for U5 will be: 0 
(seconds)
Total available quote time is: 16:00:00-09:30:00 = (16-9)*3600 + (60-
30)*60 + (00-00) = 27000 (seconds)
Total time Firm A quoted class U: 22810 + 21610 + 18344 + 23105 + 0 = 
85869 (seconds)
Total eligible quoting time for Firm A on class U: 27000 + 27000 + 
27900 + 27000 + 27000 = 135900 (seconds)

Similarly assume:
Total time for Firm A quoted class V: 80983(seconds)
Total eligible quoting time for Firm A on class V: 84515 (seconds)
Total time for Firm A quoted class W: 0(seconds)
Total eligible quoting time for Firm A on underlying W: 46513 (seconds)
Then the total quoting percentage for Firm A is: (85869 + 80983 + 0)/
(135900 + 84515 + 46513) = 156852/266928 = 62.5%

    As stated, the current rule requires a Market Maker to quote 75% of 
the series in which it is registered for 90% of each trading day. By 
comparison, the proposed rule change permits a Market Maker to quote 
any percentage of appointed classes so long as the Market Maker meets 
the requirement that it enters quotes aggregating 60% of the cumulative 
seconds across the total seconds that its appointment classes are open 
for trading. The proposed rule explicitly provides that a Market Maker 
does not necessarily have to quote every appointed class. The Exchange 
believes the proposed rule better accommodates the occasional issues 
that may arise in a particular class, whether technical or manual. For 
example, an issue may arise on the Market Maker's side in which there 
is a glitch in its systems or a manual computing error that temporarily 
disrupts quoting ability. The Exchange notes that the existing 
requirement may at times discourage liquidity in particular classes 
because a Market Maker is forced to focus on a momentary technical 
lapse in order to meet the higher current thresholds, rather than using 
the appropriate resources to focus on the classes that need and consume 
additional liquidity. The proposed rule maintains the language 
(currently in subparagraph (b)(3)) that the Exchange may announce in 
advance a higher percentage than the proposed 60% of the cumulative 
number of seconds requirement, which the Exchange believes may be 
appropriate on occasions when doing so would be in the interest of a 
fair and orderly market. This discretion is the same in the 
corresponding rules of Phlx, ISE, MRX, and GEMX.\14\
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    \14\ See supra note 6.
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    The proposed rule change also moves the continuous quoting 
obligation provisions to the introduction of Rule 22.6(d) from current 
subparagraphs (d)(1) and (d)(3) and the same quoting exclusions from 
subparagraph (d)(6). As such, the proposed rule change deletes the 
language in current subparagraph (d)(3) regarding the current 
continuous quoting obligation, the language in subparagraph (d)(6) 
regarding series excluded, as well as the remaining language in 
subparagraph (d)(6) which is consistent with C2 Rule 8.6. Additionally, 
the proposed rule change incorporates the exclusion of any intra-day 
add-on series on the day during which such series are added for 
trading. This exclusion is consistent with corresponding C2 Rule 8.6. 
The proposed change also amends the current quoting exclusion of any 
series with an expiration of nine months or greater to an expiration of 
greater than 270 days. The Exchange notes that Market Makers generally 
already monitor expirations by a defined count of 270 days, as opposed 
to a nine month count in which the number of days continuously varies. 
Therefore, this proposed change intends to align the Exchange's rules 
with current industry practice.\15\
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    \15\ The Exchange notes that C2 and EDGX Options are 
simultaneously proposing to amend their corresponding rules to 
exclude any series with an expiration of greater than 270 days.
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    Furthermore, the proposed rule change deletes the language in 
current subparagraph (d)(3) (proposed subparagraph (d)(1)), which 
states that a Market Maker shall be deemed to have fulfilled the 
continuous quoting requirement if the Market Maker provides quotes for 
the percentage of the time that it is required to provide quotes on a 
given trading day, as it is

[[Page 16307]]

redundant of the language in proposed Rule 22.6(d). The proposed rule 
change also makes non-substantive changes to the remaining language in 
proposed subparagraph (d)(1) to conform with corresponding C2 Rule 
8.6(d)(2), and modifies language in proposed subparagraphs (d)(2) and 
(d)(3) (current subparagraphs (d)(4) and (d)(5)) to reflect the form 
and substance in that of corresponding C2 Rules 8.6(d)(1) and 
8.6(d)(4), as well as the proposed continuous quoting percentage 
obligation where applicable. Additionally, the proposed rule change 
moves current subparagraph (d)(2) to proposed Rule 22.6(e), and current 
Rule 22.6(e) to proposed Rule 22.6(f). The revised language and 
paragraph lettering mirrors that of C2 corresponding Rule 8.6(e) and 
Rule 8.6(f).
    As proposed, the Exchange's Market Maker requirements and quoting 
obligations are substantially the same as current C2 Market-Maker 
requirements and obligations. Importantly, the proposed change 
incorporates C2's Chapter 8 Market Maker obligations to an appointed 
class, in lieu of the current registration to a series. Additionally, 
the Exchange amends its continuous quoting requirements to be 
substantially similar to the requirements under other exchanges' 
rules.\16\ The Exchange believes that proposed amendments to its 
quoting requirements are reasonable because these requirements are 
already in place on other options exchanges.\17\ The Exchange notes 
that the proposed change to continuous quoting requirements creates a 
clear, affirmative Market Maker obligation to hold themselves out as 
willing to buy and sell securities for their own account on a 
continuous basis, which justifies favorable Market Maker treatment and 
will continue to provide customer trading interest a net benefit. The 
Exchange further believes having consistent Market Maker requirements 
and obligations in the BZX and C2 Rules, as well as with other 
exchanges, will simplify the regulatory requirements for its Members 
that are active across multiple exchanges.
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    \16\ See supra note 6.
    \17\ See supra note 7. The same quoting requirements will be 
incorporated into C2 and EDGX Options rules.
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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.\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.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ Id.
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    In particular, the Exchange believes the proposed rule change will 
contribute to the protection of investors and the public interest by 
having rules related to Market Maker registration, appointments, and 
obligations consistent among BZX Options and its affiliated exchanges, 
C2 and EDGX Options,\21\ as well as by bolstering participants' 
collective understanding of the Exchange's rules and the rules of its 
affiliated exchanges. The proposed rule change makes a clear 
distinction between Market Maker registration and appointments to 
classes in which they are obligated to make markets, and aligns the 
Exchange Rules with the corresponding C2 rules. The Exchange notes that 
this proposed change to have Market Maker class appointments rather 
than series appointments does not propose new Market Maker obligations 
as Market Makers currently quote most series of options within a class. 
Therefore, the Exchanges believes the proposed change will not 
significantly alter Market Maker obligations nor impose any significant 
additional burden. The Exchange believes the proposed appointment to 
classes, along with the amended definitions of class and series, 
promotes consistency in Market Maker obligations and understanding of 
the rules across BZX Options and its affiliated exchange, C2.\22\ The 
Exchange believes this will result in greater uniformity and less 
burdensome regulatory compliance. As such, the Exchange believes 
maintaining uniformity in class and series definitions, Market Maker 
class appointments and their obligations to such appointments will 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities and will remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
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    \21\ See supra note 5 and note 7.
    \22\ As well as EDGX Options. See supra note 5.
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    The Exchange believes the proposed rule change to amend Market 
Makers' continuous quoting obligations will remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system. With respect to continuous quoting obligations, the proposed 
rule change seeks to conform the quoting obligations to that of the 
rules of other exchanges.\23\ The Exchange currently requires a Market 
Maker to quote in at least 75% the options series in which the Market 
Maker is registered during 90% of the trading day. The Exchange 
believes that applying a Market Maker's cumulative quoting time to the 
Market Maker's aggregate appointed classes to meet a threshold of 60% 
of the cumulative seconds its appointed classes are open for trading 
(like that of the current requirements on other exchanges) is less 
stringent than the Exchange's current requirement because of the lower 
quoting time threshold and because the proposed requirement does not 
consider a percentage of its appointed classes, so long as the overall 
60% time requirement is met. Further, the Exchange notes that the 
current continuous quoting requirement potentially discourages 
liquidity at times when a Market Maker is forced to focus on making up 
for a momentary lapse in a particular class rather than allocating 
appropriate resources to focus on the classes that need and consume 
additional liquidity, and then allowing a Market Maker to continue 
quoting in the class that experienced a lapse after correcting the 
applicable issue.\24\ The Exchange believes that this rule change 
better accommodates these occasional lapses, whether technical or 
manual, and enables a Market Maker to provide appropriate liquidity 
commensurate with the needs of its appointed classes. Moreover, the 
Exchange believes that it can better attract Market Makers, add 
liquidity, and grow its market to the benefit of all investors, if its 
quoting obligation is more aligned with that of other exchanges. The 
proposed rule change supports the quality of the

[[Page 16308]]

Exchange's market by helping to ensure that Market Makers will continue 
to be obligated to quote in a percentage of their appointed classes. 
Ultimately, the benefit the proposed rule change confers upon Market 
Makers is offset by the continued responsibilities to provide 
significant liquidity to its appointed classes to the benefit of all 
market participants. The Exchange believes that the proposed change to 
continuous quoting requirements creates a clear, affirmative Market 
Maker obligation to hold themselves out as willing to buy and sell 
securities for their own account on a continuous basis, which justifies 
favorable Market Maker treatment and will continue to provide customer 
trading interest a net benefit. The Exchange further notes that the 
proposed rule text is consistent with the Act because the quoting 
obligations are substantially the same as quoting obligations on Phlx, 
ISE, MRX, and GEMX today, previously filed with the Commission.\25\ 
Additionally, the Exchange believes the proposed rule change excluding 
any series with an expiration greater than 270 days, as opposed to nine 
months or greater, from a Market Maker's quoting obligations is in line 
with the way in which Market Makers currently monitor expiration. As a 
result, the Exchange believes that this change will foster cooperation 
and coordination with persons engaged in regulating securities, as well 
as facilitating transactions in securities. The proposed change will 
reduce confusion by codifying an industry practice already in place and 
harmonizing expiration time across the Exchange and its affiliated 
exchanges.\26\ The Exchange also notes that the proposed changes are 
reasonable and do not affect investor protection because the proposed 
changes do not present any novel or unique issues, as they have either 
been previously filed with the Commission or are codifying an industry 
practice currently in place.
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    \23\ See supra note 6.
    \24\ See also Exchange Rule 22.6(d)(4) (proposed Rule 
22.6(d)(2)). The Exchange already accounts for technical failure or 
limitation due to the automated system for order execution and trade 
reporting owned and operated by the Exchange (``System'').
    \25\ See supra note 6.
    \26\ See supra note 12.
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    To the extent a proposed rule change within Chapter 22 is based on 
an existing C2 rule within C2 Chapter 8, the language of the Exchange 
rules and C2 rules may differ where necessary to conform to existing 
Exchange rule text or to account for details or descriptions included 
in the Exchange's rules but not in the applicable C2 rules. Where 
possible, the Exchange has substantively mirrored C2 rules, as it 
believes consistent rules will simplify the regulatory requirements and 
increase the understanding of the Exchange's operations for Members 
that are also participants on C2, as well as on EDGX Options, which is 
simultaneously proposing the same changes. The proposed rule change 
will provide greater harmonization between the rules of BZX Options and 
its affiliated exchanges,\27\ resulting in greater uniformity and less 
burdensome and more efficient regulatory compliance. As such, the 
proposed rule change will foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and will 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \27\ See supra note 5.
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    The Exchange also believes that the proposed amendments will 
contribute to the protection of investors and the public interest by 
making the Exchange's rules easier to understand, standing alone and 
collectively with its affiliated exchanges' rules.\28\ In addition, the 
proposed rule change makes other non-substantive changes throughout the 
rules that will protect investors and benefit market participants, as 
these changes simplify or clarify rules, delete duplicative rule 
provisions, conform paragraph numbering and lettering throughout the 
rules, use plain English, and conform language to corresponding C2 
rules where feasible.
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    \28\ Id.
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    Additionally, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(1) of the Act,\29\ which provides that the 
Exchange be organized and have the capacity to be able to carry out the 
purposes of the Act and to enforce compliance by the Exchange's Members 
and persons associated with its Members with the Act, the rules and 
regulations thereunder, and the rules of the Exchange. As stated, the 
proposed rule change conforms its Options Market Maker rules to be 
substantially similar to the Market Maker rules of its affiliated 
exchange, C2. Moreover, the proposed change to a Market Maker's 
continuous quoting requirements will serve to harmonize the quoting 
requirement for Market Makers across its affiliated exchanges, C2 and 
EDGX Options that are also proposing the same requirements. The 
Exchange thus believes these proposed changes create uniformity, which 
allows for the Exchange to organize consistently with its affiliated 
exchanges and to more easily enforce compliance by participants on the 
multiple affiliated exchanges.
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    \29\ 15 U.S.C. 78f(b)(1).
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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 Exchange reiterates that 
a majority of the proposed rule change is intended to harmonize the 
Exchange rules with that of its affiliated exchange, C2. Thus, the 
Exchange believes this proposed rule change will reduce the burden on 
Exchange participants by providing consistent rules among affiliated 
exchanges. The harmonizing proposed rule changes in this filing conform 
to the approved rules of C2, which have already been found to be 
consistent with the Act.
    Additionally, the Exchange believes that the proposed rule change 
to a Market Maker's continuous quoting requirements does not affect 
intramarket competition. The proposed change applies an affirmative 
obligation to all Market Makers to hold themselves out as continuously 
willing to buy and sell options for their own account, justifying 
favorable treatment and benefitting the trading interest of all 
customers. The Exchange believes that the proposed change to continuous 
quoting requirements does not affect intermarket competition, as this 
proposal is based on other exchanges' rules previously filed with the 
Commission.\30\ The Exchange also notes that to the degree that other 
exchanges have varying continuous quoting obligations for Market 
Makers, market participants on other exchanges are welcome to become 
Options Market Makers on BZX Options if they determine that this 
proposed rule change has made market making on BZX Options more 
attractive or favorable. Finally, the Exchange believes that the 
proposed rule change will relieve any burden on market participants 
because it serves to provide Market Makers with affirmative quoting 
requirements that ensure each appointed class will receive appropriate 
liquidity to the benefit of all market participants who interact with 
that liquidity.
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    \30\ See supra note 6.
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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.

[[Page 16309]]

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 \31\ and 
Rule 19b-4(f)(6) \32\ 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.
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    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 17 CFR 240.19b-4(f)(6).
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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 [email protected]. Please include 
File Number SR-CboeBZX-2019-025 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-2019-025. 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-2019-025 and should be submitted 
on or before May 9, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07826 Filed 4-17-19; 8:45 am]
 BILLING CODE 8011-01-P