Document ID: SEC-2019-0860-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2019-06-18T04:00Z

[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28363-28366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12787]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86094; File No. SR-CboeEDGX-2019-037)

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating To Amend the Fat Finger Check With Respect to Limit Orders in 
Rule 21.17

June 12, 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 June 10, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, and 
II below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to

[[Page 28364]]

amend the fat finger check with respect to limit orders in Rule 21.17. 
The text of the proposed rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *

Rules of Cboe EDGX Exchange, Inc.

* * * * *

Rule 21.17. Additional Price Protection Mechanisms and Risk Controls

    The System's acceptance and execution of orders, quotes, and 
bulk messages, as applicable, are subject to the price protection 
mechanisms and risk controls in Rule 21.16, this Rule 21.17 (related 
to all orders other than complex orders), Rule 21.20 (related to 
complex orders) and as otherwise set forth in the Rules. All numeric 
values established by the Exchange pursuant to this Rule will be 
maintained by the Exchange in publicly available specifications and/
or published in a Regulatory Circular. Unless otherwise specified 
the price protections set forth in this Rule, including the numeric 
values established by the Exchange, may not be disabled or adjusted. 
The Exchange may share any of a User's risk settings with the 
Clearing Member that clears transactions on behalf of the User.
    (a) No change.
    (b) Limit Order Fat Finger Check. If a User submits a buy (sell) 
limit order to the System with a price that is more than a buffer 
amount established by the Exchange above (below) the NBO (NBB), or, 
in the case of an order received prior to [9:30 a.m.]the conclusion 
of the RTH opening auction process, [above (below) the midpoint of 
the NBBO at the close of the market on the previous trading day](i) 
the last disseminated NBBO on that trading day, or (ii) the midpoint 
of the prior trading day's closing NBBO, if no NBBO has been 
disseminated on that trading day, the System will reject or cancel 
back to the User the limit order. This check does not apply to bulk 
messages.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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 proposed rule change amends the fat finger check with respect 
to limit orders in Rule 21.17. Current Rule 21.17(b) states if a User 
submits a buy (sell) limit order to the System with a price that is 
more than a buffer amount established by the Exchange above (below) the 
NBO (NBB), or, in the case of an order received prior to 9:30 a.m., 
above (below) the midpoint of the NBBO at the close of the market on 
the previous trading day, the System will reject or cancel back to the 
User the limit order.
    The Exchange recently adopted a global trading hours (``GTH'') 
trading session, which will occur from 8:30 to 9:15 a.m. Eastern Time, 
which the Exchange intends to implement on June 24, 2019.\5\ For 
classes that trade during the GTH trading session, there may be an NBBO 
disseminated prior to 9:30 a.m. Therefore, the Exchange proposes to 
update the fat finger check for limit orders to reflect a GTH trading 
session. Specifically, the Exchange proposes that in the case of an 
order received prior to the conclusion of the RTH opening auction 
process then the fat finger check amount will be the last disseminated 
NBBO on that trading day, or the midpoint of the prior trading day's 
NBBO, if no NBBO has been disseminated on that trading day.
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    \5\ See Securities Exchange Act Release No. 85797 (May 7, 2019), 
84 FR 20920 (May 13, 2019) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change Relating To Amend the 
Exchange's Opening Process and Add a Global Trading Hours Session 
for XSP Options) (SR-CboeEDGX-2019-027). The changes in SR-CboeEDGX-
2019-027 are currently effective but not yet operative; however, the 
proposed rule changes assume operativeness of those effective 
changes.
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    First, the Exchange notes that it is updating the fat finger check 
amount to be the last disseminated NBBO on that trading day (which 
accounts for NBBOs disseminated during GTH),\6\ or the midpoint of the 
prior trading day's closing NBBO, if no NBBO has been disseminated on 
that trading day in order to accommodate the new GTH trading session 
and the fact that there may be an NBBO disseminated prior to 9:30 a.m. 
for classes that will trade during the GTH session. For example, if it 
is 9:25 a.m. the check would use the last disseminated NBBO from the 
GTH session (i.e., on that trading day), and, if no NBBO has been 
disseminated on that trading day then the System would pull the 
midpoint of the prior trading day's closing NBBO, as it currently does 
today. The Exchange also notes that this proposed language is 
substantively identical to that of the corresponding limit order fat 
finger rule under its affiliated exchange, Cboe C2 Exchange, Inc. 
(``C2''), recently filed with the Commission.\7\
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    \6\ See Rule 16.1 which states that a trading day includes both 
trading sessions on that day.
    \7\ See Securities Exchange Act Release No. 86066 (June 7, 2019) 
(SR-C2-2019-015). The changes in SR-C2-2019-015 are currently 
effective but not yet operative; however, the proposed rule changes 
assume operativeness of those effective changes.
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    Second, the Exchange notes that it is also updating the language 
that refers to an order received prior to 9:30 a.m. to refer to an 
order received prior to the conclusion of the RTH opening auction 
process. The Exchange notes that the conclusion of the RTH opening 
auction process occurs within the 9:30 a.m. minute and that the System 
currently applies the limit order fat finger check to orders received 
prior to the conclusion of the RTH opening auction process within this 
minute. Moreover, upon the implementation of the GTH trading session, 
this proposed timeframe will serve to encompass orders received from 
the beginning of the GTH opening process \8\ through the RTH opening 
process. As such, the Exchange is amending this language to more 
accurately reflect the timeframe in which the System already applies 
the fat finger check, and will continue to apply the fat finger check 
upon the implementation of the GTH trading session.
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    \8\ The Exchange notes this includes the queuing period as 
defined under Rule 21.7 which provides for the opening auction 
process.
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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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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

[[Page 28365]]

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) \11\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    In particular, the Exchange believes that by updating the fat 
finger check for limit orders to account for the recently adopted GTH 
trading session, the proposed rule change serves to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system. As described above, the check will function as it does 
today and the proposed change merely provides an added step that the 
System will take in order to account for the fact that there will be 
two trading sessions on the Exchange, one before 9:30 a.m. in which an 
NBBO may be disseminated. In addition to this, the proposed change 
updates language regarding the timeframe in which the System currently 
applies the fat finger check amounts under Rule 21.17(b). Therefore, 
the Exchange believes that by amending rule language to reflect the 
earlier GTH session time and potential NBBO dissemination during that 
session in connection with the fat finger check and by updating 
language to reflect the timeframe in which the System currently applies 
(and will apply with the implementation of GTH) the fat finger check to 
orders it receives, it will remove impediments to and perfect the 
mechanism of a free and open market, thereby protecting investors, by 
increasing transparency of the Exchange's fat finger price protection 
mechanism as it relates to the earlier GTH trading session and current 
System functionality. The Exchange also notes that this proposed change 
is substantively the same as the limit order fat finger check rule of 
its affiliated exchange, C2, recently filed with the Commission. As a 
result, the Exchange believes that the proposed rule change will serve 
to protect investors by providing similar price protection mechanisms 
between the affiliated exchanges, thereby bolstering understanding of 
the affiliated exchanges' rules and functionality for those 
participating across both exchanges.

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 to address competitive issues, but rather to update a 
current price protection mechanism in connection with the addition of a 
GTH trading session. The Exchange does not believe that the proposed 
rule change to update the fat finger check as it relates to the GTH 
trading session will impose any burden on intramarket competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act because it will apply in the same manner to all Users' limit orders 
prior to the conclusion of the RTH opening auction process. 
Furthermore, the Exchange does not believe that the proposed change 
will impose any burden on intermarket competition that that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because the proposed change merely updates a price protection mechanism 
already in place on the Exchange and applicable only to trading on the 
Exchange.

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 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because the proposed rule change is substantively similar to the the 
limit order fat finger check rule of its affiliated exchange, C2, 
recently filed with the Commission.\16\ Thus, as represented by the 
Exchange, the proposed rule change does not introduce any new or novel 
issues. For this reason, the Commission believes that waiver of the 30-
day operative delay is consistent with the protection of investors and 
the public interest. Therefore, the Commission hereby waives the 
operative delay and designates the proposal as operative upon 
filing.\17\
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    \16\ See supra note 7.
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeEDGX-2019-037 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.

[[Page 28366]]

All submissions should refer to File Number SR-CboeEDGX-2019-037. 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-CboeEDGX-2019-
037 and should be submitted on or before July 9, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12787 Filed 6-17-19; 8:45 am]
 BILLING CODE 8011-01-P