Document ID: SEC-2021-1669-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-11-29T05:00Z

[Federal Register Volume 86, Number 226 (Monday, November 29, 2021)]
[Notices]
[Pages 67777-67780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25893]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93646; File No. SR-CBOE-2021-067]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Add a 
Held Order Instruction

November 22, 2021.
    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 November 10, 2021, 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 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 Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to add a held order instruction. The text of the proposed rule change 
is provided below.

(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *

Rule 5.6. Order Types, Order Instructions, and Times-in-Force

    (a)-(b) No change.
    (c) Order Instructions. An ``Order Instruction'' is a processing 
instruction a User may apply to an order (multiple instructions may 
apply to a single order), subject to the restrictions set forth in Rule 
6.8(c) with respect to orders and bulk messages submitted through bulk 
ports and any other restrictions set forth in the Rules, when entering 
it into the System for electronic or open outcry processing and 
includes:
* * * * *

Electronic Only

    An ``Electronic Only'' order is an order a User designates for 
electronic processing, but does not route to PAR for manual handling if 
not eligible for electronic processing.

Held

    A ``held'' order is an order marked ``held'' for which a Floor 
Broker's client does not give the Floor Broker discretion as to the 
price or time at which such order is to be executed or the order was 
received by the Exchange electronically and subsequently routed to a 
Floor Broker or PAR Official pursuant to the User's instructions.
* * * * *

Not Held

    A ``not held'' order is an order marked ``not held'', ``take time'' 
or which bears any qualifying notation giving discretion as to the 
price or time at which such order is to be executed. An order entrusted 
to a Floor Broker will be considered a not held order, unless 
[otherwise specified by a Floor Broker's client]marked ``held'' or the 
order was received by the Exchange electronically and subsequently 
routed to a Floor Broker or PAR Official pursuant to the User's 
instructions. A User may not designate a not held order as Electronic 
Only.
* * * * *

Rule 5.70. Availability of Orders

    (a) Pursuant to Rule 5.6(a), the Exchange may make order types, 
Order Instructions, and Times-in-Force available on a class basis. The 
Exchange may make the following order types, Order Instructions, and 
Times-in-Force available for orders submitted in FLEX Options (``FLEX 
Orders''):
    (1) No change.
    (2) Order Instructions: All Sessions, Attributable, DAC (except for 
FLEX Options with an exercise price that is a percentage of the closing 
value of the underlying equity security or index value, as applicable 
on the trade date or that is Asian or Cliquet-settled), Direct to PAR, 
Electronic Only, Held, Non-Attributable, Not Held, and RTH Only.
* * * * *

Rule 5.83. Availability of Orders

    (a) Simple Orders. Pursuant to Rule 5.6(a), the Exchange may make 
order types, Order Instructions, and Times-in-Force available on a 
class basis for PAR routing for manual handling (and open outcry 
trading). The Exchange may make the following order types, Order 
Instructions, and Times-in-Force

[[Page 67778]]

available for PAR routing for manual handling (and open outcry 
trading):
    (1) No change.
    (2) Order Instructions: AON, Attributable, Compression/PCC, Held, 
Minimum Quantity, MTP Modifier, Non-Attributable, Not Held, Penny 
Cabinet, RTH Only, and Sub-Penny Cabinet.
    (3) No change.
    (b) Complex Orders. The Exchange may make complex orders, including 
security future-option orders, and stock-option orders available for 
PAR routing for manual handling. Other than Index Combo orders, which 
may be submitted for electronic and open outcry handling, a complex 
order with a ratio less than one-to-three (.333) or greater than three-
to-one (3.00) may only be submitted for manual handling and open outcry 
trading. The Exchange may make the follow complex order types available 
for PAR routing for manual handling (and open outcry trading):
    (1) No change.
    (2) Order Instructions: AON, Attributable, Complex Only, 
Compression/PCC, Held, Index Combo, MTP Modifier, Multi-Class Spread, 
Non-Attributable, Not Held, RFC, RTH Only, SPX Combo, and stock-option 
order.
* * * * *

Rule 5.91. Floor Broker Responsibilities

    (a)-(b) No change.
    (c) Discretionary Transactions.
    (1) An order entrusted to a Floor Broker is considered a not held 
order (as set forth in the definition of a ``not held'' order in Rule 
5.6(c)) unless the order is marked as held.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.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.

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

1. Purpose
    The Exchange proposes to add a held order instruction. Currently, 
Rule 5.6(c) permits the Exchange to offer a not held order 
instruction.\5\ A ``not held'' order is an order marked ``not held'', 
``take time'' or which bears any qualifying notation giving discretion 
as to the price or time at which such order is to be executed.\6\ An 
order entrusted to a Floor Broker will be considered a not held order, 
unless otherwise specified by a Floor Broker's client or the order was 
received by the Exchange electronically and subsequently routed to a 
Floor Broker or PAR Official pursuant to the User's instructions.\7\ In 
other words, an order received by a Floor Broker is by default a not 
held order unless the Floor Broker receives instructions to the 
contrary.\8\ Currently, there is no standardized manner in which a User 
may specify on an order that the User wants the order to be handled as 
held when routed to a Floor Broker.\9\
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    \5\ Pursuant to Rules 5.70(a)(2) and 5.83(b)(2), the Exchange 
may make the not held order instruction available for FLEX open 
outcry trading and non-FLEX open outcry trading, respectively.
    \6\ A ``not held'' order generally is one where a customer gives 
a Floor Broker discretion in executing the order, both with respect 
to the time of execution and the price (though the customer may 
specify a limit price), and the Floor Broker works the order over a 
period of time to avoid market impact while seeking best execution 
of the order.
    \7\ A User may not designate a not held order as Electronic 
Only.
    \8\ See Securities Exchange Act Release Nos. 75299 (June 25, 
2015), 80 FR 37700 (July 1, 2015) (SR-CBOE-2015-047); and 78110 
(June 21, 2016), 81 FR 41626 (June 27, 2016) (SR-CBOE-2016-050).
    \9\ See Cboe Options Regulatory Circular RG15-136 (September 30, 
2015). Pursuant to that circular, an order will be considered held 
if a client instructs a Floor Broker that the order is held. 
However, Cboe's system does not currently capture in electronic form 
whether a Floor Broker received such instruction from a client.
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    The proposed rule change adopts a held order instruction. 
Specifically, the proposed rule change defines a ``held'' order as an 
order marked ``held'' for which a Floor Broker's client does not give 
the Floor Broker discretion as to the price or time at which such order 
is to be executed or the order was received by the Exchange 
electronically and subsequently routed to a Floor Broker or PAR 
Official pursuant to the User's instructions.\10\ The proposed rule 
change makes a corresponding change to the definition of a not held 
order in Rule 5.6(c) and Rule 5.91(1)(c) to provide that an order 
entrusted to a Floor Broker is considered a not held order (as set 
forth in the definition of a ``not held'' order in Rule 5.6(c)) unless 
the order is marked as held. The proposed rule change also provides 
that the Exchange may make the held order instruction available for 
FLEX open outcry trading and non-FLEX open outcry trading, for which 
the Exchange may currently make the not held order instruction 
available.\11\ The proposed rule change is consistent with current 
rules, which permit Users to specify that an order not be handled by a 
Floor Broker as ``not held.'' It merely adopts a specified manner in 
which an order must be marked to indicate the client for such order 
does not wish for a Floor Broker to have price and time discretion with 
respect to execution of that order.
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    \10\ See proposed definition of ``held'' in Rule 5.6(c). Unlike 
a not held order, a User may designate a held order as Electronic 
Only, as any order sent for electronic execution is consistent with 
the definition of held. Therefore, the System will accept a held 
Electronic Only order.
    \11\ See proposed Rules 5.70(a)(2) and 5.83(a)(2) and (b)(2), 
respectively.
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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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ 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) \14\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In particular, the Exchange believes the proposed rule change will 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and protect investors by 
eliminating any potential ambiguity regarding how Users may indicate 
that they do not

[[Page 67779]]

want their orders to be treated as not held by Floor Brokers. The 
proposed rule change is consistent with the current not held order 
instruction and makes a corresponding held order instruction available. 
The proposed rule change is consistent with current Rules, which permit 
a User to specify that an order not be handled by a Floor Broker as 
``not held'' but do not describe how Users may make such a 
specification. The proposed rule change merely adopts a specified 
manner in which a client must mark an order to indicate the client does 
not wish for a Floor Broker to have price and time discretion with 
respect to execution of that order. The proposed rule change to make 
the held order instruction available for FLEX open outcry trading and 
non-FLEX open outcry trading will benefit investors, as it will permit 
the Exchange to make this order instruction available for the same 
trading for which the Exchange may currently make the not held order 
instruction available. This, as well as other conforming changes 
described above, will provide consistency throughout the Rules.\15\ The 
proposed rule change is consistent with current rules, which permit 
Users to specify that an order not be handled by a Floor Broker as 
``not held.''
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    \15\ See proposed Rules 5.70(a)(2) and 5.83(a)(2) and (b)(2), 
respectively.
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    Additionally, the proposed rule change will promote just and 
equitable principles of trading by enhancing the Exchange's audit 
trail, which will now capture held instructions in a standardized 
manner and assist the Exchange's regulatory review of orders executed 
in open outcry. The Exchange also believes the proposed rule change is 
consistent with Section 6(b)(1) of the Act,\16\ 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 TPHs 
and persons associated with its TPHs with the Act, the rules and 
regulations thereunder, and the rules of the Exchange. With an enhanced 
audit trail of orders executed in open outcry, the Exchange believes it 
will be able to monitor more comprehensively the trading of these 
orders.
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    \16\ 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 proposed rule change is 
not intended to address competitive issues, as it relates solely to how 
certain orders routed to a Floor Broker on the Exchange's floor for 
open outcry trading should be marked. Additionally, as discussed above, 
the Exchange believes the proposed rule change will enhance the 
Exchange's audit trail with respect to orders executed in open outcry.
    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 the 
proposed held order instruction (like the current not held order 
instruction) will be available to all Users that route held client 
orders to a Floor Broker for open outcry trading on the Exchange's 
trading floor. Currently, a held order instruction must be communicated 
in some way to a Floor Broker, when applicable, and the proposed rule 
change provides a clear, specific, and more streamlined way to do so. 
The Exchange does not believe that the proposed rule change will impose 
any burden on intermarket competition, as it relates solely to how 
orders routed for execution on the Exchange's trading floor should be 
marked. Additionally, as noted above, the proposed held order 
instruction is merely the converse of the already available not held 
order instruction that Users may apply to orders.

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 \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \19\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the 
Commission to 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 so that 
the proposed rule change may become operative immediately. The Exchange 
states that waiver of the operative delay would protect investors and 
the public interest by eliminating, as soon as possible, any potential 
confusion regarding how a User may indicate that an order is held. The 
Exchange further states that the proposed change does not raise any new 
or novel issues. For these reasons, the Commission believes that waiver 
of the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change operative upon filing.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ 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 [email protected]. Please include 
File Number SR-CBOE-2021-067 on the subject line.

[[Page 67780]]

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-2021-067. 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-2021-067 and should be submitted on 
or before December 20, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25893 Filed 11-26-21; 8:45 am]
BILLING CODE 8011-01-P