Document ID: SEC-2019-0940-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2019-07-03T04:00Z

[Federal Register Volume 84, Number 128 (Wednesday, July 3, 2019)]
[Notices]
[Pages 31944-31946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14160]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86214; File No. SR-CboeEDGX-2019-040]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Amend the Trigger for Its Opening Rotation Process for 
Equity Options

June 27, 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 24, 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 
amend the trigger for its opening rotation process for equity options.
    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.

[[Page 31945]]

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

1. Purpose
    On April 26, 2019, the Exchange filed a rule filing, SR-CboeEDGX-
2019-027, which, among other things, amended its opening auction 
process.\5\ The Exchange notes that it intends to implement the 
proposed changes under SR-CboeEDGX-2019-027 on June 27, 2019.\6\ 
Specifically, the filing amended the events that will trigger the 
opening rotation for equity options pursuant to Rule 21.7(d). Beginning 
June 27, 2019, Rule 21.7(d) will provide that after a time period 
(which the Exchange determines for all classes) following the System's 
observation after 9:30 a.m. of the first disseminated transaction price 
for the security underlying an equity the System will initiate the 
opening rotation for the series in that class.\7\
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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 rule filing is part of Feature Pack 7 in 
connection with the migration of Cboe Exchange, Inc. (``Cboe 
Options'') technology to the same trading platform used by the 
Exchange, Cboe EDGX Exchange, Inc. (``EDGX Options''), and Cboe BZX 
Exchange, Inc. (``BZX Options'') in the fourth quarter of 2019.
    \6\ Id. The Exchange notes that implementation of Feature Pack 7 
was recently postponed via Exchange notice from a roll-out of June 
24, 2019 to June 27, 2019. See Exchange Notice No. C2019062100 
(Updated June 21, 2019).
    \7\ The Exchange circulated an Exchange notice in advance of the 
implementation of the rule changes pursuant to SR-CboeEDGX-2019-027 
describing such rule changes. See Exchange Notice No. C2019050201 
(May 2, 2019). The Exchange also circulated an Exchange notice as a 
reminder of the upcoming rule changes under SR-CboeEDGX-2019-027. 
See Exchange Notice No. C2019061200 (June 12, 2019).
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    Prior to the amendment made pursuant to SR-CboeEDGX-2019-027, the 
System would initiate its opening rotation for a series following the 
first transaction in the security underlying an equity option 
disseminated by the primary market after 9:30 a.m. The Exchange now 
seeks to amend the opening rotation trigger for equity options to 
revert back to the trigger used prior to the SR-CboeEDGX-2019-027 
amendment. The Exchange understands its opening rotation trigger event, 
as amended, is not consistent with general practice in the industry, 
which is to trigger an opening rotation based on disseminated 
transactions from the primary market rather than any market. The 
Exchange notes that the proposed change to reflect the prior opening 
trigger event is the same as the rule language that existed before the 
SR-CboeEDGX-2019-027 amendment, previously filed with the Commission, 
modified only to conform to other rule text under Rule 21.7(d) amended 
by SR-CboeEDGX-2019-027 that the Exchange does not intend to alter.
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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    The Exchange believes that the proposed rule change will serve to 
remove impediments to and perfect the mechanism of a free and open 
market and national market system because it will realign the trigger 
for its opening rotation for equity options with the trigger used by 
most other options exchanges.\11\ The proposed change will benefit 
investors, as it will create consistency throughout the industry and 
will implement an opening rotation trigger that was previously in place 
under the Exchange Rules and thus, previously filed with the Commission 
and already familiar to market participants.
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    \11\ See Rules of Nasdaq BX, Chapter VI, Sec. 8(b); and Nasdaq 
Stock Market Options Rules, Chapter VI, Sec. 8(b). See also http://www.nasdaqtrader.com/Content/BXOptions/BXOptions_FAQs.pdf; and 
http://www.nasdaqtrader.com/content/ProductsServices/Trading/OptionsMarket/options_market_faqs.pdf.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed change will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed rule change will impose any burden on intramarket 
competition that is not necessary in furtherance of the purposes of the 
Act, because the proposed opening trigger will apply in the same manner 
to all equity options. The proposed rule change impacts a System 
process that occurs prior to the opening of trading, and merely 
modifies when the System will initiate an opening rotation. The 
Exchange also does not believe that the proposed change will impose any 
burden on intermarket competition that is not necessary in furtherance 
of the purposes of the Act, because use of the first disseminated 
transaction price from the primary market as a trigger for the opening 
rotation is consistent with the rules of other options exchanges \12\ 
and with the Exchange Rules in place prior to the amendment made 
pursuant to SR-CboeEDGX-2019-027.
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    \12\ Id.
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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.

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 \13\ and Rule 19b-4(f)(6) 
thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to

[[Page 31946]]

Rule 19b-4(f)(6)(iii) \16\ 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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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 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 will implement functionality relating 
to the opening rotation trigger for equity options that was previously 
in place on the Exchange. As such, waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest 
as the proposed rule change will implement an opening rotation trigger 
that was previously in place under an Exchange Rule that is already 
familiar to market participants. 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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    \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-2019-040 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-CboeEDGX-2019-040. 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-2019-040 and should be 
submitted on or before July 24, 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. 2019-14160 Filed 7-2-19; 8:45 am]
BILLING CODE 8011-01-P