[Federal Register Volume 84, Number 158 (Thursday, August 15, 2019)]
[Notices]
[Pages 41779-41788]
[FR Doc No: 2019-17488]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86621; File No. SR-CboeEDGX-2019-047]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing of a Proposed Rule Change To Adopt Rule 21.21 (Solicitation
Auction Mechanism)

August 9, 2019.
    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 July 31, 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, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
adopt Rule 21.21. The text of the proposed rule change is provided in
Exhibit 5.
    The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/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
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(``Cboe Global''), which is the parent company of Cboe Exchange, Inc.
(``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2''), acquired the
Exchange, Cboe EDGA Exchange, Inc. (``EDGA''), Cboe BZX Exchange, Inc.
(``BZX or BZX Options''), and Cboe BYX Exchange, Inc. (``BYX'' and,
together with C2, Cboe Options, the Exchange, EDGA, and BZX, the ``Cboe
Affiliated Exchanges''). The Cboe Affiliated Exchanges are working to
align certain system functionality, retaining only intended differences
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its technology to the same
trading platform used by the Exchange, C2, and BZX Options in the
fourth quarter of 2019. The proposal set forth below is intended to add
certain functionality to the Exchange's System that is available on
Cboe Options in order to ultimately provide a consistent technology
offering for market participants who interact with the Cboe Affiliated
Exchanges. Although the Exchange intentionally offers certain features
that differ from those offered by its affiliates and will continue to
do so, the Exchange believes that offering similar functionality to the
extent practicable will reduce potential confusion for Users.
    The purpose of the proposed rule change is to adopt the
Solicitation Auction Mechanism (``SAM''), which is a solicited order
mechanism for larger-sized orders. SAM will provide an additional
method for market participants to effect orders in a price improvement
auction. The proposed rule change is similar to the solicited order
mechanism of Cboe Options and other options exchanges. Many aspects of
the proposed rule change are similar to the corresponding aspects of
the Automated Improvement Mechanism (``AIM''), which is the Exchange's
current electronic crossing mechanism. The Exchange believes the
similarity of SAM to the Exchange's AIM mechanism and the mechanisms of
other exchanges will allow the Exchange's proposed price improvement
functionality to fit seamlessly into the options market and benefit
market participants who are already familiar with this similar
functionality. The Exchange also believes this will encourage Users to
compete vigorously to provide the opportunity for price improvement for
larger-sized customer orders in a competitive auction process.
    An Options Member (the ``Initiating Member'') may electronically
submit for execution an order it represents as agent (``Agency Order'')
against a solicited order(s) \3\ if it submits the Agency Order for
electronic execution into a SAM Auction pursuant to proposed Rule
21.21.\4\
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    \3\ The solicited order(s) cannot be for the same EFID as the
Agency Order or for the account of any Options Market Maker with an
appointment in the applicable class on the Exchange. Cboe Options
Rule 6.74B is silent on how it determines whether both orders
submitted to a SAM Auction are solicited for different accounts. The
Agency Order and Solicited Order cannot both be for the accounts of
a customer. Cboe Options Rule 6.74B does not contain a similar
prohibition. The Exchange believes it is appropriate for such
customer-to-customer crosses to be submitted to an AIM Auction
pursuant to Rule 6.74A [sic], as that rule contains a provision for
Customer-to-Customer Immediate AIM Crosses.
    \4\ For purposes of proposed Rule 21.21, the term ``NBBO'' means
the national best bid or national best offer at the particular point
in time applicable to the reference, and the term ``Initial NBBO''
means the national best bid or national best offer at the time a SAM
Auction is initiated.
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    The Initiating Member may initiate a SAM Auction if all of the
following conditions are met:
     The Agency Order may be in any class traded on the
Exchange.\5\
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    \5\ See proposed Rule 21.21(a)(1). Cboe Options Rule 6.74B(a)(1)
permits Cboe Options to make SAM available on a class-by-class
basis. The Exchange does not believe it currently needs this
flexibility.
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     The Initiating Member must mark an Agency Order for SAM
Auction processing.\6\
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    \6\ See proposed Rule 21.21(a)(2); see also Cboe Options Rule
6.74B(b)(1)(A).
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     The Agency Order must be for at least the minimum size
designated by the Exchange (which may not be less than 500 standard
option contracts or 5,000 mini-option contracts). The Solicited Order
must be for (or must total, if the Solicited Order is comprised of
multiple solicited orders) \7\ the same size as the Agency Order. The
Initiating Member must designate each of the Agency Order and Solicited
Order as all-or-none (``AON'').\8\
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    \7\ Cboe Options Rule 6.74B does not permit the solicited order
to consist of multiple contras. See additional discussion below
regarding the provision to permit multiple contra-parties to be
solicited to trade against an Agency Order.
    \8\ See proposed Rule 21.21(a)(3); see also Cboe Options Rule
6.74B(a)(1) and (2).
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     The price of the Agency Order and Solicited Order must be
in an increment of $0.01.\9\
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    \9\ See proposed Rule 21.21(a)(4). Cboe Options Rule 6.74B(a)(3)
permits Cboe Options to determine the minimum price increment for
the Agency Order and Solicited Order, which may not be smaller than
$0.01. The Exchange does not believe it needs this flexibility, and
thus the proposed rule change applies the $0.01 increment to all
classes.

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     An Initiating Member may not designate an Agency Order or
Solicited Order as Post Only.\10\
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    \10\ See proposed Rule 21.21(a)(5). The Post Only designation is
not currently available on Cboe Options. The Exchange believes this
is appropriate, as the purpose of a Post Only order is to not
execute upon entry and instead rest in the EDGX Options Book, while
the purpose of orders submitted into a SAM Auction is to receive an
execution following the auction but prior to entering the EDGX
Options Book. See also Rule 21.19(a)(5).
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     An Initiating Member may only submit an Agency Order to a
SAM Auction after the market open.\11\
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    \11\ See proposed Rule 21.21(a)(6). Cboe Options Rule 6.74B is
silent on when a SAM Auction may be initiated. However, the Exchange
understands that the proposed rule change is consistent with Cboe
Options functionality. See also Rule 21.19(a)(6).
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     An Initiating Member may not submit an Agency Order if the
NBBO is crossed (unless the Agency Order is a SAM ISO).\12\
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    \12\ See proposed Rule 21.21(a)(7). Cboe Options Rule 6.74B is
silent on whether a SAM Auction may be initiated when the NBBO is
crossed. However, the proposed rule change is consistent with the
proposed requirement (and Cboe Options Rule 6.74B(b)(1)(A) and
(2)(A)(1)) that the stop price and execution price be at or better
than the initial NBBO (as discussed below), as well as linkage rules
that do not permit executions at prices that trade through the NBBO
(see Rule 27.2).
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    The System rejects or cancels both an Agency Order and Solicited
Order submitted to a SAM Auction that do not meet these conditions.\13\
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    \13\ See proposed Rule 21.21(a). Cboe Options Rule 6.74B does
not specify whether an Agency Order and Solicited Order will be
rejected or cancelled if they do not meet the SAM eligibility
requirements. However, the Exchange understands that the proposed
rule change is consistent with Cboe Options functionality. The
proposed SAM Auction eligibility requirements (other than the
minimum size) are the same as the AIM Auction eligibility
requirements. See Rule 21.19(a).
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    As defined, the Solicited Order may be comprised of multiple
solicited orders, in which case they must total the same size as the
Agency Order (and thus be for a total of at least 500 contracts). This
will accommodate multiple contra-parties and increase the opportunities
for customer orders to be submitted into a SAM Auction with the
potential for price improvement, since the Initiating Order must stop
the full size of the Agency Order. This will have no impact on the
execution of the Agency Order, which may trade against multiple contra-
parties depending on the final auction price, as set forth in proposed
paragraph (e). The Exchange notes that with regard to order entry, the
first order submitted into the system is marked as the initiating/
agency side and the second order is marked as the contra-side.
Additionally, the Solicited Order will always be entered as a single
order, even if that order consists of multiple contra-parties who are
allocated their portion of the trade in a post-trade allocation.\14\
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    \14\ The Exchange notes that while other exchange rules do not
specify whether the contra-side order in a solicitation auction
mechanism may consist of multiple orders, the contra-side order for
Qualified Contingent Cross Orders (see Rule 21.1(d)(10)), which
similarly have a minimum quantity requirement and are fully crossed
against an initiating order that must be for a minimum number of
contracts, may consist of multiple contra-side orders. However, ISE
Regulatory Information Circular 2014-013 states that the contra-side
order submitted into a crossing mechanism (including the ISE
solicited order mechanism) may consist of one or more parties.
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    The Solicited Order must stop the entire Agency Order at a price
that satisfies the following conditions:
     The stop price for a buy (sell) Agency Order must be at or
better than the then-current NBO (NBB).\15\
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    \15\ See proposed Rule 21.21(b)(1); see also Cboe Options Rule
6.74B(b)(1)(A).
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     If the Agency Order is to buy (sell), the stop price must
be at least $0.01 better than the Exchange best bid (offer), unless the
Agency Order is a Priority Customer order and the resting order is a
non-Priority Customer order, in which case the stop price must be at or
better than the Exchange best bid (offer).\16\ The Exchange believes
this condition protects orders on the same side as the Agency Order
resting on the EDGX Options Book, including Priority Customer orders.
By permitting a Priority Customer Agency Order to be entered at the
same price as a resting non-Priority Customer order, the proposed rule
change also protects Priority Customer orders submitted into an AIM
[sic] Auction. The proposed rule change is consistent with general
customer priority principles.
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    \16\ See proposed Rule 21.21(b)(2). These conditions regarding
orders on the same side as the Agency Order are the same as those
applicable to AIM for orders of 50 contracts or more. See Rule
21.19(b). Cboe Options Rule 6.74B is silent regarding whether the
stop price must be at or better than the same-side Cboe Options best
bid or offer; however, the execution price must be at or better than
the Cboe Options best bid or offer.
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     If the Agency Order is to buy (sell) and the Exchange best
offer (bid) represents (a) a Priority Customer order on the EDGX
Options Book, the stop price must be at least $0.01 better than the
Exchange best offer (bid); or (b) a quote or order that is not a
Priority Customer order on the EDGX Options Book, the stop price must
be at or better than the Exchange best offer (bid).\17\ The Exchange
believes this condition protects orders on the opposite side of the
Agency Order resting on the EDGX Options Book, including Priority
Customer orders.
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    \17\ See proposed Rule 21.21(b)(3). Cboe Options Rule 6.74B is
silent regarding whether the stop price must be at or better than
the opposite-side Cboe Options best bid or offer; however, the
execution price may not be at the same price as priority customer
orders resting on the book on the opposite side of the Agency Order
(unless the priority customer orders execute against the Agency
Order).
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     If the Initiating Member submits a SAM sweep order to a
SAM Auction, the stop price, SAM responses, and executions are
permitted at a price inferior to the Initial NBBO. A ``SAM sweep
order'' or ``SAM ISO'' is the submission of two orders for crossing in
a SAM Auction without regard for better-priced Protected Quotes (as
defined in Rule 27.1) because the submitting Options Member routed an
ISO(s) simultaneously with the routing of the SAM ISO to execute
against the full displayed size of any Protected Quote that is better
than the stop price and has swept all interest in the EDGX Options Book
with a price better than the stop price. Any execution(s) resulting
from these sweeps accrue to the AIM [sic] Agency Order.\18\
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    \18\ See proposed Rule 21.21(b)(4). Cboe Options Rule 6.74B is
silent on whether ISOs are permitted with respect to SAM auctions.
However, ISOs are similarly permitted for AIM Auctions, and the
proposed definition of a SAM ISO is consistent with linkage rules.
See Rules 21.19(b)(3)(A) and 27.1.
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    The System rejects or cancels both an Agency Order and Solicited
Order submitted to a SAM Auction that do not meet these conditions.\19\
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    \19\ See proposed Rule 21.21(b).
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    Upon receipt of an Agency Order that meets the above conditions,
the SAM Auction process commences.\20\ One or more SAM Auctions in the
same series may occur at the same time. To the extent there is more
than one SAM Auction in a series underway at a time, the SAM Auctions
conclude sequentially based on the exact time each SAM Auction
commenced, unless terminated early pursuant to proposed paragraph (d).
At the time each SAM Auction concludes, the System allocates the Agency
Order pursuant to proposed paragraph (e) and takes into account all SAM
Auction responses and unrelated orders in place at the exact time of
conclusion. In the event there are multiple SAM Auctions underway that
are each terminated early pursuant to proposed paragraph (d), the
System processes the SAM Auctions sequentially based on the exact time
each SAM Auction commenced.\21\
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    \20\ See proposed Rule 21.21(c).
    \21\ See proposed Rule 21.21(c)(1). This provision regarding
concurrent SAM Auctions is similar to the AIM provision that permits
concurrent AIM Auctions for Agency Orders of 50 contracts or more.
See Rule 21.19(c)(1). Cboe Options Rule 6.74B does not permit
concurrent SAM Auctions.

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    The Exchange notes it is also possible for various types of
auctions (such as an AIM Auction or a complex order auction (``COA''))
to occur concurrently in the same series, and at the end of each
auction, it is possible for interest resting in the EDGX Options Book
to trade against any of the auctioned orders in the series. While these
auctions may be occurring at the same time, they will be processed in
the order in which they are terminated (similar to how the System
processes SAM Auctions as discussed above). In other words, suppose
there is an AIM Auction, a SAM Auction, and a COA all occurring in the
same series, which began and will terminate in that order, and each of
which last 100 milliseconds. While it is possible for all three
auctions to terminate nearly simultaneously, the System will still
process them in the order in which they terminate. When the AIM Auction
terminates, the System will process it in accordance with Rule 21.19,
and the auctioned order may trade against any resting interest (in
addition to the contra-side order and responses submitted to that AIM
Auction, which may only trade against the order auctioned in that AIM
pursuant to Rule 21.19). The System will then process the SAM Auction
when it terminates, and the auctioned order may trade against any
resting interest that did not execute against the AIM order (in
addition to the contra-side order and responses submitted to that SAM
Auction, which may only trade against the order auctioned in that SAM
pursuant to proposed Rule 21.21). Finally, the System will then process
the COA Auction when it terminates, and the COA order may leg into the
EDGX Options Book and trade against any resting interest that did not
execute against the AIM order or SAM order (in addition to any interest
resting on the complex order book and COA responses pursuant to Rule
21.20).
    The Exchange System initiates the SAM Auction process by sending a
SAM Auction notification message detailing the side, size, price,
origin code, Auction ID, and options series of the Agency Order to all
Options Members that elect to receive SAM Auction notification
messages. SAM Auction notification messages are not included in the
disseminated BBO or OPRA.\22\ The ``SAM Auction period'' is a period of
time determined by the Exchange, which may be no less than 100
milliseconds and no more than one second.\23\ An Initiating Member may
not modify or cancel an Agency Order or Solicited Order after
submission to a SAM Auction.\24\
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    \22\ See proposed Rule 21.21(c)(2); see also Cboe Options Rule
6.74B(b)(1)(B).
    \23\ See proposed Rule 21.21(c)(3); see also Cboe Options Rule
6.74B(b)(1)(C). Pursuant to Rule 16.3, the Exchange will announce
the length of the SAM Auction period via specification, Exchange
Notice, or Regulatory Circular.
    \24\ See proposed Rule 21.21(c)(4); see also Rule 21.19(c)(4)
(corresponding provision in AIM). Cboe Options Rule 6.74B does not
contain this detail; however, the Exchange understands this is
consistent with current Cboe Options functionality.
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    Any User other than the Initiating Member (determined by EFID) may
submit responses to a SAM Auction that are properly marked specifying
size, side of the market, and the Auction ID for the SAM Auction to
which the User is submitting the response.\25\ A SAM response may
specify a limit price or be treated as market. A SAM response may only
participate in the SAM Auction with the Auction ID specified in the
response.\26\
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    \25\ The System disregards any Post Only instruction applied to
a SAM response, as that instruction is inconsistent with the purpose
of a SAM response, which is to execute against the Agency Order at
the conclusion of a SAM Auction (and thus not post to the EDGX
Options Book). As a result, the System handles a SAM response with a
Post Only instruction in the same manner as all other SAM responses,
which is as providers of liquidity (i.e., makers).
    \26\ See proposed Rule 21.21(c)(5); see also Rule 21.19(c)(5)
(corresponding provision in AIM). Cboe Options Rule 6.74B does not
specify that a response may be market as well as limit or that a
response may only participate in the auction specific in the
response.
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     The minimum price increment for SAM responses is $0.01.
The System rejects a SAM response that is not in a $0.01 increment.\27\
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    \27\ See proposed Rule 21.21(c)(5)(A). Cboe Options permits it
to determine the minimum increment of SAM responses, which may not
be less than $0.01. See Cboe Options Rule 6.74B(b)(1)(E). The
Exchange does not believe it needs that flexibility.
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     SAM buy (sell) responses are capped at the Exchange best
offer (bid), or $0.01 better than the Exchange best offer (bid) if it
is represented by a Priority Customer order resting on the EDGX Options
Book (unless the Agency Order is a SAM ISO) that exists at the
conclusion of the SAM Auction. The System executes SAM responses, if
possible, at the most aggressive permissible price not outside the BBO
at the conclusion of the SAM Auction or the Initial NBBO.\28\ Capping
the prices of these responses based on prices at the conclusion of the
SAM Auction will ensure any changes to the BBO or prices of orders
resting in the Book that occur during the SAM Auction will be
considered. This will ensure responses are able to execute at the most
aggressive permissible prices. This will ensure the execution price
does not cross the Initial NBBO in accordance with linkage rules.
Additionally, proposed subparagraph (e) requires the execution price to
be at or between the BBO at the conclusion of the SAM Auction.
Therefore, as proposed, the price at which any response may execute
will ultimately not be through the Initial NBBO or the BBO at the
conclusion of the AIM [sic] Auction.
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    \28\ See proposed Rule 21.21(c)(5)(B). Cboe Options does not
have a corresponding provision; however, this is the same as the
corresponding provision for the Exchange's AIM Auction. The Exchange
notes it intends to similarly cap AIM responses in the corresponding
rule provision in Rule 21.19(c)(5)(B) in a separate rule filing.
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     A User may submit multiple SAM responses at the same or
multiple prices to a SAM Auction. For purposes of the SAM Auction, the
System aggregates all of a User's orders and quotes resting on the EDGX
Options Book and SAM responses for the same EFID at the same price.\29\
The Exchange believes this is appropriate since all interest at a
single price is considered for execution against the Agency Order at
that price, and can then together be subject to the size cap, as
discussed below. This (combined with the proposed size cap) will
prevent an Options Member from submitting multiple orders, quotes, or
responses at the same price to obtain a larger pro-rata share of the
Agency Order.
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    \29\ See proposed Rule 21.21(c)(5)(C). Cboe Options does not
specify whether a participant may submit multiple responses at the
same price or whether the size of all of a participant's interest at
the same price will be aggregated; however, this is the same as the
corresponding provision for the Exchange's AIM Auction. See Rule
21.19(c)(5)(C).
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     The System caps the size of a SAM response, or the
aggregate size of a User's orders and quotes resting on the EDGX
Options Book and SAM responses for the same EFID at the same price, at
the size of the Agency Order (i.e., the System ignores size in excess
of the size of the Agency Order when processing the SAM Auction).\30\
This Exchange believes this is reasonable to prevent an Options Member
from submitting an order, quote, or response with an extremely large
size in order to obtain a larger pro-rata share of the Agency Order.
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    \30\ See proposed Rule 21.21(c)(5)(D). This is in contrast to
Cboe Options, which requires responses to not exceed the size of the
Agency Order. See Cboe Options Rule 6.74B(b)(1)(F). However, this is
the same as the corresponding provision for the Exchange's AIM
Auction. See Rule 21.19(c)(5)(D).
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     SAM responses must be on the opposite side of the market
as the Agency Order. The System rejects a SAM response on the same side
of the market as the Agency Order.\31\
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    \31\ See proposed Rule 21.21(c)(5)(E). Cboe Options does not
specify whether a response will be rejected if it is not on the
opposite side of the Agency Order; however, the Exchange understands
this is consistent with Cboe Options functionality and the same as
the corresponding provision for the Exchange's AIM Auction.
Additionally, it is reasonable given that the purpose of a response
is to trade against the Agency Order. See Rule 21.19(c)(5)(E).

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     SAM responses are not visible to SAM Auction participants
or disseminated to OPRA.\32\
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    \32\ See proposed Rule 21.21(c)(5)(F); see also Cboe Options
Rule 6.74B(b)(1)(D).
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     A User may modify or cancel its SAM responses during the
SAM Auction.\33\
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    \33\ See proposed Rule 21.21(c)(5)(G). Cboe Options does not
specify whether responses may be cancelled during the auction;
however, this is the same as the corresponding provision for the
Exchange's AIM Auction. See Rule 21.19(c)(5)(I). Unlike Cboe Options
Rule 6.74B, the proposed rule change permits responses for the
account of an options market-maker from another options exchange.
Other options exchanges similarly permit such responses in solicited
auction mechanisms. See, e.g., ISE Rule 716(e); and MIAX Rule
515A(b).
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    A SAM Auction concludes at the earliest to occur of the following
times:
     the end of the SAM Auction period;
     upon receipt by the System of a Priority Customer order on
the same side of the market with a price the same as or better than the
stop price that would post to the EDGX Options Book;
     upon receipt by the System of an unrelated order or quote
that is not a Priority Customer order on the same side of the market as
the Agency Order that would cause the stop price to be outside of the
EDGX BBO;
     the market close; and
     any time the Exchange halts trading in the affected
series, provided, however, that in such instance the SAM Auction
concludes without execution.
    An unrelated market or marketable limit order (against the EDGX
BBO), including a Post Only Order,\34\ on the opposite side of the
Agency Order received during the SAM Auction does not cause the SAM
Auction to end early and executes against interest outside of the SAM
Auction. If contracts remain from such unrelated order at the time the
SAM Auction ends, they may be allocated for execution against the
Agency Order pursuant to proposed paragraph (e).\35\ Because these
orders may have the opportunity to trade against the Agency Order
following the conclusion of the SAM Auction, which execution must still
be at or better than the Initial NBBO and EDGX Options BBO existing at
the conclusion of the SAM Auction, the Exchange does not believe it is
necessary to cause a SAM Auction to conclude early in the event the
Exchange receives such orders. This will provide more time for
potential price improvement, and the unrelated order will have the
opportunity to trade against the Agency Order in the same manner as all
other contra-side interest.
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    \34\ Any Post Only order resting on the EDGX Options Book at the
conclusion of the SAM Auction that executes against the Agency Order
pursuant to proposed paragraph (e) executes in the same manner as
any other order type of order resting on the EDGX Options Book,
which is as providers of liquidity (i.e., makers).
    \35\ See proposed Rule 21.21(d). The proposed reasons why a SAM
Auction may conclude early differ from the reasons why a Cboe
Options SAM Auction may conclude early, but the proposed reasons are
the same as those that will cause an AIM Auction to conclude early.
See Rule 21.19(d). Similarly, a Cboe Options SAM Auction will
conclude early for the same reasons that cause a Cboe Options AIM
Auction to terminate early. See Cboe Options Rule 6.74B(b)(2).
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    At the conclusion of the SAM Auction, the System executes the
Agency Order against the Solicited Order or contra-side interest (which
includes orders and quotes resting in the EDGX Options Book and SAM
responses) at the best price(s) as follows. Any execution price(s) must
be at or between the BBO existing at the conclusion of the SAM Auction
and at or between the Initial NBBO:\36\
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    \36\ See proposed Rule 21.21(e); see also Cboe Options Rule
6.74B(b)(2)(A) (which provides the execution price must be at or
better than the initial auction NBBO and that an execution will
occur at prices equal to or better than the Cboe Options BBO).
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     The System executes the Agency Order against the Solicited
Order at the stop price if there are no Priority Customer Orders
(including Priority Customer AON Orders) on the opposite side of the
Agency Order resting in the EDGX Options Book at the stop price and the
aggregate size of contra-side interest at an improved price(s) is
insufficient to satisfy the Agency Order.
     The System executes the Agency Order against contra-side
interest (and cancels the Solicited Order) if (A) there is a Priority
Customer order (including a Priority Customer AON order) on the
opposite side of the Agency Order resting on the EDGX Options Book at
the stop price and the aggregate size of the Priority Customer order
and other contra-side interest at the stop price or an improved
price(s) is sufficient to satisfy the Agency Order or (B) the aggregate
size of contra-side interest at an improved price(s) is sufficient to
satisfy the Agency Order. The Agency Order against such contra-side
interest occurs at each price level, to the price at which the balance
of the Agency Order can be fully executed, in the following order:
    [cir] Priority Customer orders (including Priority Customer AON
orders) on the EDGX Options Book (non-AON orders before AON orders,
each in time priority);
    [cir] remaining contra-side trading interest (including non-
Priority Customer orders and quotes on the EDGX Options Book and SAM
responses) pursuant to Rule 21.8(c);
    [cir] any nondisplayed Reserve Quantity (Priority Customer before
non-Priority Customer, each in time priority); and
    [cir] any non-Priority Customer AON orders, if there is sufficient
size to satisfy the AON order.
     The System cancels the Agency Order and Solicited Order
with no execution if:
    [cir] execution of the Agency Order against the Solicited Order at
the stop price would not be at or between the EDGX BBO at the
conclusion of the SAM Auction or at or between the Initial NBBO; or
    [cir] there is a Priority Customer order (including a Priority
Customer AON order) resting on the opposite side of the Agency Order at
the stop price on the EDGX Options Book, and the aggregate size of the
Priority Customer order and any other contra-side interest is
insufficient to satisfy the Agency Order.\37\
---------------------------------------------------------------------------

    \37\ See proposed Rule 21.21(e); see also Rule 21.19(e).
---------------------------------------------------------------------------

     The System cancels or rejects any unexecuted SAM responses
(or unexecuted portions) at the conclusion of the SAM Auction.\38\
---------------------------------------------------------------------------

    \38\ See id.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change is consistent with
the AON nature of solicitation mechanisms and the priority order
applicable to executions following a SAM Auction at the stop price, as
well as general priority provisions.\39\ The proposed provisions
regarding the execution of the Agency Order at the conclusion of a SAM
Auction is similar to the corresponding provisions for a Cboe Options
SAM, as well as current Rules regarding priority and allocation of
resting orders and

quotes.\40\ The proposed priority will ensure execution of the Agency
Order at the stop price if there is sufficient interest while
protecting Priority Customer orders (except AON orders) resting on the
EDGX Options Book in accordance with the general principle of customer
priority. This will ensure the Agency Order is allocated in a manner
consistent with the standard priority of allocation on the Exchange
rules that distinguish between Priority Customers and displayed and
non-displayed interest in a manner that will help ensure a fair and
orderly market by maintaining priority of orders and quotes while still
affording the opportunity for price improvement in each SAM Auction
commenced on the Exchange.
---------------------------------------------------------------------------

    \39\ See Rule 21.8, which provides that at a single price level:
(a) Priority Customer orders have priority over non-Priority
Customer orders, and Priority Customer orders at the same price are
allocated in time priority; (b) non-customer orders have next
priority and are allocated in a pro-rata manner; (c) displayed
orders have priority over nondisplayed orders, and nondisplayed
portions of Reserve Orders are allocated in a pro-rata manner,
except nondisplayed portions of Priority Customer Reserve Orders
trade ahead of non-customer Reserve Orders; and AON orders have last
priority (including after nondisplayed Reserve Quantity). The
Exchange notes it may apply an entitlement for Designated Primary
Market Makers or Preferred market Makers, which entitlement would
apply after Priority Customer orders. This entitlement is
inapplicable in the setting of an auction; however, it is comparable
to order when a Solicited Order receives priority. The Exchange
notes, unlike the allocation following other executions, the
proposed rule change prioritizes Priority Customer AON orders in the
same manner as all other Priority Customer orders in executions
following SAM Auctions.
    \40\ See Cboe Options Rule 6.74B(b)(2)(A) (which states if there
are priority customer orders and there is sufficient size
(considering all resting orders, electronic quotes and responses) to
execute the Agency Order, the Agency Order will be executed against
these interests and the solicited order will be cancelled, and if
there are priority customer orders and there is not sufficient size
(considering all resting orders, electronic quotes and responses),
both the Agency Order and the solicited order will be cancelled).
---------------------------------------------------------------------------

    Proposed Rule 21.21, Interpretation and Policy .01 provides that
prior to entering Agency Orders into a SAM Auction on behalf of
customers, Initiating Members must deliver to the customer a written
notification informing the customer that his order may be executed
using the SAM Auction. The written notification must disclose the terms
and conditions contained in this Rule 21.21 and be in a form approved
by the Exchange.\41\
---------------------------------------------------------------------------

    \41\ See also Cboe Options Rule 6.74B, Interpretation and Policy
.02.
---------------------------------------------------------------------------

    Rule 22.12 prevents an Options Member from executing agency orders
to increase its economic gain from trading against the order without
first giving other trading interests on the Exchange an opportunity to
either trade with the agency order or to trade at the execution price
when the Options Member was already bidding or offering on the book.
However, the Exchange recognizes that it may be possible for an Options
Member to establish a relationship with a Priority Customer or other
person to deny agency orders the opportunity to interact on the
Exchange and to realize similar economic benefits as it would achieve
by executing agency order as principal. Under Rule 21.21, Initiating
Members may enter contra-side orders that are solicited. SAM provides a
facility for Options Members that locate liquidity for their customer
orders. Options Members may not use the SAM Auction to circumvent Rule
21.19 or 22.12 limiting principal transactions. This may include, but
is not limited to, Options Members entering contra-side orders that are
solicited from (a) affiliated broker-dealers or (b) broker-dealers with
which the Options Member has an arrangement that allows the Options
Member to realize similar economic benefits from the solicited
transaction as it would achieve by executing the customer order in
whole or in part as principal.\42\
---------------------------------------------------------------------------

    \42\ See proposed Interpretation and Policy .02; see also Cboe
Options Rule 6.74B, Interpretation and Policy .03.
---------------------------------------------------------------------------

    The following examples demonstrate how orders will be executed in a
SAM Auction:

Example #1
    XYZ Jan 50 Calls
    NBBO: 1.10--1.25
    BBO: 1.10--1.30 (no Priority Customer orders)
    Paired order to execute 2000 contracts AON (Agency Order to sell)
at 1.10

    A SAM Auction notification message is sent to all Options Members
that elect to receive SAM Auction notification messages, which shows
the option, size, side, and price. The SAM Auction timer begins, and
the System starts the SAM Auction to sell at 1.10.
    During the SAM Auction, the System receives the following responses
in the following order:

 Response 1 to buy 2000 at 1.10
 Response 2 to buy 2000 at 1.10
 Response 3 to buy 5000 at 1.10
 Response 4 to buy 1000 at 1.20

    The aggregate responses did not improve the price of the entire
Agency Order, and there are no Priority Customer orders at the stop
price, so at the conclusion of the SAM Auction, the System executes the
Solicited Order against the Agency Order at a price of 1.10 and cancels
the SAM responses.

Example #2
    XYZ Jan 50 Calls
    NBBO: 1.10--1.25
    BBO: 1.10--1.30 (no Priority Customer orders)
    Paired order to execute 2000 contracts AON (Agency Order to sell)
at 1.10

    A SAM Auction notification message is sent to all Options Members
that elect to receive SAM Auction notification messages, which shows
the option, size, side, and price. The SAM Auction timer begins, and
the System starts the SAM Auction to sell at 1.10.
    During the SAM Auction, the System receives the following responses
in the following order:

 Response 1 to buy 2000 at 1.10
 Response 2 to buy 2000 at 1.10
 Response 3 to buy 5000 at 1.10
 Response 4 to buy 1000 at 1.20
 Response 5 to buy 2000 at 1.15

    There is sufficient size among the SAM responses to improve the
price of the entire Agency Order, so at the conclusion of the SAM
Auction, the System executes 1000 contracts of the Agency Order at a
price of 1.20 against Response 4 and 1000 contracts of the Agency Order
at a price of 1.15 against Response 5, and cancels the Solicited Order
and Responses 1, 2, 3, and 5 (the remaining 1000).

Example #3
    XYZ Jan 50 Calls
    NBBO: 1.10--1.25
    BBO: 1.10 (200)--1.30 (no Priority Customer orders)
    Paired order to execute 2000 contracts AON (Agency Order to sell)
at 1.11

    A SAM Auction notification message is sent to all Options members
that elect to receive SAM Auction notification messages, which shows
the option, size, side, and price. The SAM Auction timer begins, and
the System starts the SAM Auction to sell at 1.11.
    During the SAM Auction, the System receives the following responses
in the following order:

 Response 1 to buy 2000 at 1.11
 Response 2 to buy 2000 at 1.11
 Response 3 to buy 5000 at 1.11
 Response 4 to buy 1000 at 1.12
 Unrelated Order A to sell 500 at 1.10

    The SAM Auction terminates when the System receives Unrelated Order
A, because it is marketable against the EDGX best bid of 1.10, and
would cause the stop price to be outside of the EDGX BBO if it
immediately executed. The aggregate responses did not improve the price
of the entire Agency Order, and there are no Priority Customer orders
at the stop price, so at the conclusion of the SAM Auction, the System
executes the Solicited Order against the Agency Order at a price of
1.11 and cancels the SAM responses. The System then executes 200
contracts of Unrelated Order A against the resting order at a 1.10 at
that price, and then enters 300 contracts of Unrelated Order A onto the
Book. The EDGX BBO then becomes 1.08--1.10 (which, as noted above,
would have caused the stop price to be outside of the EDGX BBO).

Example #4
    XYZ Jan 50 Calls
    NBBO: 1.10--1.25
    BBO: 1.10--1.30 (Priority Customer order for 20 included in the
bid, and no Priority Customer order included in the offer)
    Paired order to execute 2000 contracts AON (Agency Order to sell)
at 1.11 (one increment better than a resting Priority Customer order on
the

opposite side of the EDGX Options Book).

    A SAM Auction notification message is sent to all Options Members
that elect to receive SAM Auction notification messages, which shows
the option, size, side, and price. The SAM Auction timer begins, and
the System starts the SAM Auction to sell at 1.11.
    During the SAM Auction, the System receives the following responses
in the following order:

 Response 1 to buy 2000 at 1.11
 Response 2 to buy 2000 at 1.11
 Response 3 to buy 1000 at 1.15
 Response 4 to buy 900 at 1.12
 Priority Customer order to buy 100 at 1.11

    There is sufficient size among the SAM responses at prices better
than the stop price and the Priority Customer order at the stop price,
so at the conclusion of the SAM Auction, the System executes 1000
contracts of the Agency Order at a price of 1.15 against Response 3,
900 contracts of the Agency Order at a price of 1.12 against Response
4, and 100 contracts of the Agency Order at a price of 1.11 against the
Priority Customer order, and cancels the Solicited Order and Responses
1 and 2.
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.\43\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \44\ 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) \45\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b).
    \44\ 115 U.S.C. 78f(b)(5).
    \45\ Id.
---------------------------------------------------------------------------

    The proposed rule change is generally intended to add certain
system functionality currently offered by Cboe Options to the
Exchange's System in order to provide a consistent technology offering
for the Cboe Affiliated Exchanges. A consistent technology offering, in
turn, will simplify the technology implementation, changes and
maintenance by Users of the Exchange that are also participants on Cboe
Affiliated Exchanges. This will provide Users with greater
harmonization of price improvement auction mechanisms available among
the Cboe Affiliated Exchanges.
    The proposed rule change will provide market participants with an
additional auction mechanism that will provide them with greater
flexibility in pricing larger-sized orders and may provide more
opportunities for price improvement.\46\ SAM as proposed will function
in a substantially similar manner as AIM, the Exchange's current price
improvement mechanism--the differences relating primarily to the
minimum size requirement and all-or-none nature of SAM. Additionally,
the proposed auction mechanism provides equal access to the exposed
Agency Orders for all market participants, as all Options Members that
subscribe to the Exchange's data feeds with the opportunity to interact
with orders submitted into SAM Auctions.\47\ SAM is intended to benefit
investors, because it is designed to provide investors seeking to
execute large option orders with opportunities to access additional
liquidity and receive price improvement. It will provide Options
Members that locate liquidity for their customers' larger-sized orders
a facility in which to execute those orders, potentially at improved
prices. The proposed rule change may result in increased liquidity
available at improved prices for larger-sized orders, with competitive
final pricing out of the Initiating Member's control. The Exchange
believes SAM will promote and foster competition and provide more
options contracts with the opportunity for price improvement.
---------------------------------------------------------------------------

    \46\ See Securities Exchange Act Release Nos. 49141 (January 28,
2004), 69 FR 5625 (February 5, 2004) (SR-ISE-2001-22); 57610 (April
3, 2008), 73 FR 19535 (April 10, 2008) (SR-CBOE-2008-14); and 72009
(April 23, 2014), 79 FR 24032 (April 29, 2014) (SR-MIAX-2014-09).
    \47\ Any Options Member can subscribe to the options data
disseminated through the Exchange's data feeds.
---------------------------------------------------------------------------

    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, because the proposed SAM Auction is similar
to other solicitation auction mechanisms currently available at other
options exchanges.\48\ The general framework of the proposed SAM
Auction process (such as the eligibility requirements, the auction
response period, the same-side stop price requirements, response
requirements, and auction notification process),\49\ is substantively
the same as the framework for the AIM price improvement auction the
Exchange's current price improvement auction. The primary features of
the proposed SAM Auction process are similar to the solicitation
auction mechanisms of other options exchanges, including Cboe Options
SAM, as discussed above and below. The clarity in how the proposed
price improvement auction will function and its consistency with
similar auctions at other exchanges will help promote a fair and
orderly national options market system.
---------------------------------------------------------------------------

    \48\ See, e.g., Cboe Options Rule 6.74B; ISE Rule 716(e); and
MIAX Rule 515A(b).
    \49\ See Rule 21.19.
---------------------------------------------------------------------------

    Further, the new functionality may lead to an increase in Exchange
volume and should allow the Exchange to better compete against other
markets that already offer an electronic solicitation mechanism, while
providing an opportunity for price improvement for Agency Orders. The
Exchange believes that its proposal will allow the Exchange to better
compete for solicited transactions, while providing an opportunity for
price improvement for Agency Orders and assuring that Priority
Customers (including Priority Customer AON orders) on the EDGX Options
Book are protected. The new solicitation mechanism should promote and
foster competition and provide more options contracts with the
opportunity for price improvement, which should benefit market
participants.
    The Exchange believes the proposed rule change will result in
efficient trading and reduce the risk for investors that seek access to
additional liquidity and price improvement for larger-sized orders by
providing additional opportunities to do so. The proposed priority and
allocation rules in the SAM Auction are similar to the Exchange's
current priority and allocation rules that give priority to displayed
Priority Customer orders,\50\ while also providing priority to Priority
Customer AON orders. The Exchange believes this will ensure a fair and
orderly market by maintaining priority of orders and

quotes and protecting Priority Customer orders, while still affording
the opportunity for price improvement during each SAM Auction commenced
on the Exchange. The proposed allocation ensures that the Agency Order
will be filled if there is a Priority Customer order on the EDGX
Options Book at the stop price and sufficient other contra-side
interest to satisfy the Agency Order.
---------------------------------------------------------------------------

    \50\ Pursuant to Rule 21.8, at a single price level, Priority
Customer orders have priority over non-Priority Customer orders,
which have priority over all nondisplayed orders (i.e., the Reserve
Portion of Priority Customer and non-Priority Customer Reserve
Orders).
---------------------------------------------------------------------------

    By keeping the priority and allocation rules for a SAM Auction
similar to the standard allocation used on the Exchange, the proposed
rule change reduces the ability of market participants to misuse the
SAM Auction to circumvent standard priority rules in a manner that is
designed to prevent fraudulent and manipulative acts and practices, and
to promote just and equitable principles of trade on the Exchange. The
proposed execution and priority rules will allow orders to interact
with interest in the EDGX Options Book, and will allow interest on the
EDGX Options Book to interact with option orders in the price
improvement mechanisms in an efficient and orderly manner. The Exchange
believes this interaction of orders will benefit investors by
increasing the opportunity for option orders to receive executions,
while also enhancing the execution quality for orders resting on the
Book. The proposed priority is also substantially similar to that of
corresponding solicitation auction mechanisms of other options
exchanges.\51\
---------------------------------------------------------------------------

    \51\ See, e.g., Cboe Options Rule 6.74B; ISE Rule 716(e); and
MIAX Rule 515A(b).
---------------------------------------------------------------------------

    The proposed SAM Auction eligibility requirements are reasonable
and promote a fair and orderly market and national market system,
because they are substantially similar to the eligibility requirements
for other exchanges' solicited order mechanisms,\52\ and benefit
investors by providing clarity regarding how they may initiate a SAM
Auction. Additionally, other than the minimum size requirement and AON
requirement (which are standard for solicited order mechanisms), the
eligibility requirements are virtually the same as those for AIM, the
Exchange's other price improvement mechanism.\53\ This will further
benefit investors by providing consistency across the Exchange's price
improvement mechanisms.
---------------------------------------------------------------------------

    \52\ See Cboe Options Rule 6.74B(a) and (b)(1) and
Interpretation and Policy .03; and MIAX Rule 515A(b)(1) and (2) and
Interpretation and Policy .04 (which permit applicability to any
class, prohibit appointed market-makers from being solicited, impose
the same minimum size and all-or-none requirement, has the same
minimum increment, and requires Agency Orders to be marked for SAM
processing). The proposed rule change that states a SAM Auction may
not commence until after the market open is reasonable, as execution
following a SAM Auction would not be possible until after the market
open and when there is a BBO and NBBO.
    \53\ See Rule 21.19(a).
---------------------------------------------------------------------------

    The proposed rule that an Initiating Member may not designate an
Agency Order or Initiating Order as Post Only protects investors,
because it provides transparency regarding functionality that will not
be available for SAM. The Exchange believes this is appropriate, as the
purpose of a Post Only order is to not execute upon entry and instead
rest in the EDGX Options Book, while the purpose of submitting orders
to a SAM Auction is to receive an execution following the auction and
not enter the EDGX Options Book. Pursuant to current and proposed Rule
21.21, an Agency Order will fully execute against contra-side interest
(possibly against the Solicited Order, which must be for the same size
as the Agency Order), or will be cancelled in the event there is no
execution following a SAM Auction, and thus there cannot be remaining
contracts in an Agency Order or Solicited Order to enter the EDGX
Options Book.
    The proposed rule change to state that the minimum size requirement
of 500 or more standard option contracts applies to the equivalent
number of mini-option contracts (i.e., 5,000 mini-option contracts)
promotes just and equitable principles of trade. Rule 19.6,
Interpretation and Policy .07 permits the listing of mini-options,
which is an option with a 10 share deliverable of the underlying
security rather than 100 share deliverable of the underlying security
(which is the standard deliverable for a standard option contract). The
proposed change to state that 500 standard option contracts is
consistent with 5,000 mini-option contracts is consistent with this
definition of mini-options. This provides transparency to investors
that SAM functionality and the potential for price improvement is
available to Agency Orders for large orders of mini-options as well as
standard options.
    The proposed rule change to prohibit an Agency Order and Solicited
Order from both being for the accounts of Priority Customers is
reasonable, because the Exchange believes it would be in the interests
of such pairs of orders to be submitted to a Customer-to-Customer AIM
Immediate Cross pursuant to Rule 21.19(f) pursuant to which they can be
executed immediately. The Exchange believes there will be minimal
demand to submit pairs of Priority Customer orders into SAM Auctions
given its offering of immediate cross functionality via AIM.
    The Exchange believes the proposed rule change to permit the
Solicited Order to be comprised of multiple orders that total the size
of the Agency Order may increase liquidity and opportunity for Agency
Orders to participate in SAM Auctions, and therefore provide Agency
Orders with additional opportunities for price improvement, which is
consistent with the principles behind the SAM Auction. The Exchange
believes that this will be beneficial to participants because allowing
multiple contra-parties should foster competition for filling the
contra-side order and thereby result in potentially better prices, as
opposed to only allowing one contra-party and, thereby requiring that
contra-party to do a larger size order which could result in a worse
price for the trade. Another exchange permits the contra-side in a
solicited auction mechanism to be comprised of multiple contra-
parties.\54\ The Exchange notes the contra-side of a Qualified
Contingent Cross order may be comprised of multiple orders.\55\
---------------------------------------------------------------------------

    \54\ See ISE Rule 716(e) and ISE Regulatory Information Circular
2014-013.
    \55\ Unlike orders submitted to a SAM Auction, Qualified
Contingent Cross orders may immediately execute and are not exposed
to the market for possible price improvement.
---------------------------------------------------------------------------

    As discussed above, the Exchange has proposed to allow SAM Auctions
to occur concurrently with other SAM Auctions. Although SAM Auctions
for Agency Orders will be allowed to overlap, the Exchange does not
believe this raises any issues that are not addressed through the
proposed rule change described above. For example, although
overlapping, each SAM Auction will be started in a sequence and with a
time that will determine its processing. Thus, even if there are two
SAM Auctions that commence and conclude, at nearly the same time, each
SAM Auction will have a distinct conclusion at which time the SAM
Auction will be allocated. In turn, when the first Auction concludes,
unrelated orders that then exist will be considered for participation
in the SAM Auction. If unrelated orders are fully executed in such SAM
Auction, then there will be no unrelated orders for consideration when
the subsequent SAM Auction is processed (unless new unrelated order
interest has arrived). If instead there is remaining unrelated order
interest after the first SAM Auction has been allocated, then such
unrelated order interest will be considered for allocation when the
subsequent SAM Auction is processed. As another example, each SAM
response is required to specifically

identify the Auction for which it is targeted and if not fully executed
will be cancelled back at the conclusion of the Auction. Thus, SAM
responses will be specifically considered only in the specified SAM
Auction.
    The Exchange does not believe that allowing multiple auctions to
overlap for Agency Orders presents any unique issues that differ from
functionality already in place on the Exchange or other exchanges.
Pursuant to Rule 21.19(c)(1), multiple AIM Auctions for Agency Orders
for 50 or more contracts may overlap. Additionally, other options
exchanges permit other auctions to overlap.\56\
---------------------------------------------------------------------------

    \56\ See, e.g., ISE Rule 716(d), which governs ISE's
facilitation mechanism and does not restrict such auctions to one
auction at a time; and Boston Options Exchange (``BOX'') Rule 7270.
---------------------------------------------------------------------------

    The proposed auction process will promote a free and open market,
because it ensures equal access to information regarding SAM Auctions
and the exposed Agency Orders for all market participants, as all
Options Members that subscribe to the Exchange's data feeds with the
opportunity to interact with orders submitted into SAM Auctions.\57\
The Exchange has proposed a range between no less than 100 milliseconds
and no more than one second for the duration of a SAM Auction.\58\ This
will provide investors with more timely execution of their options
orders than a mechanism that has a one second auction, while ensuring
there is an adequate exposure of orders in EDGX SAM. This proposed
auction response time should provide investors with the opportunity to
receive price improvement for larger-sized orders through SAM while
reducing market risk. The Exchange believes a briefer time period
reduces the market risk for the Initiating Member, versus an auction
with a longer period, as well as for any Options Member providing
responses to a broadcast. As such, the Exchange believes the proposed
rule change would help perfect the mechanism for a free and open
national market system, and generally help protect investors and the
public interest. All Options Members will have an equal opportunity to
respond with their best prices during the SAM Auction. Since the
Exchange considers all interest present in the System, and not solely
SAM response, for execution against the Agency Order, those
participants who are not explicit responders to a SAM Auction may
receive executions via SAM as well.
---------------------------------------------------------------------------

    \57\ Any Options Member can subscribe to the options data
disseminated through the Exchange's data feeds.
    \58\ See also Cboe Options Rule 6.74B(b)(1)(C); ISE Rule 716,
Supplementary Material .04; and MIAX Rule 515A(b)(2)(1)(C).
---------------------------------------------------------------------------

    The proposed SAM Auction response requirements are reasonable and
promote a fair and orderly market and national market system, because
they are substantially similar to the response requirements for other
exchanges' solicited order mechanisms,\59\ and benefit investors by
providing clarity regarding how they may respond to a SAM Auction.
Additionally, other than not restricting Times in Force or MTP
Modifiers available for responses (which restrictions the Exchange does
not currently believe are necessary for SAM responses), the eligibility
requirements are virtually the same as those for AIM responses, the
Exchange's other price improvement mechanism.\60\ This will further
benefit investors by providing consistency across the Exchange's price
improvement mechanisms.
---------------------------------------------------------------------------

    \59\ See Cboe Options Rule 6.74B(a) and (b)(1) and
Interpretation and Policy .03; and MIAX Rule 515A(b)(1) and (2) and
Interpretation and Policy .04 (which permit applicability to any
class, prohibit appointed market-makers from being solicited, impose
the same minimum size and all-or-none requirement, has the same
minimum increment, and requires Agency Orders to be marked for SAM
processing). The proposed rule change that states a SAM Auction may
not commence until after the market open is reasonable, as execution
following a SAM Auction would not be possible until after the market
open and when there is a BBO and NBBO.
    \60\ See Rule 21.19(a).
---------------------------------------------------------------------------

    The proposed rule change will also perfect the mechanism of a free
and open market and a national market system, as it is consistent with
linkage rules. Proposed Rule 21.21 does not permit Agency Orders to be
submitted when the NBBO is crossed and requires Agency Order execution
prices at the end of SAM Auctions to be at or between the Initial NBBO
and the EDGX BBO at the conclusion of the SAM Auction. The proposed
stop price requirements and the events to terminate a SAM Auction early
further ensure execution prices at or better than the NBBO and EDGX
BBO. Additionally, the proposed SAM ISO order type (which is similar to
current AIM ISO functionality) will provide Options Members with an
efficient method to initiate a SAM Auction while preventing trade-
throughs.
    Unlike the rules of other exchanges, the Exchange will not conclude
a SAM Auction early due to the receipt of an opposite side order. The
Exchange believes this promotes just and equitable principles of trade,
because these orders may have the opportunity to trade against the
Agency Order following the conclusion of the SAM Auction, which
execution must still be at or better than the Initial NBBO and EDGX
Options BBO existing at the conclusion of the SAM Auction. The Exchange
believes this will protect investors, because it will provide more time
for price improvement, and the unrelated order will have the
opportunity to trade against the Agency Order in the same manner as all
other contra-side interest.
    With respect to trading halts, as described herein, in the case of
a trading halt on the Exchange in the affected series, the Auction will
be cancelled without execution. Cancelling Auctions without execution
in this circumstance is consistent with Exchange handling of trading
halts in the context of continuous trading on EDGX Options and promotes
just and equitable principles of trade and, in general, protects
investors and the public interest.\61\
---------------------------------------------------------------------------

    \61\ The Exchange notes that trading on the Exchange in any
option contract will be halted whenever trading in the underlying
security has been paused or halted by the primary listing market and
other circumstances. See Rule 20.3.
---------------------------------------------------------------------------

    The proposed rule change is also consistent with Section 11(a)(1)
of the Act \62\ and the rules promulgated thereunder. Generally,
Section 11(a)(1) of the Act restricts any member of a national
securities exchange from effecting any transaction on such exchange for
(i) the member's own account, (ii) the account of a person associated
with the member, or (iii) an account over which the member or a person
associated with the member exercises discretion (collectively referred
to as ``covered accounts''), unless a specific exemption is available.
Examples of common exemptions include the exemption for transactions by
broker dealers acting in the capacity of a market maker under Section
11(a)(1)(A),\63\ the ``G'' exemption for yielding priority to non-
members under Section 11(a)(1)(G) of the Act and Rule 11a1-1(T)
thereunder,\64\ and ``Effect vs. Execute'' exemption under Rule 11a2-
2(T) under the Act.\65\ The ``Effect vs. Execute'' exemption permits an
exchange member, subject to certain conditions, to effect transactions
for covered accounts by arranging for an unaffiliated member to execute
transactions on the exchange. To

comply with Rule 11a2-2(T)'s conditions, a member: (i) Must transmit
the order from off the exchange floor; (ii) may not participate in the
execution of the transaction once it has been transmitted to the member
performing the execution; \66\ may not be affiliated with the executing
member; and (iv) with respect to an account over which the member has
investment discretion, neither the member nor its associated person may
retain any compensation in connection with effecting the transaction
except as provided in the Rule. For the reasons set forth below, the
Exchange believes that Exchange Members entering orders into SAM would
satisfy the requirements of Rule 11a2-2(T).
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78k(a). Section 11(a)(1) prohibits a member of a
national securities exchange from effecting transactions on that
exchange for its own account, the account of an associated person,
or an account over which it or its associated person exercises
discretion unless an exception applies.
    \63\ 15 U.S.C. 78k(a)(1)(A).
    \64\ 15 U.S.C. 78k(a)(1)(G) and 17 CFR 240.11a1-1(T).
    \65\ 17 CFR 240.11a2-2(T).
    \66\ The member may, however, participate in clearing and
settling the transaction.
---------------------------------------------------------------------------

    The Exchange does not operate a physical trading floor. In the
context of automated trading systems, the Commission has found that the
off-floor transmission requirement is met if a covered account order is
transmitted from a remote location directly to an exchange's floor by
electronic means.\67\ The Exchange represents that the System and the
proposed SAM Auction receive all orders electronically through remote
terminals or computer-to-computer interfaces. The Exchange represents
that orders for covered accounts from Options Members will be
transmitted from a remote location directly to the proposed SAM
mechanism by electronic means.
---------------------------------------------------------------------------

    \67\ See, e.g., Securities Exchange Act Release Nos. 61419
(January 26, 2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-031)
(approving BATS options trading); 59154 (December 23, 2008), 73 FR
80468 (December 31, 2008) (SRBSE-2008-48) (approving equity
securities listing and trading on BSE); 57478 (March 12, 2008), 73
FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-
080) (approving NOM options trading); 53128 (January 13, 2006), 71
FR 3550 (January 23, 2006) (File No. 10-131) (approving The Nasdaq
Stock Market LLC); 44983 (October 25, 2001), 66 FR 55225 (November
1, 2001) (SR-PCX-00-25) (approving Archipelago Exchange); 29237 (May
24, 1991), 56 FR 24853 (May 31, 1991) (SR-NYSE-90-52 and SR-NYSE-90-
53) (approving NYSE's Off-Hours Trading Facility); and 15533
(January 29, 1979), 44 FR 6084 (January 31, 1979) (``1979
Release'').
---------------------------------------------------------------------------

    The second condition of Rule 11a2-2(T) requires that neither a
member nor an associated person participate in the execution of its
order once the order is transmitted to the floor for execution. The
Exchange represents that, upon submission to the SAM Auction, an order
or SAM response will be executed automatically pursuant to the rules
set forth for SAM. In particular, execution of an order (including the
Agency and the Soliciting [sic] Order) or a SAM response sent to the
mechanism depends not on the Options Member entering the order or
response, but rather on what other orders and responses are present and
the priority of those orders and responses. Thus, at no time following
the submission of an order or response is a Member able to acquire
control or influence over the result or timing of order or response
execution.\68\ Once the Agency Order and Solicited Order has [sic] been
transmitted, the Initiating Member that transmitted the orders will not
participate in the execution of the Agency Order or Solicited Order.
Initiating Members submitting Agency Orders and Solicited Orders will
relinquish control to modify or cancel their Agency Orders and
Solicited Orders upon transmission to the System. Further, no Member,
including the Initiating Member, will see a SAM response submitted into
SAM, and therefore and will not be able to influence or guide the
execution of their Agency Orders, Solicited Orders, or SAM responses,
as applicable.
---------------------------------------------------------------------------

    \68\ An Initiating Member may not cancel or modify an Agency
Order or Solicited Order after it has been submitted into SAM. See
proposed Rule 21.21(c)(4). Options Members may modify or cancel
their responses after being submitted to into a SAM. See proposed
Rule 21.21(c)(5)(G); see also Securities Exchange Act Release No.
14563 (March 14, 1978), 43 FR 11542, 11547 (the ``1978 Release'').
---------------------------------------------------------------------------

    Rule 11a2-2(T)'s third condition requires that the order be
executed by an exchange member who is unaffiliated with the member
initiating the order. The Commission has stated that the requirement is
satisfied when automated exchange facilities, such as the SAM Auction
are used, as long as the design of these systems ensures that members
do not possess any special or unique trading advantages in handling
their orders after transmitting them to the exchange.\69\ The Exchange
represents that the SAM Auction is designed so that no Options Member
has any special or unique trading advantage in the handling of its
orders after transmitting its orders to the mechanism.
---------------------------------------------------------------------------

    \69\ In considering the operation of automated execution systems
operated by an exchange, the Commission noted that, while there is
not an independent executing exchange member, the execution of an
order is automatic once it has been transmitted into the system.
Because the design of these systems ensures that members do not
possess any special or unique trading advantages in handling their
orders after transmitting them to the exchange, the Commission has
stated that executions obtained through these systems satisfy the
independent execution requirement of Rule 11a2-2(T). See 1979
Release.
---------------------------------------------------------------------------

    Rule 11a2-2(T)'s fourth condition requires that, in the case of a
transaction effected for an account with respect to which the
initiating member or an associated person thereof exercises investment
discretion, neither the initiating member nor any associated person
thereof may retain any compensation in connection with effecting the
transaction, unless the person authorized to transact business for the
account has expressly provided otherwise by written contract referring
to Section 11(a) of the Act and Rule 11a2-2(T) thereunder.\70\ The
Exchange recognizes that Options Members relying on Rule 11a2-2(T) for
transactions effected through the SAM Auction must comply with this
condition of the Rule and the Exchange will enforce this requirement
pursuant to its obligations under Section 6(b)(1) of the Act to enforce
compliance with federal securities laws.
---------------------------------------------------------------------------

    \70\ See 17 CFR 240.11a2-2(T)(a)(2)(iv). In addition, Rule 11a2-
2(T)(d) requires a member or associated person authorized by written
contract to retain compensation, in connection with effecting
transactions for covered accounts over which such member or
associated persons thereof exercises investment discretion, to
furnish at least annually to the person authorized to transact
business for the account a statement setting forth the total amount
of compensation retained by the member in connection with effecting
transactions for the account during the period covered by the
statement which amount must be exclusive of all amounts paid to
others during that period for services rendered to effect such
transactions. See also 1978 Release, at 11548 (stating ``[t]he
contractual and disclosure requirements are designed to assure that
accounts electing to permit transaction-related compensation do so
only after deciding that such arrangements are suitable to their
interests'').
---------------------------------------------------------------------------

    The Exchange believes that the instant proposal is consistent with
Rule 11a2-2(T), and that therefore the exception should apply in this
case.
    The Exchange also believes that the proposed rule changes would
further the objectives of the Act to protect investors by promoting the
intermarket price protection goals of the Options Intermarket Linkage
Plan.\71\ The Exchange believes its proposal would help ensure inter-
market competition across all exchanges and facilitate compliance with
best execution practices.
---------------------------------------------------------------------------

    \71\ See Rule 27.3 regarding Locked and Crossed Markets.
---------------------------------------------------------------------------

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 SAM Auction is
voluntary for Options Members to use and will be available to all
Options Members. As discussed above, the Exchange believes the proposed
rule change should encourage Options Members to compete amongst each
other by responding with their best price and size for a particular
auction.

    The Exchange does not believe the proposed rule change will impose
any burden on intramarket competition, as the proposed rule change will
apply in the same manner to all orders submitted to a SAM Auction. With
respect to the restriction on appointed market-makers being solicited,
the Exchange believes market-makers will still have opportunities to
provide liquidity to trade against Agency Orders by submitting quotes
to rest on the EDGX Options Book or responses to a SAM Auction. With
respect to the restriction on permitting a pair of Priority Customer
orders to a SAM Auction, the Exchange believes this is appropriate
given the immediate cross functionality available to pairs of Priority
Customer orders. Options Members will continue to be able to
immediately cross these pairs of orders via AIM.\72\
---------------------------------------------------------------------------

    \72\ See Rule 21.19(f).
---------------------------------------------------------------------------

    The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition, because the proposed changes, as
described above and below, are based on rules for similar price
improvement auction mechanisms at other options exchanges.\73\ The
general framework and primary features of the proposed SAM Auction
process (such as the eligibility requirements, auction response period,
same-side stop price requirements, response requirements, and auction
notification process),\74\ are substantively the same as the framework
for the AIM price improvement auction the Exchange's current price
improvement auction.
---------------------------------------------------------------------------

    \73\ See, e.g., Cboe Options Rule 6.74B; ISE Rule 716(e); and
MIAX Rule 515A(b).
    \74\ See Rule 21.19.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change will relieve
any burden on, or otherwise promote, competition. The Exchange believes
this proposed rule change is necessary to permit fair competition among
the options exchanges and to establish more uniform price improvement
auction rules on the various options exchanges. The Exchange
anticipates that this auction proposal will create new opportunities
for the Exchange to attract new business and compete on equal footing
with those options exchanges with auctions and for this reason the
proposal does not create an undue burden on intermarket competition.
Rather, the Exchange believes that the proposed rule would bolster
intermarket competition by promoting fair competition among individual
markets, while at the same time assuring that market participants
receive the benefits of markets that are linked together, through
facilities and rules, in a unified system, which promotes interaction
among the orders of buyers and sellers. The Exchange believes its
proposal would help ensure intermarket competition across all exchanges
and facilitate compliance with best execution practices. In addition,
the Exchange believes that the proposed rule change would help promote
fair and orderly markets by helping ensure compliance with Options
Order Protection and Locked and Crossed Market Rules. Thus, the
Exchange does not believe the proposal creates a significant impact on
competition.

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

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

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule
change should be 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-CboeEDGX-2019-047 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-2019-047. 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 such 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-2019-047, and should be
submitted on or before September 5, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\75\
---------------------------------------------------------------------------

    \75\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17488 Filed 8-14-19; 8:45 am]
 BILLING CODE 8011-01-P


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[Federal Register: November 12, 2009 (Volume 74, Number 217)]
[Rules and Regulations]
[Page 58213-58215]
[DOCID:fr12no09-13]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 564 and 571

[Docket No. NHTSA-2007-28322; Notice 3]
RIN 2127-AK66

Federal Motor Vehicle Safety Standards; Lamps, Reflective
Devices, and Associated Equipment

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Final rule; delay of effective date.

-----------------------------------------------------------------------

SUMMARY: This final rule delays the effective date of a final rule that
reorganized and improved the structure and clarity of the Federal motor
vehicle safety standard on lamps, reflective devices, and associated
equipment. The final rule reorganizing the lighting standard was
published on December 4, 2007 with an effective date of September 1,
2008.\1\ The effective date was extended to December 1, 2009 in a final
rule published on August 28, 2008.\2\ The agency received fourteen
petitions for reconsideration of the 2007 final rule, including two
that requested a delay in the effective date of the rule,

and others that raised concerns that the reorganization of FMVSS No.
108 imposed new requirements. This rule delays the effective date
further, from December 1, 2009 to December 1, 2012, to enable the
agency to fully resolve all of the issues raised in the petitions well
before manufacturers are required to certify to the new requirements.
---------------------------------------------------------------------------

    \1\ See 72 FR 68234.
    \2\ See 73 FR 50730.

DATES: The effective date of the final rule amending 49 CFR parts 564
and 571 published at 72 FR 68234, December 4, 2007, and delayed at 73
FR 50730, August 28, 2008, is further delayed until December 1, 2012.
The incorporation by reference of certain publications listed in the
rule is approved by the director of the Federal Register as of December
1, 2012. Optional early compliance continues to be permitted. Any
petitions for reconsideration of today's final rule must be received by
---------------------------------------------------------------------------
NHTSA not later than December 28, 2009.

ADDRESSES: Any petitions for reconsideration should refer to the docket
number of this document and be submitted to: Administrator, National
Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE.,
West Building, Ground Floor, Docket Room W12-140, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: For non-legal issues, you may call Mr.
David Hines, Office of Crash Avoidance Standards (Phone:<PHONE_NUMBER>;
FAX:<PHONE_NUMBER>). For legal issues, you may call Mr. Ari Scott Office
of the Chief Counsel (Phone:<PHONE_NUMBER>; FAX:<PHONE_NUMBER>). You may
send mail to these officials at: National Highway Traffic Safety
Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590.

SUPPLEMENTARY INFORMATION:

I. Background

    Federal Motor Vehicle Safety Standard (FMVSS) No. 108, Lamps
reflective devices, and associated equipment, specifies requirements
for original and replacement lamps, reflective devices, and associated
equipment. The purpose of FMVSS No. 108 is to reduce traffic accidents
and deaths and injuries resulting from traffic accidents, by providing
adequate illumination of the roadway, and by enhancing the conspicuity
of motor vehicles on the public roads so that their presence is
perceived and their signals understood, both in daylight and in
darkness or other conditions of reduced visibility.
    On December 4, 2007, NHTSA published a final rule amending FMVSS
No. 108 to reorganize the standard and provide a more straightforward
and logical presentation of the applicable regulatory requirements (see
72 FR 68234). Related amendments were made to 49 CFR part 564,
Replacement Light Source Information. While the final rule greatly
reduced the number of third-party standards incorporated by reference,
it did not impose any new substantive requirements on manufacturers.
Along with the changes made, the final rule specified an effective date
of September 1, 2008 for these amendments and permitted voluntary early
compliance immediately upon publication.

II. Petitions for Reconsideration

    In response to the December 2007 final rule, the agency received
fourteen petitions for reconsideration.\3\ Petitions for
reconsideration were submitted by Grote Industries, LLC, Alliance of
Automobile Manufacturers (Alliance), Motor and Equipment Manufacturers
Association (MEMA) \4\, Nissan North America, Inc., Valeo Sylvania,
Calcoast Industrial Testing Laboratory, Harley-Davidson Motor Company,
Koito Manufacturing Co, Ltd., Ford Motor Company, Toyota Motor North
America, Inc., GE Consumer & Industrial Automotive Lighting, SABIC
Innovative Plastics, Valeo Lighting Systems, and Vehicle Services
Consulting, Inc. The petitions addressed a wide range of FMVSS No. 108
subjects, including technical amendments to the rule, concern that the
reorganization imposed new requirements, and requests to change the
effective date of the final rule. On August 28, 2008, NHTSA published a
subsequent final rule changing the effective date to December 1, 2009
(see 73 FR 50730). This was done in order to allow for more time for
the agency to analyze the petitions prior to the rule taking effect.
---------------------------------------------------------------------------

    \3\ We note that the American Association for Justice (AAJ)
submitted a document objecting to the agency's discussion of implied
preemption. The agency does not consider this to be a petition for
reconsideration, as NHTSA's preemption discussion is not a rule. For
a further discussion of this, in a different context, see 73 FR
54536; September 22, 2008.
    \4\ MEMA submitted a petition for reconsideration collectively
with the Transportation Safety Equipment Institute and the Motor
Vehicle Lighting Council.
---------------------------------------------------------------------------

III. Agency Response to Petitions

    When the agency issued the 2008 final rule extending the effective
date to December 1, 2009, it believed that the additional time was
sufficient to allow NHTSA time to consider and respond fully to all
aspects of the numerous petitions for reconsideration. However, NHTSA's
consideration of the petitions has taken longer than expected and is
not yet concluded. Given the imminence of the December 1, 2009
effective date, the agency has determined that more time is needed to
fully respond to petitions concerning the technical and substantive
issues of the December 2007 final rule.
    We are extending the mandatory effective date of the rewrite of
Standard No. 108 for three years to allow sufficient time for the
agency to analyze the issues raised by the petitioners in relationship
to the version of the SAE standards that are referenced. In many cases,
the referenced version of the SAE standard is not the most current. The
agency would also like to carefully review issues the petitioners have
raised in the context of past interpretations.
    This additional delay in the effective date will enable the agency
to fully resolve all of the issues raised in the petitions well before
manufacturers are required to certify to the new requirements. The
various technical and substantive issues in the petitions for
reconsideration will be addressed by the agency in separate documents.
    We note that, as indicated above, some petitioners have argued that
the reorganization imposed new requirements. We will specifically
address the arguments and specific requirements at issue in separate
documents, and why we are accepting or not accepting each of the
petitioners' arguments and requests. We recognize, however, that one
consequence of a major rewriting of a regulation as complex as Standard
No. 108 is that some regulated parties may discover that they have been
interpreting some provisions of the earlier version of the standard
incorrectly. One of the reasons we are extending the effective date of
the new standard for three years is so that manufacturers will have a
period of time after the agency has responded to the petitions for
reconsideration in which they can continue to certify their products to
the earlier version of the standard.

IV. Effective Date of This Document

    Because December 1, 2009 (the effective date for the amendments to
FMVSS No. 108, set in the August 2008 final rule) is fast approaching,
NHTSA finds for good cause that this action delaying the effective date
should take effect immediately. Today's final rule makes no substantive
changes to FMVSS No. 108, but further delays the effective date of the
December 4, 2007 final rule until December 1, 2012.

V. Rulemaking Analyses and Notices

A. Executive Order 12866 and DOT Regulatory Policies and Procedures

    This action delays the effective date of an administrative rewrite
of FMVSS No. 108. It was not reviewed by the Office of Management and
Budget under E.O. 12866. The agency has considered the impact of this
action under the Department of Transportation's regulatory policies and
procedures (44 FR 11034; February 26, 1979), and has determined that it
is not ``significant'' under them.
    This final rule delays the effective date of a December 4, 2007
final rule (which, pursuant to the August 28, 2008 final rule, was
scheduled to become effective December 1, 2009), to December 1, 2012.
Neither that rule nor today's action will have any measurable effect on
costs or benefits since the rule merely reorganizes and clarifies
existing requirements.

B. Privacy Act

    Anyone is able to search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://docketsinfo.dot.gov/.

C. Other Rulemaking Analyses and Notices

    In the December 2007 final rule, the agency discussed relevant
requirements related to the Regulatory Flexibility Act, the National
Environmental Policy Act, Executive Order 13132 (Federalism), the
Unfunded Mandates Reform Act, Civil Justice Reform, the National
Technology Transfer and Advancement Act, the Paperwork Reduction Act,
and Executive Order 13045 (Protection of Children from Environmental
Health and Safety Risks). Since that final rule was an administrative
rewrite of existing requirements and since today's action simply delays
the effective date of that final rule, today's rule does not affect the
agency's analyses in those areas.
    Therefore, the effective date of the final rule amending 49 CFR
Parts 564 and 571 published at 72 FR 68234, December 4, 2007, and
delayed at 73 FR 50730, August 28, 2008, is further delayed until
December 1, 2012.

    Authority: 49 U.S.C 322, 30111, 30115, 30117, and 30166;
delegations of authority at 49 CFR 1.50 and 501.8.

Ronald L. Medford,
Acting Deputy Administrator.
[FR Doc. E9-27075 Filed 11-5-09; 4:15 p.m.]

BILLING CODE 4910-59-P