[Federal Register Volume 84, Number 179 (Monday, September 16, 2019)]
[Notices]
[Pages 48664-48671]
[FR Doc No: 2019-19902]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86923; File No. SR-CBOE-2019-057]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Regarding
Price Protections and Risk Controls

September 10, 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 September 5, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend the Exchange's Rules regarding price protections and risk
controls, and moves those Rules from the currently effective Rulebook
(``current Rulebook'') to the shell structure for the Exchange's
Rulebook that will become effective upon the migration of the
Exchange's trading platform to the same system

used by the Cboe Affiliated Exchanges (as defined below) (``shell
Rulebook''). 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://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with
Cboe Options, C2, EDGX, 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 trading platform to the
same system used by the Cboe Affiliated Exchanges, which the Exchange
expects to complete on October 7, 2019. In connection with this
technology migration, the Exchange has a shell Rulebook that resides
alongside its current Rulebook, which shell Rulebook will contain the
Rules that will be in place upon completion of the Cboe Options
technology migration.
    The Exchange proposes to harmonize its rules in connection with the
risk control and price protection functions on the Exchange to that of
its affiliated Exchanges. Specifically, the Exchange proposes to
consolidate all order and quote price protection mechanisms and risk
controls into a single rule, proposed Rule 5.34 (and subsequently
delete the relevant price protection mechanism and risk control
provisions in current Rules 6.12, 6.13, 6.14, 6.23C, and 6.53C.08 upon
migration). Proposed Rule 5.34 is substantively identical to C2 Rule
6.14, as well as substantially the same as corresponding EDGX Options
Rules 21.16, 21.17 and 22.11. In line with C2 Rule 6.14, proposed Rule
5.34 categorizes these mechanisms and controls as ones applicable to
simple orders (proposed paragraph (a)), complex orders (proposed
paragraph (b)), and all (i.e. simple and complex) orders (proposed
paragraph (c)). The following table identifies the Exchange's current
price protection mechanisms and risk controls, the current Exchange
Rule, the proposed Exchange Rule, the corresponding C2 Rule and EDGX
rule, where applicable, and any proposed changes, if any. The Exchange
notes that much of the proposed functionality is substantially similar
to the current price protections and risk controls functionality. The
Exchange also proposes to make non-substantive changes by updating
cross-references to rules in the shell Rulebook and rules not yet in
the shell Rulebook but that in the Exchange intends to move to the
shell Rulebook, updating Exchange-specific references for consistency
throughout the rules, and, as a result of consolidating and conforming
the proposed rule to the rules of affiliated options exchanges,
simplifies, clarifies, and updates the rule text to read in plain
English, and reformats the paragraph lettering and/or numbering.

----------------------------------------------------------------------------------------------------------------
                                    Current Cboe                          Affiliated
 Price protection/ risk control     options rule      Proposed rule      exchange rule       Proposed changes
----------------------------------------------------------------------------------------------------------------
Handling of market orders        6.13(b)(vi).......  5.34(a)(1).....  C2 Rule             Pursuant to the
 received in no-bid series.                                            6.14(a)(1); EDGX    proposed rule change,
                                                                       Rule 21.17(a)(5).   the System cancels or
                                                                                rejects a market
                                                                                order if there is no-
                                                                                bid and the best
                                                                                offer is less than or
                                                                                equal to $0.50. Under
                                                                                current
                                                                                functionality, the
                                                                                System would treat
                                                                                the sell order as a
                                                                                limit order with a
                                                                                price equal to the
                                                                                minimum increment in
                                                                                this situation. The
                                                                                proposed rule change
                                                                                also expands the same
                                                                                protection to market
                                                                                orders in no-offer
                                                                                series. The Exchange
                                                                                believes the proposed
                                                                                rule change will
                                                                                provide protection
                                                                                for these orders to
                                                                                prevent execution at
                                                                                potentially erroneous
                                                                                prices when a market
                                                                                order is entered in a
                                                                                series with no bid or
                                                                                offer.
Market order NBBO width          6.13(b)(v)(A).....  5.34(a)(2).....  C2 Rule             The proposed
 protection.                                                           6.14(a)(2); EDGX    functionality is
                                                                       21.17(a)(1).        generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the acceptable amount
                                                                                away from NBBO that a
                                                                                market order may
                                                                                execute will be
                                                                                determined by a
                                                                                percentage away from
                                                                                the NBBO midpoint
                                                                                (subject to a minimum
                                                                                and maximum dollar
                                                                                amount) rather than
                                                                                specified dollar
                                                                                ranges based on
                                                                                premium, providing
                                                                                the Exchange with
                                                                                flexibility it
                                                                                believes is
                                                                                appropriate given
                                                                                previous experience
                                                                                with risk controls.
Buy order put check............  6.14(a)...........  5.34(a)(3).....  C2 6.14(a)(3);      The proposed rule
                                                                       EDGX 21.17(a)(3).   change will apply to
                                                                                market order
                                                                                executions during the
                                                                                Opening Process, and
                                                                                deletes the call
                                                                                underlying value
                                                                                check in current Rule
                                                                                6.17(a)(i)(B), as
                                                                                this functionality
                                                                                will not be available
                                                                                on the Exchange's new
                                                                                system following the
                                                                                technology migration.
Drill-through protection         6.13(b)(v)(B).....  5.34(a)(4).....  C2 6.14(a)(4);      The proposed
 (simple).                                                             EDGX 21.17(a)(4).   functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the drill-through
                                                                                amount is a buffer
                                                                                amount determined by
                                                                                class and premium
                                                                                rather than a number
                                                                                ticks. The proposed
                                                                                rule change deletes
                                                                                the distinction
                                                                                between orders
                                                                                exposed via HAL,
                                                                                which is in line with
                                                                                current functionality
                                                                                on EDGX, which
                                                                                provides for the HAL
                                                                                equivalent, SUM. The
                                                                                proposed
                                                                                functionality applies
                                                                                to Day orders, as
                                                                                well as Good-til-Date
                                                                                (``GTD'') and Good-
                                                                                til-Cancel (``GTC'')
                                                                                \5\ orders that
                                                                                reenter the Book from
                                                                                the prior trading
                                                                                day, but not an
                                                                                Immediate-or-Cancel
                                                                                (``IOC'') or Fill-or-
                                                                                Kill (``FOK'') order,
                                                                                as resting in the
                                                                                Book for a period of
                                                                                time is inconsistent
                                                                                with their purpose
                                                                                (which is to cancel
                                                                                if not executed
                                                                                immediately).

Bulk message fat finger check..  N/A...............  5.34(a)(5).....  C2 6.14(a)(5);      The proposed
                                                                       EDGX 21.17(a)(6).   functionality adds a
                                                                                price protection
                                                                                mechanism for bulk
                                                                                messages similar to
                                                                                the fat finger check
                                                                                the Exchange
                                                                                currently provides
                                                                                for orders. The
                                                                                proposed rule states
                                                                                the System cancels or
                                                                                rejects any bulk
                                                                                message bid (offer)
                                                                                above (below) the NBO
                                                                                (NBB) by more than a
                                                                                specified amount
                                                                                determined by the
                                                                                Exchange. The
                                                                                proposed check also
                                                                                will not apply to
                                                                                bulk messages
                                                                                submitted prior to
                                                                                the conclusion of the
                                                                                Opening Process or
                                                                                when no NBBO is
                                                                                available, which is
                                                                                appropriate during
                                                                                the pre-open or
                                                                                opening rotation so
                                                                                that the check does
                                                                                not impact the
                                                                                determination of the
                                                                                opening price, and
                                                                                also when there is no
                                                                                NBBO, as the Exchange
                                                                                believes that it is
                                                                                the most reliable
                                                                                measure against which
                                                                                to compare the price
                                                                                of the bulk message
                                                                                to determine its
                                                                                reasonability.
Definitions of vertical spread,  6.53C.08..........  5.34(b)(1).....  C2 6.14(b)(1);      No substantive
 butterfly spread, and box                                             EDGX 21.17(b)(1).   changes.
 spread.
Credit-to-debit parameters.....  6.53C.08(b).......  5.34(b)(2).....  C2 6.14(b)(2);      No substantive
                                                                       EDGX 21.17(b)(2).   changes.
Debit/credit price               6.53C.08(c).......  5.34(b)(3).....  C2 6.14(b)(3);      The proposed
 reasonability checks.                                                 EDGX 21.17(b)(3).   functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the acceptable price
                                                                                is subject to a pre-
                                                                                set buffer amount,
                                                                                which flexibility is
                                                                                consistent with C2
                                                                                and EDGX
                                                                                functionality. The
                                                                                proposed rule also
                                                                                adopts language that
                                                                                accounts for the
                                                                                stock component of a
                                                                                stock-option order,
                                                                                which is consistent
                                                                                with EDGX Rule 21.17
                                                                                (and not found within
                                                                                C2 Rule 6.14 because
                                                                                C2 does not currently
                                                                                provide for this
                                                                                functionality). The
                                                                                check will apply to
                                                                                multi-class spreads
                                                                                because, upon
                                                                                migration, such
                                                                                orders will be routed
                                                                                to PAR to which the
                                                                                price protections and
                                                                                risk controls under
                                                                                the proposed rule
                                                                                will apply.
Buy strategy parameters........  6.53C.08(d).......  5.34(b)(4).....  C2 6.14(b)(4);      The proposed
                                                                       EDGX 21.17(b)(4).   functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the net credit price
                                                                                is subject to a
                                                                                buffer amount
                                                                                (consistent with C2
                                                                                and EDGX
                                                                                functionality). The
                                                                                proposed rule change
                                                                                deletes the
                                                                                mechanism's
                                                                                applicability to sell
                                                                                strategies, as that
                                                                                functionality will
                                                                                not be available on
                                                                                the Exchange
                                                                                following the
                                                                                technology migration.
                                                                                The Exchange also
                                                                                uses proposed term
                                                                                ``minimum increment''
                                                                                as opposed to
                                                                                ``$0.01'' as some
                                                                                classes move in
                                                                                increments that
                                                                                differ from a penny.
Maximum value acceptable price   6.53C.08(g).......  5.34(b)(5).....  C2 6.14(b)(5);      The proposed
 range.                                                                EDGX 21.17(b)(5).   functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the price range is
                                                                                calculated using a
                                                                                buffer amount
                                                                                (consistent with C2
                                                                                and EDGX
                                                                                functionality) rather
                                                                                than a percentage
                                                                                amount.
Drill-through protection         N/A...............  5.34(b)(6).....  C2 6.14(b)(6);      The proposed
 (complex).                                                            EDGX 21.17(b)(6).   functionality is
                                                                                generally the same as
                                                                                current functionality
                                                                                that applies to
                                                                                simple orders, and
                                                                                expands it to complex
                                                                                orders. The proposed
                                                                                rule change replaces
                                                                                market width
                                                                                parameter protection
                                                                                and acceptable
                                                                                percentage range
                                                                                parameter in current
                                                                                Rule 6.53C.08(a) and
                                                                                (e), respectively,
                                                                                which currently
                                                                                protect Cboe Options
                                                                                complex orders from
                                                                                executing at
                                                                                potentially erroneous
                                                                                prices too far away
                                                                                from the order's
                                                                                price or the market's
                                                                                best price. The
                                                                                proposed rule is
                                                                                identical to the
                                                                                corresponding C2 and
                                                                                EDGX rules, which
                                                                                adds the concept that
                                                                                an order eligible for
                                                                                complex order request
                                                                                for responses auction
                                                                                process (``COA'')
                                                                                would initiate a COA
                                                                                at the drill-through
                                                                                price as the prices
                                                                                for complex strategy
                                                                                executions may be
                                                                                subject to the drill-
                                                                                through protection,
                                                                                and the price of a
                                                                                COA may be impacted
                                                                                by the drill-through
                                                                                protection; and (2)
                                                                                describes how a
                                                                                change in the SBBO
                                                                                prior to the end of
                                                                                the time period but
                                                                                the complex order
                                                                                cannot Leg, and the
                                                                                new SBO (SBB) crosses
                                                                                the drill-through
                                                                                price, the System
                                                                                changes the displayed
                                                                                price of the complex
                                                                                order to the new SBO
                                                                                (SBB) minus (plus)
                                                                                $0.01, and the order
                                                                                will not be cancelled
                                                                                at the end of the
                                                                                time period. The
                                                                                proposed rule change
                                                                                merely permits an
                                                                                order to remain on
                                                                                the complex order
                                                                                book (``COB'') since
                                                                                the market reflects
                                                                                interest to trade
                                                                                (but not currently
                                                                                executable due to
                                                                                Legging Restrictions)
                                                                                that was not there at
                                                                                the beginning of the
                                                                                time period,
                                                                                providing additional
                                                                                execution
                                                                                opportunities prior
                                                                                to cancellation.
Limit Order Fat Finger Check...  6.12(a)(3) and      5.34(c)(1).....  C2 6.14(c)(1);      The proposed
                                  6.12(b).                             EDGX 21.17(a)(2)    functionality is
                                                                       & (b)(7).           generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the amount away from
                                                                                the NBBO a limit
                                                                                order price may be is
                                                                                a buffer amount
                                                                                rather than a number
                                                                                of ticks with no
                                                                                minimum, and Exchange
                                                                                may determine whether
                                                                                the check applies to
                                                                                simple orders prior
                                                                                to the conclusion of
                                                                                the RTH opening
                                                                                auction process
                                                                                (current rules codify
                                                                                pre-open
                                                                                application),
                                                                                providing the
                                                                                Exchange with
                                                                                flexibility it
                                                                                believes appropriate
                                                                                given previous
                                                                                experience with risk
                                                                                controls. The
                                                                                proposed rule change
                                                                                does not apply to GTC
                                                                                or GTD orders that
                                                                                reenter the Book from
                                                                                the prior trading
                                                                                day, as this check
                                                                                only applies to
                                                                                orders when the
                                                                                System receives them.
                                                                                The proposed rule
                                                                                change provides Users
                                                                                with the ability to
                                                                                set a different
                                                                                buffer amount to
                                                                                accommodate its own
                                                                                risk modeling; does
                                                                                not apply to adjusted
                                                                                series prior to the
                                                                                RTH opening auction
                                                                                process, as prices
                                                                                may reflect the
                                                                                corporate action for
                                                                                the underlying but
                                                                                the previous day's
                                                                                NBBO would not
                                                                                reflect that action.
                                                                                If the check applies
                                                                                prior to the RTH
                                                                                opening auction
                                                                                process, the System
                                                                                compares the last
                                                                                disseminated NBBO on
                                                                                that trading day, or
                                                                                the midpoint of the
                                                                                prior trading day's
                                                                                closing NBBO, if no
                                                                                NBBO has been
                                                                                disseminated on that
                                                                                trading day, which
                                                                                the Exchange believes
                                                                                is another reasonable
                                                                                price comparison.
Maximum contract size..........  6.14(e)...........  5.34(c)(2).....  C2 6.14(c)(2);      The proposed
                                                                       EDGX 21.17(b)(8).   functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, except
                                                                                the Exchange will set
                                                                                a default amount
                                                                                rather than permit
                                                                                User to set amount.
                                                                                The proposed rule
                                                                                change applies per
                                                                                port rather than
                                                                                acronym or login. The
                                                                                functionality to
                                                                                cancel a resting
                                                                                order or quote if
                                                                                replacement order or
                                                                                quote is entered will
                                                                                not be available on
                                                                                the Exchange
                                                                                following the
                                                                                technology migration
                                                                                (however, a User can
                                                                                enable cancel on
                                                                                reject functionality
                                                                                described below to
                                                                                receive same result).
Maximum notional value.........  N/A...............  5.34(c)(3).....  C2 6.14(c)(3);      Voluntary
                                                                       EDGX Technical      functionality similar
                                                                       specifications.     to maximum contract
                                                                                size, except the
                                                                                System cancels or
                                                                                rejects an incoming
                                                                                order or quote with a
                                                                                notional value that
                                                                                exceeds the maximum
                                                                                notional value a User
                                                                                establishes for each
                                                                                of its ports. The
                                                                                proposed rule change
                                                                                provides an
                                                                                additional, voluntary
                                                                                control for Users to
                                                                                manage their order
                                                                                and execution risk on
                                                                                the Exchange.

Daily risk limits..............  N/A...............  5.34(c)(4).....  C2 6.14(c)(4);      Voluntary
                                                                       EDGX Technical      functionality
                                                                       specifications.     pursuant to which a
                                                                                User may establish
                                                                                limits for cumulative
                                                                                notional booked bid
                                                                                (``CBB'') or offer
                                                                                (``CBO'') value, and
                                                                                cumulative notional
                                                                                executed bid
                                                                                (``CEB'') or offer
                                                                                (``CEO'') value for
                                                                                each of its ports on
                                                                                a net or gross basis,
                                                                                or both, and may
                                                                                establish limits for
                                                                                market or limit
                                                                                orders (counting both
                                                                                simple and complex),
                                                                                or both. If a User
                                                                                exceeds a cutoff
                                                                                value (by aggregating
                                                                                amounts across the
                                                                                User's ports), the
                                                                                System cancels or
                                                                                rejects incoming
                                                                                limit or market
                                                                                orders, or both, as
                                                                                applicable.\6\
Risk monitor mechanism.........  6.14(d) and 8.18..  5.34(c)(5).....  C2 6.14(c)(5);      Similar functionality
                                                                       EDGX 21.16.         to current quote risk
                                                                                monitor and order
                                                                                entry, execution, and
                                                                                price parameter rate
                                                                                checks on the
                                                                                Exchange, which will
                                                                                not be available on
                                                                                the Exchange
                                                                                following migration
                                                                                (discussed below).
Cancel on reject...............  N/A...............  5.34(c)(6).....  C2 6.14(c)(6);      Additional, voluntary
                                                                       EDGX 6.14(a)(7).    control for Users to
                                                                                manage their order
                                                                                and execution risk on
                                                                                the Exchange,
                                                                                pursuant to which the
                                                                                System cancels a
                                                                                resting order or
                                                                                quote if the System
                                                                                rejects a cancel or
                                                                                modification
                                                                                instruction (because,
                                                                                for example, it had
                                                                                an invalid
                                                                                instruction) for that
                                                                                resting order or
                                                                                quote. The proposed
                                                                                rule change is
                                                                                consistent with the
                                                                                purpose of a cancel
                                                                                or modification,
                                                                                which is to cancel
                                                                                the resting order or
                                                                                quote, and carries
                                                                                out this purpose
                                                                                despite an erroneous
                                                                                instruction on the
                                                                                cancel/modification
                                                                                message.
Kill switch....................  6.14(f)...........  5.34(c)(7).....  C2 6.14(c)(7);      The proposed
                                                                       EDGX 22.11.         functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, except
                                                                                Users may apply it to
                                                                                different categories
                                                                                of orders by EFID
                                                                                rather than acronym
                                                                                or login (consistent
                                                                                with new System
                                                                                functionality for
                                                                                migration), and block
                                                                                of incoming orders or
                                                                                quotes is a separate
                                                                                request by Users.
Cancel on disconnect...........  6.23C.............  5.34(c)(8).....  C2 6.14(c)(8);      The proposed
                                                                       EDGX Technical      functionality is
                                                                       Specifications.     generally the same as
                                                                                current technical
                                                                                disconnect
                                                                                functionality, except
                                                                                it is the same for
                                                                                both APIs on the new
                                                                                System. The proposed
                                                                                rule change will
                                                                                continue to protect
                                                                                Users against
                                                                                erroneous executions
                                                                                if it appears they
                                                                                are experiencing a
                                                                                system disruption.
                                                                                The proposed
                                                                                functionality will no
                                                                                longer provide TPHs
                                                                                with the ability to
                                                                                determine length of
                                                                                interval, but does
                                                                                provide additional
                                                                                flexibility with
                                                                                respect to which
                                                                                order types may be
                                                                                cancelled--current
                                                                                functionality permits
                                                                                a choice of market-
                                                                                maker quotes and day
                                                                                orders, while the
                                                                                proposed
                                                                                functionality permits
                                                                                a choice of day and
                                                                                GTC/GTD orders, or
                                                                                just day orders.
Block new orders...............  N/A...............  5.34(c)(9).....  C2 6.14(c)(9);      Similar to automatic
                                                                       EDGX 22.11.         functionality that
                                                                                occurs on the
                                                                                Exchange currently
                                                                                when a Trading Permit
                                                                                Holder uses kill
                                                                                switch functionality.
                                                                                The proposed rule
                                                                                change merely
                                                                                provides a separate
                                                                                way to achieve this
                                                                                result on the new
                                                                                System, providing
                                                                                Users with
                                                                                flexibility regarding
                                                                                how to manage their
                                                                                resting orders and
                                                                                quotes.
Duplicate order protection.....  N/A...............  5.34(c)(10)....  C2 6.14(c)(10);     Additional, voluntary
                                                                       EDGX Technical      control for Users to
                                                                       specifications.     manage their order
                                                                                and execution risk on
                                                                                the Exchange. The
                                                                                proposed rule change
                                                                                protects Users
                                                                                against execution of
                                                                                multiple orders that
                                                                                may have been
                                                                                erroneously entered.
Buy-Write/Married Put Check....  6.53C.08(a)(5)....  5.34(c)(11)....  EGDX 21.17(b)(9)..  The proposed
                                                                                functionality is
                                                                                generally the same as
                                                                                current
                                                                                functionality, the
                                                                                acceptable price
                                                                                range is based on the
                                                                                price of the call
                                                                                (put) plus (minus) an
                                                                                Exchange-determined
                                                                                buffer amount.
----------------------------------------------------------------------------------------------------------------

    The price  protection mechanisms and risk controls under proposed
Rule 5.34 are applicable to the System's acceptance and execution of
orders and quotes pursuant to the Rules, including Rules 5.31 through
5.33,\7\ and to and orders routed to the Exchange's Public Automated
Routing System (``PAR'') pursuant to Rule 5.82.\8\ The Exchange notes
that the proposed rule's inclusion of PAR orders is an intended
difference made between its proposed rule and C2's rule, as PAR is
unique to the Exchange. Upon migration, all orders routed to PAR will
also be subject to price protection mechanisms and risk controls. This
will provide the same protections for User's PAR routed order as for
User's order and quotes sent through and executed by the System.
Currently, PAR functions outside of the System, therefore not all risk
controls are currently applicable to PAR orders. Upon migration, PAR
orders will be entered into the System in the same manner as all other
orders, and will route to PAR per User instruction, after going through
the System, therefore, the same price protection mechanisms and risk
controls will apply.
---------------------------------------------------------------------------

    \5\ See Rule 5.6 in the shell Rulebook. For an order designated
as a GTD order, if after entry into the System, the order is not
fully executed, the order (or unexecuted portion) remains available
for potential display or execution (with the same timestamp) until a
date and time specified by the entering User unless cancelled by the
entering User. For an order designated as a GTC order, if after
entry into the System, the order is not fully executed, the order
(or unexecuted portion) remains available for potential display or
execution (with the same timestamp) unless cancelled by the entering
User, or until the option expires, whichever comes first.
    \6\ The System calculates a notional cutoff on a gross basis by
summing CBB, CBO, CEB, and CEO. The System calculates a notional
cutoff on a net basis by summing CEO and CBO, then subtracting the
sum of CEB and CBB, and then taking the absolute value of the
resulting amount.
    \7\ Rules to be effective on October 7, 2019 and cover the
opening auction process, order and quote book processing, display,
priority, and execution, as well as complex orders.
    \8\ Rule to be effective on October 7, 2019 and governs the
operation of the Exchange's Public Automated Routing System
(``PAR'').
---------------------------------------------------------------------------

    The proposed rule change also deletes the mechanisms related to
execution of quotes that lock or cross the NBBO and quotes inverting
the NBBO (current Rule 6.14(b) and (c)). The Exchange's current quote
functionality will be replaced with bulk message functionality \9\ upon
migration; however, orders and bulk messages (the equivalent of current
quotes) submitted by Market-Makers will be subject to the same
protections, except for those that do not apply to bulk messages (e.g.,
for market orders in no-bid (offer) series, market order NBBO width and
drill-through protections, limit order fat finger checks, and daily
risk limits) as described above.
---------------------------------------------------------------------------

    \9\ See Rule 1.1 in shell Rulebook, which states that ``bulk
message'' means a single electronic message a User submits to the
Exchange in which the User may enter, modify, or cancel up to an
Exchange-specified number of bids and offers. Upon migration the
System will handle a bulk message bid or offer in the same manner as
it handles an order or quote, unless the Rules specify otherwise.
The proposed rule change accounts for bulk message functionality and
makes explicit the price protections that will not apply to such
messages. This is consistent with C2 Rule 6.14.
---------------------------------------------------------------------------

    Under the current C2 and EDGX debit/credit price reasonability
check (see C2 Rule 6.14(b)(3) and EDGX Rule 21.17(b)(3)), the System
only pairs calls (puts) if they have the same expiration date but
different exercise prices or the same exercise price but different
expiration dates. Under the Exchange's

current debit/credit reasonability check, with respect to pairs with
different expiration the System pairs of calls (puts) with different
expiration dates if the exercise price for the call (put) with the
farther expiration date is lower (higher) than the exercise price for
the nearer expiration date in addition to those with different
expiration dates and the same exercise price. The proposed rule change
amends this check to pair orders in the same manner as C2 and EDGX,
which is to pair calls (puts) if they have the same expiration date but
different exercise prices or the same exercise price but different
expiration dates. Additionally, the proposed rule change deletes the
exception for complex orders with European-style exercise. This aligns
with the corresponding rules of C2 and EDGX and the Exchange no longer
believes this exception is necessary and will expand this check to
index options with all exercise styles.
    The proposed Risk Monitor Mechanism is identical to the current
functionality on C2 and substantively the same as the functionality
currently available on EDGX. Because there will no longer be separate
order and quote functionality on the Exchange following the technology
migration, there will no longer be separate mechanisms to monitor entry
and execution rates, as there are on the Exchange today. Each User may
establish limits for the following parameters in the Exchange's
counting program. The System counts each of the following within a
class (``class limit'') \10\ and across all classes for an EFID \11\
(``firm limit'') and/or across all classes for a group of EFIDs (``EFID
Group'') (``EFID Group limit'') over a User-established time period
(``interval'') on an absolute basis for a trading day (``absolute
limits''):
---------------------------------------------------------------------------

    \10\ The Exchange also changes the term ``underlying'' and
``underlying limit'' currently in the C2 rule to ``class'' and
``class limit'' which more accurately reflect this Risk Monitor
Mechanism limit and the language in the current Exchange rule.
    \11\ The Exchange will use EFIDs (i.e., Executing Firm IDs) upon
migration. See Rule 1.1 in the shell Rulebook.
---------------------------------------------------------------------------

    (i) Number of contracts executed (``volume'');
    (ii) notional value of executions (``notional'');
    (iii) number of executions (``count'');
    (iv) number of contracts executed as a percentage of number of
contracts outstanding within an Exchange-designated time period or
during the trading day, as applicable (``percentage''), which the
System determines by calculating the percentage of a User's outstanding
contracts that executed on each side of the market during the time
period or trading day, as applicable, and then summing the series
percentages on each side in the class; and
    (v) number of times the limits established by the parameters under
the above-listed are reached (``risk trips'').
    Also, when the System determines the volume, notional, count,
percentage, or risk trips limits have been reached:
    (i) a User's class limit within the interval or the absolute limit
for the class, the Risk Monitor Mechanism cancels or rejects such
User's orders or quotes in all series of the class and cancels or
rejects any additional orders or quotes from the User in the class
until the counting program resets (as described below).
    (ii) a User's firm limit within the interval or the absolute limit
for the firm, the Risk Monitor Mechanism cancels or rejects such User's
orders or quotes in all classes and cancels or rejects any additional
orders or quotes from the User in all classes until the counting
program resets (as described below).
    (iii) a User's EFID Group limit within the interval or the absolute
limit for the EFID Group, the Risk Monitor Mechanism cancels or rejects
such User's orders or quotes in all classes and cancels or rejects any
additional orders or quotes from any EFID within the EFID Group in all
classes until the counting program resets (as described below).
    The Risk Monitor Mechanism will also attempt to cancel or reject
any orders routed away to other exchanges. The System processes
messages in the order in which they are received. Therefore, it will
execute any marketable orders or quotes that are executable against a
User's order or quote and received by the System prior to the time the
Risk Monitor Mechanism is triggered at the price up to the size of the
User's order or quote, even if such execution results in executions in
excess of the User's parameters. The System will not accept new orders
or quotes from a User after a class limit is reached until the User
submits an electronic instruction to the System to reset the counting
program for the class. The System will not accept new orders or quotes
from a User after an EFID limit or EFID Group limit is reached until
the User manually notifies the Trade Desk to reset the counting program
for the firm, unless the User instructs the Exchange to permit it to
reset the counting program by submitting an electronic message to the
System. The Exchange may restrict the number of User class and firm
resets per second. The System counts executed COA responses as part of
the Risk Monitor Mechanism. The System counts individual trades
executed as part of a complex order when determining whether the
volume, notional, count, or risk trips limit has been reached. The
System counts the percentage executed of a complex order when
determining whether the percentage limit has been reached. In addition,
a User may also engage the Risk Monitor Mechanism to cancel resting
bids and offers, as well as order set forth in the kill switch
protection provision. The Risk Monitor Mechanism providers Users with
similar ability to manage their order and execution risk to the quote
risk monitor and rate checks currently available on the Exchange, and
merely uses different parameters and modifies the functionality to
conform the new System to that of C2 and EDGX upon migration.
    With respect to various price protections and risk controls in
current Rules 6.12.01, 6.13, and 6.53C.08, the Exchange has the
authority to provide intraday relief by widening or inactivating one or
more of the parameter settings for the mechanisms in those rules. This
authority is included in proposed Interpretation and Policy .01, to
provide this flexibility for all price protections and risk controls
for which the Exchange sets parameters, providing the Exchange with
flexibility it believes appropriate given previous experience with risk
controls. This is consistent with corresponding C2 Rule 6.14.01. The
Exchange will continue to make and keep records to document all
determinations to grant intraday relief, and periodically review these
determinations for consistency with the interest of a fair and orderly
market.
    The proposed rule change makes a non-substantive change in moving
the provision regarding the Exchange's ability to share User-designated
risk settings in the System with a Clearing Trading Permit Holder that
clears Exchange transactions on behalf of the User from the
introduction of current Rule 6.14 to proposed Rule 5.34.02. Also, the
proposed change makes non-substantive changes in that it updates all
provisions to account for ``User'' as opposed to Trading Permit Holder
(``TPH''), which is consistent with the definition under Rule 1.1 the
shell Rulebook, and the use of the term throughout the Exchange Rules
upon migration.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations

thereunder applicable to the Exchange and, in particular, the
requirements of Section 6(b) of the Act.\12\ Specifically, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \13\ requirements that the rules of an exchange be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \14\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
---------------------------------------------------------------------------

    The proposed rule change is generally intended to add or align
certain System functionality in connection with price protection
mechanisms and risk controls with functionality currently offered by C2
and EDGX 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. The proposed rule changes would also provide Users with
access to functionality that is generally available on markets other
than the Cboe Affiliated Exchanges and may result in the efficient
execution of such orders and will provide additional flexibility as
well as increased functionality to the Exchange's System and its Users.
The proposed rule change seeks to provide greater harmonization between
the rules of the Cboe Affiliated Exchanges, which would result in
greater uniformity and less burdensome and more efficient regulatory
compliance. As such, the proposed rule change would foster cooperation
and coordination with persons engaged in facilitating transactions in
securities and would remove impediments to and perfect the mechanism of
a free and open market and a national market system. The Exchange also
believes that consistent rules will increase the understanding of the
Exchange's operations for Trading Permit Holders that are also
participants on the Cboe Affiliated Exchanges, thereby contributing to
the protection of investors and the public interest. The proposed rule
change does not propose to implement new or unique functionality that
has not been previously filed with the Commission or is not available
on Cboe Affiliated Exchanges. The Exchange notes that the proposed rule
text mirrors C2 Rules, save for intended differences that account for
PAR (unique to the Exchange), Exchange-specific cross-references and
references to certain terms (i.e. User throughout the proposed rule).
    Overall, the Exchange believes the additional and enhanced price
protection mechanisms and risk controls will protect investors and the
public interest and maintain fair and orderly markets by mitigating
potential risks associated with market participants entering orders and
quotes at unintended prices, and risks associated with orders and
quotes trading at prices that are extreme and potentially erroneous,
which may likely have resulted from human or operational error. The
Exchange notes that the proposed rule change is substantially similar
to the current Cboe Options Rules, and, while the Exchange currently
offers many similar protections and controls, as described above, the
Exchange believes Users will benefit from the additional functionality
that will be available following the technology migration.
    As indicated in the table above, the proposed price protection and
risk control mechanisms no longer establish outer boundaries or limits
to the levels at which mechanisms are set (save for the proposed no-bid
provision, noted below), but instead, the proposed rule change amends
the price protection mechanisms and risk controls to account for
Exchange-determined and/or User-determined buffer or default amounts.
The Exchange believes this removes impediments to and perfects the
mechanism of a free and open market and national market system because
it affords the Exchange and Users reasonable and necessary flexibility
to establish and modify the default parameters, which, in turn,
protects investors and the public interest, and maintains a fair and
orderly market. The Exchange notes any Exchange-determined parameters
will always be available on the Exchange's website via specification or
Notice.\15\ The Exchange also believes the proposed rule change to the
no-bid provisions, that the System cancels or rejects a market order if
there is no-bid and the best offer is less than or equal to $0.50, as
well as a market order where there is no-offer, is designed to protect
User's as it will provide protection for market orders to prevent
execution at potentially erroneous prices when a market order is
entered in a series with no bid or offer.
---------------------------------------------------------------------------

    \15\ See Rule 1.5 in the shell Rulebook.
---------------------------------------------------------------------------

    The proposed drill-through protections for complex orders removes
impediments to and perfect the mechanism of a free and open market and
national market system and facilitates transactions in securities by
adding detail to the rules regarding complex order price protections.
Particularly, by adding that a COA-eligible order would initiate a COA
at the drill-through price because the prices for complex strategy
executions may be subject to the drill-through protection and
permitting an order that is not currently executable due to Legging
restrictions to remain on the COB if the SBBO changes during the set
time-period will provide additional execution opportunities, for Users'
orders participating in the COA and/or prior to cancellation.
    The proposed provision in connection with the Risk Monitor
Mechanism will not alter the function of this mechanism for market
participants as it provides Users with the ability to manage their
order and execution risk to the quote risk monitor and rate checks
similar to that which is currently available on the Exchange, and
merely uses different parameters and modifies the functionality to
conform the new System to that of C2 and EDGX upon migration. The
Exchange also notes that this functionality is optional; it is User-
enabled and the parameters are User-established.
    The proposed rule change also removes functionality, and reference
to such functionality, that will not exist upon migration in order to
align the Exchange's System with that of its affiliated options
exchanges, which will serve to remove impediments to and perfect the
mechanism of a free and open market and national market system by
providing market participants with rules that accurately reflect
functionality post-migration and effectively harmonize Exchange
functionality with that of C2 and EDGX. Moreover, the Exchange does not
believe that the proposed change that removes functionality that will
no longer be available upon migration will impact investors because the
proposed change provides substantially similar alternative mechanisms
and controls that result in the same protections as current Exchange
functionality. The

Exchange believes that the proposed rule provides a full suite of price
protection mechanisms and risk controls, the same as those currently in
effect on its affiliated options exchanges, which will sufficiently
mitigate risks associated with market participants entering orders and
quotes at unintended prices, and risks associated with orders and
quotes trading at prices that are extreme and potentially erroneous, as
a likely result of human or operational error. The Exchange also notes
that a majority of the proposed price protection mechanisms and risks
controls are voluntary and/or User-determined, which benefits market
participants by providing Users with additional control and flexibility
in connection with their orders.
    As stated, the Exchange notes the proposed price protection
mechanisms and risk controls provisions do not present any new or
unique rules or functionality for market participants as the proposed
rule is substantially similar to the Exchange's current rules,
identical to C2 Rule 6.14, as well as substantively the same as
corresponding EDGX rules and technical specifications, as discussed
above. The proposed rule change makes various non-substantive changes
throughout the rules by updating cross-references and Exchange-specific
terms, and by means of conforming language to C2 Rule 6.14, as well as
corresponding EDGX rules, that will protect investors and benefit
market participants as these changes simplify or clarify rules, delete
duplicative rule provisions, conform paragraph numbering and lettering
throughout the rules, and use plain English.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange reiterates that
the proposed rule change is being proposed in the context of the
technology integration of the Cboe Affiliated Exchanges. Thus, the
Exchange believes this proposed rule change is necessary to permit fair
competition among national securities exchanges.
    The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, the
proposed rule change is designed to benefit Exchange participants in
that it will provide a consistent technology offering for Users by the
Cboe Affiliated Exchanges. Following the technology migration, the
Exchange's System, as described in this proposed rule change, will
apply to all Users and order and quotes submitted by Users in the same
manner. The Exchange also notes that many of the proposed price
protections and risk controls are either User-determined or altogether
voluntary.
    In addition to this, the Exchange does not believe that the
proposed rule change will impose any burden on intermarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because the basis for the majority of the proposed rule changes
in this filing are the rules of C2 and EDGX, which have previously been
filed with the Commission. The Exchange also notes that market
participants on other exchanges are welcome to become participants on
the Exchange if they determine that this proposed rule change has made
Cboe Options a more attractive or favorable venue. As stated, the
proposed changes to the rules that accurately reflect functionality
that will be in place come October 7, 2019, will not impose any burden
on intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act but rather provide clear,
consistent rules for market participants surrounding the completion of
migration.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \16\ and paragraph (f) of Rule 19b-4 \17\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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_ADDRESS>Please include
File Number SR-CBOE-2019-057 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-CBOE-2019-057. 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-CBOE-2019-057, and should be submitted
on or before October 7, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19902 Filed 9-13-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 130 (Monday, July 8, 2013)]
[Proposed Rules]
[Pages 40654-40655]
[FR Doc No: 2013-16295]

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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R08-OAR-2012-0026, FRL-9830-9]

Approval, Disapproval and Promulgation of Implementation Plans;
State of Wyoming; Regional Haze State Implementation Plan; Federal
Implementation Plan for Regional Haze; Notice of Public Hearings

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of public hearings; extension of comment period.

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

SUMMARY: EPA has scheduled additional public hearings for our proposed
action on Wyoming's State Implementation Plan (SIP) addressing regional
haze under. We are making this change in response to letters submitted
by the Governor of Wyoming on June 13, 2013, the Wyoming Congressional
Delegation on June 14, 2013, and the Wyoming Department of
Environmental Quality on June 14, 2013. The comment period for this
action was scheduled to close on August 9, 2013. EPA is extending the
comment period to August 26, 2013 to allow for a full 30 days for the
submission of additional comments following the public hearings.

DATES: Public hearings for this proposal are scheduled to be held on
July 17, 2013 at the Laramie County Library, Cottonwood Room, 2200
Pioneer Avenue, Cheyenne, Wyoming 82001 and on July 26, 2013 at the Oil
& Gas Conservation Commission, Meeting Room 129, 2211 King Boulevard,

Casper, Wyoming 82602. The public hearings will be held from 1 p.m.
until 5 p.m. and again from 6 p.m. until 8 p.m. at both locations. The
comment period for the proposed rule published June 10, 2013 at 78 FR
34738 is extended. Comments must be received on or before August 26,
2013.

FOR FURTHER INFORMATION CONTACT: Laurel Dygowski, EPA Region 8,
Mailcode 8P-AR, 1595 Wynkoop Street, Denver, Colorado 80202-1129, (303)
312-6144<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: On June 10, 2013, we published a proposed
rule partially approving and partially disapproving Wyoming's 40 CFR
51.309(g) regional haze SIP. 78 FR 34738. In our June 10, 2013 proposed
rule, we provided notification that we were holding a public hearing on
June 24, 2013, in Cheyenne, Wyoming. To partially accommodate requests
for both additional time to prepare for public hearings and an
extension to the public comment period in letters from the Governor of
Wyoming on June 13, 2013, the Wyoming Congressional Delegation on June
14, 2013, and the Wyoming Department of Environmental Quality on June
14, 2013, we have scheduled additional public hearings as stated above
and extended the public comment period to August 26, 2013.
    The public hearings will provide interested parties the opportunity
to present information and opinions to EPA concerning our proposal.
Interested parties may also submit written comments, as discussed in
the proposed rulemaking. Written statements and supporting information
submitted during the comment period will be considered with the same
weight as any oral comments and supporting information presented at the
public hearings.

    Dated: June 21, 2013.
Howard M. Cantor,
Acting Regional Administrator, Region 8.
[FR Doc. 2013-16295 Filed 7-5-13; 8:45 am]
BILLING CODE 6560-50-P