I. Introduction

On March 26, 2021, Cboe BZX Exchange, Inc. (“Cboe BZX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),^[1] and Rule 19b-4 thereunder,^[2] a proposed rule change to modify Exchange Rule 11.23 to amend the cutoff time for accepting on close orders entered for participation in the Exchange's Closing Auction and to make clarifying changes to the definitions of Late-Limit-On-Close and Late-Limit-On-Open orders. The proposed rule change was published for comment in the Federal Register on April 9, 2021.^[3] The Commission received no comments on the proposed rule change. This order approves the proposed rule change.

II. Description of the Proposal

Exchange Rule 11.23(c) currently provides that Users may submit Limit-on-Close (“LOC”) ^[4] and Market-on-Close (“MOC”) ^[5] orders to the Exchange until 3:55 p.m. ET (“Closing Auction Cutoff”), at which point any additional LOC and MOC orders will be rejected.^[6] Users may submit Late-Limit-on-Close (“LLOC”) ^[7] orders between 3:55 p.m. ( printed page 27906) and 4:00 p.m. and any LLOC orders submitted before 3:55 p.m. or after 4:00 p.m. will be rejected.^[8] Exchange Rule 11.23(c) also provides that Eligible Auction Orders ^[9] designated for the Exchange's Closing Auction ^[10] may not be cancelled between 3:55 p.m. and 4:00 p.m.^[11]

As described in more detail in the Notice,^[12] the Exchange now proposes to amend Exchange Rule 11.23(c) to extend the cutoff time for accepting on close orders to permit the submission of LOC and MOC orders until 3:59 p.m. ET, to allow the submission of LLOC orders between 3:59 p.m. and 4:00 p.m. ET, and to prevent the cancellation of Eligible Auction Orders designated for the Closing Auction between 3:59 p.m. and 4:00 p.m. ET. As proposed, Exchange Rule 11.23(c)(1)(A) would provide that Users may submit LOC and MOC orders until 3:59 p.m., at which point any additional LOC and MOC orders submitted would be rejected. Proposed Exchange Rule 11.23(c)(1)(A) would also provide that users may submit LLOC orders between 3:59 p.m. and 4:00 p.m., and any LLOC orders submitted before 3:59 p.m. or after 4:00 p.m. would be rejected. As proposed, Exchange Rule 11.23(c)(1)(B) would provide that Eligible Auction Orders designated for the Closing Auction may not be cancelled between 3:59 p.m. and 4:00 p.m.

The Exchange also proposes to amend the definitions of LLOC and Late-Limit-on-Open (“LLOO”) ^[13] in Exchange Rule 11.23(a). Currently, Exchange Rules 11.23(a)(11) and (a)(12) provide that, to the extent a LLOC or LLOO bid or offer received by the Exchange has a limit price that is more aggressive than the National Best Bid (“NBB”) or National Best Offer (“NBO”), the price of such bid or offer is adjusted to be equal to the NBB or NBO, respectively, at the time of receipt by the Exchange. Where the NBB or NBO becomes more aggressive, the limit price of the LLOC or LLOO bid or offer will be adjusted to the more aggressive price, only to the extent that the more aggressive price is not more aggressive than the original User entered limit price. The limit price will never be adjusted to a less aggressive price. If there is no NBB or NBO, the LLOC or LLOO bid or offer, respectively, will assume its entered limit price. The Exchange proposes to amend these definitions to clarify that, rather than never be adjusted to a less aggressive price, the limit price of a LLOC order or a LLOO order would not be adjusted to a less aggressive price, unless otherwise provided by Exchange rules. The Exchange stated that, for example, a short sale LLOO or LLOC order entered at a price less than the NBB while a short sale circuit breaker pursuant to Regulation SHO was in effect would be re-priced by the Exchange's System ^[14] at one minimum price variation above the NBB pursuant to Exchange Rules 11.9(g)(5) and (6).^[15]

III. Discussion and Commission's Findings

The Commission has carefully reviewed the proposed rule change and finds that it is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act.^[16] Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,^[17] which requires, among other things, that a national securities exchange have rules 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 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.

As discussed above, the Exchange proposes to amend Exchange Rule 11.23(c) to extend the cutoff time for accepting on close orders to permit the submission of LOC and MOC orders until 3:59 p.m.,^[18] to allow the submission of LLOC orders between 3:59 p.m. and 4:00 p.m.,^[19] and to prevent the cancellation of Eligible Auction Orders designated for the Closing Auction between 3:59 p.m. and 4:00 p.m.^[20] The Exchange asserts that extending the Closing Auction Cutoff for submitting on close orders will assist market participants in managing their trading at the close by allowing them to retain control over their orders for a longer period of time.^[21] The Exchange expects that this would reduce risk for those market participants participating in the Closing Auction and improve price discovery by facilitating the additional participation of market participants.^[22] The Commission believes that extending the cutoff time to submit LOC, MOC and LLOC orders and to cancel Eligible Auction Orders to 3:59 p.m. ET would allow market participants to retain flexibility with respect to submitting and cancelling their orders, while still providing time for market participants to react to and offset imbalances. As a result, the Commission believes that the proposal could encourage participation in the Closing Auction by market participants that are unwilling to give up flexibility and control over these orders. The Commission notes that the Exchange has represented that another exchange uses a 3:59 p.m. ET cutoff time for the entry of MOC and LOC orders in its closing auction.^[23]

In addition, as discussed above, the Exchange proposes to amend the definitions of LLOC and LLOO in Exchange Rule 11.23(a), which currently state that the limit price of these orders will never be adjusted to a less aggressive price, in order to clarify that the limit price of LLOC and LLOO orders, respectively, would not be adjusted to a less aggressive price unless otherwise provided by Exchange ( printed page 27907) rules.^[24] The Exchange has explained that its System, in certain instances, may adjust the limit price of LLOC and LLOO orders to a less aggressive price pursuant to other Exchange Rules.^[25] The Commission believes that the proposed amendments to the definitions of LLOC and LLOO would provide greater transparency regarding the operation of the Exchange.

IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,^[26] that the proposed rule change (SR-CboeBZX-2021-023) be, and hereby is, approved.