2023-00989. Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.6 Concerning All-or-None Orders With the Size of One Contract

January 13, 2023.

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 January 5, 2023, Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Text of the Proposed Rule Change

(a) Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) proposes to amend Rule 5.6. The text of the proposed rule change is provided below.

(additions are italicized; deletions are [bracketed])

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Rules of Cboe Exchange, Inc.

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

(a)-(b) No change.

(c) Order Instructions. An “Order Instruction” is a processing instruction a User may apply to an order (multiple instructions may apply to a single order), subject to the restrictions set forth in Rule 5.5(c) with respect to orders and bulk messages submitted through bulk ports and any other restrictions set forth in the Rules, when entering it into the System for electronic or open outcry processing and includes:

All-or-None or AON

An “All-or-None” or “AON” order is an order to be executed in its entirety or not at all. An AON order may be a market or limit order. Users may not designate an AON order as All Sessions or RTH and Curb.

(1)-(6) No change.

(7) The System disregards an AON instruction on an order with a size of one contract.

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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

The Exchange proposes to amend Rule 5.6. Specifically, the proposed rule change codifies in new subparagraph (7) of the definition of an All-or-None (“AON”) order in Rule 5.6(c) that the System will disregard an AON instruction on an order with a size of one contract. An AON order is an order to be executed in its entirety or not at all.^[3] Any order for one contract (regardless of whether it has an AON instruction) may only be executed in its entirety or not at all, as the Exchange does not permit executions of partial contracts. Therefore, an AON instruction on such an order is unnecessary. If a market participant submits an order for one contract with an AON instruction, that order would execute in the same manner as an order for one contract without an AON instruction. However, in certain circumstances, the System handles orders with AON instructions differently than non-AON orders. For example, pursuant to Rule 5.32(a)(3), AON orders are generally last in priority. Such provisions may prevent or delay executions of one-lot orders with AON instructions, despite the fact that they would otherwise execute in the same manner as one-lot orders without AON instructions. The Exchange believes it is appropriate to treat all one-lot orders (which are functionally like AON orders (as they can only execute in their entirety or not at all)) as non-AON orders so such orders that unnecessarily include an AON instruction, including AON orders from customers, do not lose otherwise lose priority.

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.^[4] Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) ^[5] 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) ^[6] requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.

The Exchange believes the proposed rule change will promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market and a national market system, because the System will handle and prioritize all one-lot orders, which are functionally like AON orders (as they can only execute in their entirety or not at all), in the same manner. The Exchange believes it is equitable to treat all one-lot AON orders as non-AON orders so such orders do not lose priority despite inclusion of an instruction that has no practical impact on its execution. The Exchange believes the proposed rule change may benefit and protect market participants that submit one-lot orders with unnecessary AON instructions, as it may improve the priority (and possibly increase execution opportunities) of such orders. Additionally, because the proposed rule change codifies current System behavior, it adds transparency and clarity to the Rules, which ultimately benefits investors.

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 does not believe that the proposed rule change will impose any intramarket burden that is not necessary or appropriate in furtherance of the purposes of the Act because it applies to all orders for one contract with AON instructions in the same manner. Additionally, as described above, by disregarding an AON instruction on an order for one contract, the System handles and prioritizes all one-lot orders that may execute in their entirety or not at all (and thus all one-lot orders) in the same manner. The Exchange does not believe that the proposed rule change will impose any intermarket burden that is not necessary or appropriate in furtherance of the purposes of the Act because it only impacts how the System internally handles and prioritizes one-lot orders with AON instructions on the Exchange.

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

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

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

Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act ^[7] and Rule 19b-4(f)(6) thereunder.^[8]

A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) ^[9] permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requested that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The codification of the new System functionality to treat all one-lot AON orders as non-AON orders, so that such orders do not lose priority, may benefit and protect investors sooner with the waiver of the operative delay. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest as the proposed rule change does not raise any new or novel issues. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change operative upon filing.^[10]

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.

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 [e-mail]. Please include File Number SR-CBOE-2023-004 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-2023-004. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website ( http://www.sec.gov/​rules/​sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2023-004 and should be submitted on or before February 9, 2023.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.¹¹

Sherry R. Haywood,

Assistant Secretary.

Footnotes

1. 15 U.S.C. 78s(b)(1).

2. 17 CFR 240.19b-4.

3.  Rule 5.6(c).

4.  15 U.S.C. 78f(b).

5.  15 U.S.C. 78f(b)(5).

6.   Id.

7.  15 U.S.C. 78s(b)(3)(A).

8.  17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement.

9.  17 CFR 240.19b-4(f)(6)(iii).

10.  For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See15 U.S.C. 78c(f).

11.  17 CFR 200.30-3(a)(12).