Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add a New Version of the Silexx Platform
| Citation | 85 FR 24045 |
| Record Number | 2020-09126 |
| Published date | 30 April 2020 |
| Section | Notices |
| Court | Securities And Exchange Commission |
Federal Register, Volume 85 Issue 84 (Thursday, April 30, 2020)
[Federal Register Volume 85, Number 84 (Thursday, April 30, 2020)]
[Notices]
[Pages 24045-24048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09126]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88741; File No. SR-CBOE-2020-040]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Add a
New Version of the Silexx Platform
April 24, 2020.
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 April 20, 2020, 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 Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to add a new version of the Silexx platform. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add a new version of the Silexx platform
(``Cboe Silexx'').\5\ By way of background, Silexx is a User-optional
order entry and management trading platform. The current versions of
the Silexx platform, other than Silexx FLEX, are designed so that a
User may enter orders into the platform to send to the executing
broker, including Trading Permit Holders (``TPHs''), of its choice with
connectivity to the platform. The executing broker can then send orders
to Cboe Options (if the broker-dealer is a TPH) or other U.S. exchanges
(and trading centers) in accordance with the User's instructions. Users
cannot directly route orders through any of the current versions of
Silexx, other than Silexx FLEX, to an exchange or trading center nor is
the platform integrated into or directly connected to Cboe Option's
System. The Exchange recently made available an additional version of
the Silexx platform, Silexx FLEX, which supports the trading of FLEX
Options and allows authorized Users with direct access to the
Exchange.\6\
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\5\ The Exchange originally filed this proposed rule change on
April 15, 2020 (SR-CBOE-2020-038). On April 20, 2020, the Exchange
withdrew that filing and replaced it with this filing.
\6\ See Securities Exchange Act Release No. 87028 (September 19,
2019) 84 FR 50529 (September 25, 2019) (SR-CBOE-2019-061).
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In addition to supporting the trading of FLEX Options,\7\ the
proposed new version, Cboe Silexx, will also support the trading of
non-FLEX options and allow for direct access to the Exchange.
Additionally, functionality that will be available on Cboe Silexx,
which was previously adopted by the Exchange and is already available
on other versions of Silexx, include real-time data, alerts, trade
reports, views of exchange books, management of the customer's orders
and positions, simple and complex order tickets, basic risk features,
and availability of clearing fields in order tickets.\8\ The Exchange
notes that Cboe Silexx is essentially the same platform, with the same
applicable functionality as Silexx FLEX, except that it additionally
supports direct access for non-FLEX trading. As is the case with Silexx
FLEX, only authorized Users and associated persons of Users may
[[Page 24046]]
establish connectivity to and directly access the Exchange, pursuant to
Rule 5.5, however, a User that is not authorized for direct access will
be able to send orders through the Exchange's broker community who will
have access to Cboe Silexx and can submit orders directly on the User's
behalf.\9\ The Exchange notes there will be a verification process for
Users that wish to access Cboe Silexx to ensure that each User is
authorized for direct Exchange access. Each verified User will require
a username and password to authenticate their access. The Exchange
notes that those authorized to directly access the Exchange must uphold
supervisory duties over those associated with it to ensure that only
authorized Users access the platform. Other than the above noted
differences, the new Cboe Silexx platform will function in the same
manner as the Silexx versions currently available to Users: It will be
completely voluntary; orders entered through the platform will receive
no preferential treatment as compared to orders electronically sent to
Cboe Options in any other manner; orders entered through the platform
will be subject to current trading rules in the same manner as all
other orders sent to the Exchange, which is the same as orders that are
sent through the Exchange's System today; the Exchange's System will
not distinguish between orders sent from Silexx and orders sent in any
other manner; and Silexx \10\ will provide technical support,
maintenance and user training for the new platform version upon the
same terms and conditions for all Users.\11\ The Exchange notes that it
currently offers a similar front-end order entry system, the PULSe
workstation, which also permits connectivity to Cboe Options. The
Exchange notes that no changes are being made to the other current
Silexx platform versions.
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\7\ Only Users authorized for direct access and who are approved
to trade FLEX Options may trade FLEX Options via Cboe Silexx.
\8\ See Securities Exchange Act Release No. 82088 (November 15,
2017) 82 FR 55449 (November 21, 2017) (SR-CBOE-2017-068).
\9\ The Exchange notes that Users may also send orders through a
Cboe Silexx certified broker, once brokers begin electing to become
certified. The Exchange has implemented a certification process
which is open to any broker that supports trading and will allow
Users without direct access to submit through an electronic broker
certified with Silexx. The Exchange currently conducts similar
certifications for any broker that wishes to connect to Cboe, and
for other platform offerings (e.g. PULSe).
\10\ Silexx is the wholly owned subsidiary of Cboe Options'
parent company, Cboe Global Markets, Inc., which purchased Silexx in
2017.
\11\ See Securities Exchange Act Release No. 82088 (November 15,
2017), 82 FR 55443 (November 21, 2017) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Describe
Functionality of and Adopt Fees for a New Front-End Order Entry and
Management Platform) (SR-CBOE-2017-068).
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The Exchange lastly noted that at this time, it does not propose to
assess a fee in connection with the Cboe Silexx platform.\12\
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\12\ The Exchange will submit a separate rule filing to address
any fees it may wish to adopt in the future.
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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.\13\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \14\ 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) \15\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. Additionally, the Exchange also believes the
proposed rule change is consistent with Section 6(b)(4) of the Act,\16\
which requires that Exchange rules provide for the equitable allocation
of reasonable dues, fees, and other charges among its Trading Permit
Holders and other persons using its facilities.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
\16\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that offering the Cboe Silexx platform to
market participants protects investors and is in the public interest
because it will allow the Exchange to directly offer Users an order
entry and management tool for both non-FLEX and FLEX trading in
addition to the technology products it currently offers, such as the
other versions of the Silexx platform and the PULSe workstation.
Indeed, as noted above, the Cboe Silexx is essentially the same
platform as Silexx FLEX in particular, but merely allows for non-FLEX
trading in addition to supporting FLEX trading. In addition, firms can
create their own proprietary front-end order entry technology or obtain
systems with such functionality from third-party vendors.\17\ The
Exchange believes providing an alternative tool for trading, may
encourage more Users to submit orders in both FLEX and non-FLEX options
(including into price improvement auctions), which may lead to
additional execution opportunities for market participants and
liquidity in the market, which ultimately benefits investors.
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\17\ Market participants are free to do so by accessing the
Exchange's specs via the publicly accessible Application Programming
Interface and using such information in order to support trading
within their own technology, software, and front-end systems.
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The Exchange believes the proposed rule change does not
discriminate among market participants because use of the Cboe Silexx
platform is completely voluntary. Users can choose to route orders,
including to Cboe Options, and directly submit orders to Cboe Options,
without the use of the platform. The Exchange is making the platform
available as a convenience to market participants, who will continue to
have the option to use any order entry and management system available
in the marketplace to send orders to the Exchange and other exchanges;
the platform is merely an alternative that will be offered by the
Exchange. Cboe Silexx is not an exclusive means available to market
participants to send orders to Cboe Options or other markets. Any
orders sent through the platform to Cboe Options for execution will
receive no preferential treatment. Additionally, Cboe Silexx will be
available to all market participants, and the Exchange will license the
platform to market participants pursuant to the same terms and
conditions.
The Exchange believes Cboe Silexx removes impediments to and
perfects the mechanism of a free and open market and a national market
system because users have discretion to determine to which broker-
dealer they will route orders from the platform. Non-broker-dealer
users may separately enter into an agreement with a broker-dealer (the
Exchange will have no involvement with the entry into such agreements),
which can provide for routing to U.S. options and stock exchanges (and
trading centers). Only Trading Permit Holders will continue to be
permitted to directly submit orders using Cboe Silexx to Cboe Options,
and only members of other U.S. exchanges will be able to enter orders
for execution at those exchanges that they receive from the platform.
The Exchange also notes that broker-dealers must continue to ensure
that orders they receive from the platform will be subject to
applicable pre-trade risk control
[[Page 24047]]
requirements of the broker-dealer that directly submits the orders to
an exchange in accordance with Rule 15c3-5 under the Act.\18\
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\18\ See 17 CFR 240.15c3-5.
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The Exchange believes that its reasonable to not assess a monthly
Login ID fee for Cboe Silexx as market participants won't be subject to
a fee for this product. Additionally, the Exchange notes Silexx FLEX is
also currently provided at no cost.\19\ The Exchange believes not
assessing a fee at this time also serves as an incentive to market
participants to start using the Silexx platform as a trading tool on
their trading desks. The proposal is equitable and not unfairly
discriminatory as it applies to all market participants.
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\19\ See Cboe Silexx Fees Schedule.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change will not
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
Exchange will make the Cboe Silexx version of the platform available to
all market participants and at no additional cost. Indeed, all market
participants may use Cboe Silexx, both those with direct access and
those without, by sending orders through the Exchange's broker
community who will be able to submit orders directly though Cboe
Silexx.
As described in detail above, the use of the platform will be
completely voluntary and market participants will continue to have the
flexibility to use any entry and management tool that is proprietary or
from third-party vendors, and/or market participants may choose any
executing brokers to enter their orders. The proposed platform is not
an exclusive means of trading, and if market participants believe that
other products, vendors, front-end builds, etc. available in the
marketplace are more beneficial than the Cboe Silexx platform, they may
simply use those products instead. Use of such functionality is
completely voluntary. Also, the Exchange notes that use of the platform
will not provide market participants with any additional access to the
Exchange than that which is available through the use of any other
front-end order entry system supporting trading. Orders executed
through the platform will not receive preferential treatment and the
Exchange's System will not distinguish between orders sent from Cboe
Silexx and orders sent in any other manner. The Exchange notes that
similar platforms, such as other Silexx versions and PULSe
workstations, are currently offered today.
The Exchange does not believe that the proposed change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because Cboe
Options will be offering a type of product that is widely available
throughout the industry, including from some exchanges. As noted above,
market participants can also develop their own proprietary products
with the same functionality. Additionally, ISE currently offers a
similar front-end order entry application (PrecICE). The offering of
Cboe Silexx to market participants to enter and manage orders for
routing or submitting to U.S. exchanges will be an addition to the
Exchange's current suite of technology products it offers, including
other current Silexx platforms. As such, market participants will be
able to choose to execute, or continue to execute, orders through any
of these means.
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 \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \22\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. Cboe
Options asserts that the proposed rule change doesn't present novel or
unique issues because the proposed Cboe Silexx platform is similar to
technology already available on the Exchange.\24\ The Exchange notes
that the proposed Cboe Silexx platform is an extension of the Silexx
FLEX platform, with the main substantive difference being that it
permits entry of non-FLEX orders, as discussed above. The Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. The Commission
hereby waives the operative delay and designates the proposed rule
change operative upon filing.\25\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ See supra note 6.
\25\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2020-040 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
[[Page 24048]]
All submissions should refer to File Number SR-CBOE-2020-040. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2020-040 and should be submitted on
or before May 21, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09126 Filed 4-29-20; 8:45 am]
BILLING CODE 8011-01-P
