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Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices during the opening auction process when it deems necessary to maintain a fair and orderly opening process which modifications the Exchange disseminates to all subscribers to the Exchanges data feeds that deliver opening auction updates. This proposed change merely permits the Exchange to modify these amounts at any time as it deems necessary and appropriate. The Exchange notes several options exchanges are able to change the amounts of valid opening widths by notice or circular and do not need to submit a rule filing to the Commission to do so.15
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 6b of the Act.16 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6b5 17 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 6b5 18 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
In particular, the Exchange believes the proposed forced opening process for simple orders will remove impediments to and perfect the mechanism of a free and open market and a national market system and protect investors. The proposed rule change will provide for 15 See, e.g., Nasdaq Options Market NOM
Options 3, Section 8a6, Cboe EDGX Options Exchange, Inc. EDGX Rule 21.7a definitions of Maximum Composite Width and Opening Collar; Cboe BZX Options Exchange, Inc. BZX
Rule 21.7a definitions of Maximum Composite Width and Opening Collar; Cboe C2 Exchange Inc.
C2 Rule 6.11a definitions of Maximum Composite Width and Opening Collar; see also Miami Securities Exchange, Inc. MIAX Rule 503f2 which permits MIAX to determine by circular an acceptable range in which openings are permissible if there is no valid width national best bid or offer NBBO.
16 15 U.S.C. 78fb.
17 15 U.S.C. 78fb5.
18 Id.

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series to open for trading on the Exchange sooner than they may open currently, as long as they are open for trading on other options exchanges. The Exchange believes the proposed rule change will benefit investors, because it may permit these options to open sooner and increase the times during which investors may conduct trading in these options. Additionally, this may increase liquidity in the market for a series that is otherwise open on another options exchange. While the market on the Exchange for a series may be wider than the Maximum Composite Width,19
the Exchange believes it is reasonable to open the series if it opened for trading on another options exchange pursuant to that exchanges Commissionapproved rules. Options exchanges have varying opening processes and have made separate determinations on what constitutes separate, reasonable opening market widths. The Exchange believes if other options exchanges opened a series with a market width, it is reasonable to open the series for trading on the Exchange as well as orders submitted to other exchanges may be trading at those widths. Since orders may not trade outside of the disseminated NBBO
which defines the then-current market for the series, any orders resting in the Queuing Book that may execute following the forced opening will receive protection against executions at potentially erroneous prices.
Additionally, the proposed ability of Users to cancel orders in the event of a forced opening will provide Users with additional protection. Additionally, the Exchange believes opening series for trading on the Exchange that are open for trading on other options exchanges will put Exchange Users on equal footing with other market participants, as it will provide Users orders that are otherwise resting in the Queuing Book and awaiting execution with the ability to get into the market for potential execution.
The Exchange currently has the authority to deviate from the standard opening process, including to temporarily increase the Maximum Composite Width amounts i.e., widen the permissible opening market and to compel a series open, even if the Maximum Composite Width check is not satisfied, but that may only happen manually if the Exchange determines it is necessary in the interests of a fair and 19 The Exchange notes pursuant to Rule 5.31e1B, there are currently instances in which the Exchange will open for trading despite the Composite Market Width being larger than the Maximum Composite Width.

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orderly market.20 Currently, if a series is open on another exchange but not on the Exchange, the Exchange generally manually increases the Maximum Composite Width for the series until the series opens. Manually increasing the Maximum Composite Width for a series until the series open is a different manual process than compelling the series to open, but ultimately achieves the same result of causing a series that does not satisfy the Maximum Composite Width check to otherwise open. The Exchange believes it is in the interests of a fair and orderly market to deviate from the opening process to systematically force a series to open, despite a wide Exchange market, if the series is open for trading on another exchange to provide investors with orders in that series resting on the Exchanges Queuing Book to have the same execution opportunities as other investors who submitted orders to other options exchanges with different opening conditions. The proposed rule change is consistent with this authority and creates an automated compelled opening in certain circumstances to replace the manual process currently used. This will benefit investors by providing additional transparency to the Rules regarding when a series may open despite not satisfying the Maximum Composite Width check as well as remove impediments to and perfect the mechanism of a free and open market and a national market system by automating an otherwise manual process.
The Exchange believes the proposed rule change to permit Users to give the System a standing instruction regarding how to handle their orders when a forced or manually compelled for simple orders opening of series occurs will benefit investors, as it will give them an additional tool to manage their orders in connection with the opening of series. Users may currently cancel any of their orders resting in the Queuing Book prior to the opening of a series, and they may cancel any orders that do not execute at the open once those orders are in the Book or COB, as applicable. Because the Exchange market may be wider in these situations, the Exchange believes it is appropriate to provide Users with the ability to cancel market orders so they dont execute at the wider market prices once in the Book or cancel all of their orders if they prefer.
Additionally, the Exchange believes the proposed rule change to permit the 20 See Rule 5.31h; see also definition of Maximum Composite Width and Opening Collar in Rule 5.31a.

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