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Federal Register / Vol. 86, No. 164 / Friday, August 27, 2021 / Notices
The text of the proposed rule change is also available on the Exchanges website http www.cboe.com/
AboutCBOE/CBOELegal RegulatoryHome.aspx, at the Exchanges Office of the Secretary, and at the Commissions Public Reference Room.
II. Self-Regulatory Organizations 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 Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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1. Purpose The Exchange proposes to amend Rule 5.33 regarding complex orders.
Specifically, the proposed rule change makes certain clarifying changes to add detail to the Rule and nonsubstantive changes, including to make certain provisions plain English and to conform certain language in the rule to that in corresponding rules of its affiliated options exchanges, Cboe EDGX
Exchange, Inc. EDGX Rule 21.20 and Cboe C2 Exchange, Inc. C2 Rule 5.33.
First, the Exchange proposes to make the following clarifying or codifying changes:
The definition of complex strategy in Rule 5.33a currently provides that the Exchange may limit the number of new complex strategies that may be in the System at a particular time. The proposed rule change codifies that the Exchange may also limit the number of new complex strategies that may be entered for any EFID which EFID limit would be the same for all users at a particular time. This proposed change is identical to the definition of complex strategy in C2
Rule 5.33a.5 Similar to the authority for the Exchange to limit the number of 5 See
C2 Rule 5.33a definition of complex strategy, which permits the Exchange to limit the number of new complex strategies that may be in the System or entered for any EFID which EFID
limit would be the same for all Users at a particular time.

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new complex strategies that may be in the System, the proposed rule change codifies another manner in which the Exchange may limit complex strategies in the System at a particular time. The Exchange believes limiting complex strategies per EFID will allow the Exchange to manage System capacity in a fair and reasonable manner by limiting each EFID to the same number of complex strategies they may have in the System at one time.
The proposed rule change specifies in the definition of each of synthetic best bid or offer SBBO and synthetic national best bid or offer SNBBO that each is comprised of the best net bid and net offer on the Exchange or nationally, respectively. The SBBO and SNBBO
each use the BBO or NBBO, respectively, of each component to determine the best synthetic bid or offer, which is done by calculating the best net bid or offer. The proposed rule change merely clarifies that netting the BBOs or NBBOs, as applicable, is how the SBBO or SNBBO, respectively, is calculated. This proposed change is identical to the definition of SNBBO
in C2 Rule 5.33a.6
In Rule 5.33b2, the proposed rule change deletes the parenthetical after the term Capacities, which parenthetical states that Capacities means, in other words, non-brokerdealer customers, broker-dealers that are not maker-makers on an options exchange, or market-makers on an options exchange. The Rule does permit the Exchange to determine which Capacities are eligible for the complex order auction COA or for entry into the COB, but this parenthetical is not consistent with the definition of Capacities. Rule 1.1 defines Capacity as the capacity in which a user submits an order, which the user specifies by applying the corresponding code to the order. The Capacity codes available are:
B for the account of a broker or dealer, C for the account of a public customer, F for an OCC clearing member firm proprietary account, J for a joint back office account, L for the account of a non-Trading Permit Holder TPH
affiliate, M for the account of a MarketMaker, N for the account of a marketmaker on another options exchange, and U for the account of a professional. However, there is no Capacity code for the three categories listed in the parenthetical in Rule 5.33b2, so the proposed rule change 6 See C2 Rule 5.33a definition of SNBBO, which states that the NBBO for each component of a complex strategy establishes the best net bid and offer for a complex strategy.

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deletes the inaccurate parenthetical to maintain consistency throughout the Rules. As noted above, the Exchange does determine which Capacities are eligible for COA or entry into the COB
which the Exchange previously announced to TPHs in accordance with Rule 1.5 7, so the proposed rule change has no impact on trading.
The proposed rule change changes the term Queuing Period to order entry period in Rule 5.33c1.
Queuing Period is a defined term used for the Opening Process for simple orders set forth in Rule 5.31. The Queuing Period, as defined, is the time period prior to the initiation of an opening rotation during which the System accepts simple orders and quotes in the book for participation in the opening rotation for the applicable trading sessionin other words, the order entry period. However, the COB
Opening Process described in Rule 5.33c differs from the Opening Process for simple orders described in Rule 5.31for example, there is no rotation i.e., auctionand does not use the same terminology. The proposed rule change merely updates Rule 5.33c1
to use the appropriate terminology as used in the heading for that subparagraph for the COB Opening Process.
The proposed rule change amends Rule 5.33d3B and C which describe certain circumstances that will cause the Response Time Interval of a COA to terminate early to clarify that subparagraph B applies to the receipt of a non-Priority Customer Order in a leg of the complex order that would improve the SBBO on the same side as the COA-eligible order that initiated the COA. Subparagraph C explicitly applies to the receipt of a Priority Customer Order that would improve or join the SBBO on the same side as the COA-eligible order that initiated the COA. Currently, subparagraph B only references receipt of an order, but receipt of a Priority Customer Order is covered by subparagraph C and thus the intent of subparagraph B was to apply only to non-Priority Customer Orders. Additionally, because a COA
will terminate early when the System receives a non-Priority Customer Order in a leg that would improve the SBBO
on the same side as the COA-eligible order that initiated the COA, it would only do so if the price was better than 7 Rule 1.5 states the Exchange announces to TPHs all determinations it makes pursuant to the Rules via specifications, notices, or regulatory circulars with appropriate advanced notice, which are posted on the Exchanges website or as otherwise provided in the Rules, among other manners of announcement.

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