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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices
a regular-way settlement cycle of T+2
except where: i The order with the parameter for potential settlement on T+0 executes against another order with a parameter for potential settlement on T+0 in which case settlement would occur on the trade date if the transaction is also eligible for settlement on T+0
under the rules, policies and procedures of a registered clearing agency or ii the order with a parameter for potential settlement on T+0 executes against an order with a parameter for potential settlement on T+1 in which case settlement would occur T+1. Similarly, as proposed, an order that includes a parameter for potential settlement on T+1 will execute against any order against which it is marketable with settlement occurring on a regular-way settlement date of T+2 except where: i An order that includes a parameter for potential settlement on T+1 executes against another such order or an order that includes a parameter for potential settlement on T+0 in which case settlement would occur T+1. In all cases under the settlement logic in proposed BSTX Rule 25060h, an order that does not include an optional parameter indicating a preference for potential settlement on T+0 or T+1
would be a regular way order that would always receive T+2 settlement if it executes against any other order in the BSTX System. In this way, all of the orders submitted to BSTX would be regular way orders that in and of themselves would be presumed to settle on T+2. Only where a BSTX Participant includes the optional parameters to express a preference for potential T+0 or T+1 settlement where consistent with the rules, policies and procedures of a registered clearing agency and the order matches against another order seeking a shorter settlement time than T+2 could a transaction settle more quickly than T+2 under the settlement logic in proposed BSTX Rule 25060h and as described immediately above. Thus, every market participant seeking T+2
settlement for an execution on BSTX
would be able to interact with any order against which their order is marketable, including those marked for possible T+0
or T+1 settlement. In addition, the possibility of shortened settlement timing would have no impact on the Exchanges price time priority.357 For these reasons, the Exchange believes that no burden on competition is imposed in this first possible circumstance.
The second possible circumstance arises when an order that would be required under Exchange Act Rule 357 See
supra n. 82 and accompanying text.

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611,358 the Commissions order protection rule, to be routed to BSTX
from a third party exchange that extends UTP to a Security. This required routing of the order in such a Security would occur in this setting because the NBBO
existed on BSTX at the time of the entry of the order. Under proposed BSTX Rule 25060h, the order routed to BSTX
would execute against any order against which it is marketable without regard to whether a BSTX Participant may have included an optional parameter for potential T+0 or T+1 settlement where the order executes against another order that also has an optional parameter for potential T+0 or T+1 settlement under the settlement logic in BSTX Rule 25060h. In the event the order routed to BSTX executes against another order on BSTX against which it is marketable, that executed transaction in the Security would be bound for regular way T+2
settlement under BSTX Rule 25060h because the Exchange believes that the routed order from a third party exchange would not include a parameter for T+0 or T+1 settlement.
This is because the Exchange believes that no other exchange currently includes any such optional parameters to be able to indicate a preference for potential T+0 or T+1 settlement. This structure means that any non-BSTX
Participant that sees a quote in a Security on BSTX would remain able to execute against that quote even if that quote includes an optional parameter indicating a preference for T+0 or T+1
settlement where an executed order becomes eligible for any such settlement on a basis that is faster that T+2 under the settlement logic in BSTX Rule 25060h. The Exchange believes that no burden on competition results in this second possible circumstance because an order routed to BSTX would interact against any order on BSTX against which it is marketable. All orders in a Security that are submitted directly to BSTX by BSTX Participants or that may be routed to BSTX would be regular way orders that when viewed in isolation would be presumed to settle on a T+2
basis at the time of order entry. It would only be upon execution against another order that also includes an order parameter expressing a preference for settlement on a T+0 or T+1 basis that the executed transaction i.e., not the initial orders would become eligible for settlement faster than T+2 under the settlement logic in Rule 25060h. The Exchange believes this imposes no burden on competition on BSTX
Participants because inclusion of any T+0 or T+1 parameter would be entirely 358 17

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optional and any BSTX Participant that includes such a parameter would do so with an ex-ante understanding of the settlement logic in BSTX Rule 25060
that could cause an executed transaction to settle more quickly than T+2. As noted, the Exchange believes that orders in a Security that would be required to be routed to BSTX, for example under the Commissions Order Protection Rule, would also not impose any burden on competition because other exchanges do not have rules that similarly contemplate the inclusion of a T+0 or T+1 parameter, such routed orders would therefore result in T+2 settlement if executed against any other order on BSTX against which the order is marketable regardless of whether the order against which it executes includes an optional parameter indicating a preference for T+0 or T+1 settlement.
Therefore, any order routed to BSTX
would be able to interact with any other order on BSTX against which it is marketable and would settle on a regular way T+2 basis just as occurs today regarding any order in an NMS
stock that is routed to a national securities exchange.
The third possible circumstance contemplates an order that must be routed under the order protection rule from BSTX to a third party exchange that extends UTP for a Security because the third party exchange has the NBBO
at that time. The Exchange believes that this setting is not relevant under the proposed rules of BSTX. Specifically, the Exchange believes that it is not relevant because proposed BSTX Rule 25130d states that the BSTX System will reject any order or quotation that would lock or cross a protected quotation of another exchange at the time of entry. Therefore, any such orders that would otherwise be required to be routed by BSTX to another exchange will instead be rejected by the BSTX System. Accordingly, any specification by a BSTX Participant of a T+0 or T+1 settlement timing parameter for an order in this setting could not create any burden on competition because the order will be rejected and would never lead to an execution.
In addition to not imposing any burden on competition, the Exchange believes that allowing BSTX
Participants to use faster settlement cycles where consistent with the rules, policies and procedures of a registered clearing agency would mitigate settlement risk for transactions in such Securities, consistent with the benefits the Commission has noted in this area.
Namely, in adopting amendments to SEC Rule 15c61 in 2017 to shorten the standard settlement cycle for most
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