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Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices For a temporary period that begins on June 17, 2020 and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020, Floor Broker Interest will not be eligible to participate in the Closing Auction.

Proposed Rule Changes Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions
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The Exchange proposes to make permanent the parameters for DMMfacilitated electronic auctions that are currently in effect on a temporary basis as set forth in Commentaries .01a and b to Rule 7.35A and Commentary .01
to Rule 7.35B, with one proposed change for Trading Halt Auctions.
Current Rules 7.35Ac1G and H
provide that a DMM may not effect a Core Open or Trading Halt Auction electronically if i the Auction Price will be more than 4% away from the Consolidated Last Sale Price,16 or ii the paired volume for the Auction will be more than 1,500 round lots for securities with an average opening volume of 1,000 round lots or fewer in the previous calendar quarter, or 5,000
round lots for securities with an average opening volume of over 1,000 round lots in the previous calendar quarter. Rule 7.35Ac2 further provides that if as of 9:00 a.m., the E-mini S&P 500 Futures are +/2% from the prior days closing price of the E-mini S&P 500 Futures, or if the Exchange determines that it is necessary or appropriate for the maintenance of a fair and orderly market, a DMM may effect an opening or reopening electronically if the Auction Price will be up to 8% away from Consolidated Last Sale Price, without any volume limitations.
Current Rule 7.35Bc1G and H
provide that a DMM may not effect a Closing Auction electronically if i the Auction Price will be more than a designated percentage away from the Exchange Last Sale Price,17 or ii the paired volume for the Closing Auction will be more than 1,000 round lots for such security. The designated percentages are currently as follows:
16 The term Consolidated Last Sale Price is defined in Rule 7.35 to mean the most recent consolidated last-sale eligible trade in a security on any market during Core Trading Hours on that trading day, and if none, the Official Closing Price from the prior trading day for that security.
17 The term Exchange Last Sale Price is defined in Rule 7.35 to mean the most recent trade on the Exchange of a round lot or more in a security during Core Trading Hours on that trading day, and if none, the Official Closing Price from the prior trading day for that security.

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Core Open Auctions occurring close to the beginning of Core Trading Hours.
For example, in February 2020, 85.9%
$25.00 and below
5 of all Core Open Auctions, and 75.9%
$25.01 to $50.00
4 of Core Open Auctions in S&P 500
Above $50.00
2 securities, occurred within two seconds of 9:30 a.m. Eastern Time. By contrast, The Exchange proposes to make the for the period July 2020 through October price percentage parameter 10% and 2020, 95.9% of all Core Open Auctions, eliminate the volume restrictions for and 89.6% of Core Open Auctions in DMM-facilitated Core Open Auctions and Closing Auctions. These parameters S&P 500 securities, occurred within two seconds of 9:30 a.m. Eastern Time.
are currently in effect on a temporary The Exchange has observed similar basis pursuant to Commentaries .01a trends for Closing Auctions, with DMMs and b to Rule 7.35A and Commentary facilitating more Closing Auctions .01 to Rule 7.35B not only for Core Open electronically, which means more Auctions and Closing Auctions, but also Closing Auctions occurring closer to for Trading Halt Auctions. The 4:00 p.m. Eastern Time. In February Exchange believes that making these 2020, DMMs effected electronically 57%
temporary Commentaries permanent of all Closing Auctions and 5.5% of would promote fair and orderly DMMClosing Auctions in S&P 500 securities.
facilitated Core Open Auctions and By contrast, for the period July 2020
Closing Auctions. For DMM-facilitated through October 2020, DMMs effected Trading Halt Auctions, the Exchange electronically 90.9% of all Closing proposes to make the price parameter Auctions, and 53.6% of Closing 5% instead of 10% and eliminate the Auctions in S&P 500 securities.
volume restrictions.
Currently, DMM electronicallyIn particular, DMMs have been facilitated Closing Auctions occur operating with the temporary shortly after 4:00 p.m. Eastern Time.18
parameters for Core Open, Trading Halt Accordingly, the increased number of Auctions, and Closing Auctions since DMM electronically-facilitated Closing March 23, 2020. Accordingly, these Auctions translates to an increase in the temporary parameters have been in number of Closing Auctions that occur effect not only during the period when close to 4:00 p.m. Eastern Time. Because the Trading Floor was closed in full, but the temporary wider percentage also for the period when the Trading parameters and eliminated volume Floor has partially reopened to reduced parameters have resulted in more Core staff of DMM and Floor brokers firms. In Open Auctions and Closing Auctions addition, these temporary parameters occurring at 9:30 a.m. Eastern Time or have been in effect during periods of 4:00 p.m. Eastern Time, respectively, both extreme volatility and high trading the Exchange believes that making these volumes. Accordingly, DMMs have had temporary parameters permanent would over six months of experience of support the continued fair and orderly electronically facilitating Auctions operation of Auctions on the Exchange.
within these temporary parameters and The Exchange also notes that during apply them during varying market the period when the temporary conditions.
parameters have been in place, the The Exchange has observed that Exchange has not observed greater during the period when these temporary auction price dislocation compared to parameters have been in effect, DMMs the period immediately preceding have facilitated more Core Open implementation of these temporary Auctions electronically, resulting in a parameters, and has even observed higher percentage of Core Open modest improvement. The Exchange Auctions occurring within two seconds defines auction price dislocation as the of 9:30 a.m. Eastern Time. For example, difference between the Core Open in February 2020, which was before the Auction price and the consolidated Trading Floor closed, DMMs effected 18 When Floor Broker Interest was eligible to electronically 85.9% of all Core Open participate in the Closing Auction, DMM
Auctions and 75.9% of Core Open electronically-facilitated Closing Auctions occurred Auctions in S&P 500 securities. By at 4:02 p.m. Eastern Time. Because there has been contrast, for the period July 2020
no Floor Broker Interest for the Closing Auction during the period while the Trading Floor has been through October 2020, after when temporarily closed, the Exchange moved the time DMMs had returned to the Trading for DMM electronically-facilitated Closing Auctions Floor, DMMs effected electronically to closer to 4:00 p.m. With the proposed change, 96% of all Core Open Auctions and described below, to permanently eliminate Floor Broker Interest for the Closing Auction, the 89.6% of Core Open Auctions in S&P
500 securities. The increased number of Exchange would continue to conduct DMM
electronically-facilitated Closing Auctions shortly DMM electronically-facilitated Core after 4:00 p.m., rather than revert to the 4:02 p.m.
Open Auctions has resulted in more time for such auctions.

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