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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices
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trading conduct of BSTX Participants, primarily with respect to prohibiting forms of market manipulation and specifying certain obligations brokerdealers have to their customers, such as the duty of best execution. For example, proposed Rule 23000 Market Manipulation sets forth a general prohibition against a BSTX Participant purchasing a security at successively higher prices or sales of a security at successively lower prices, or to otherwise engage in activity for the purpose of creating or inducing a false, misleading or artificial appearance of activity in such security.156 Proposed Rule 23010 Fictitious Transactions similarly prohibits BSTX Participants from fictitious transaction activity, such as executing a transaction which involves no beneficial change in ownership, and proposed Rule 23020
Excessive Sales by a BSTX Participant prohibits a BSTX Participant from executing purchases or sales in any security trading on the Exchange for any account in which it has an interest, which are excessive in view of the BSTX Participants financial resources or in view of the market for such security.157 Proposed Rule 23060 Joint Activity prohibits a BSTX Participant from directly or indirectly holding any interest or participation in any joint account for buying or selling a security traded on the Exchange unless reported to the Exchange with certain information provided and proposed Rule 23090 Best Execution reaffirms 156 Proposed Rule 23030 Manipulative Transactions specifies further prohibitions relating to potential manipulation by prohibiting BSTX
Participants from, among other things, participating or having any direct or indirect interest in the profits of a manipulative operation or knowingly managing or financing a manipulative operation.
157 Other proposed rules relating to potential manipulation include: i Rule 23040
Dissemination of False Information, which generally prohibits, consistent with Exchange Rule 3080, BSTX Participants from spreading information that is false or misleading; ii Rule 23070 Influencing Data Feeds, which generally prohibits transactions to influence data feeds; iii Rule 23080 Trade Shredding, which generally prohibits conduct that has the intent or effect of splitting any order into multiple smaller orders for the primary purpose of maximizing remuneration to the BSTX Participant; iv Rule 23110 Trading Ahead of Research Reports, which generally prohibits BSTX Participants from trading based on non-public advance knowledge of a research report and requires BSTX Participants to enforce policies and procedures to limit information flow from research personnel to trading personnel that might trade on such information; v Rule 23120 Front Running Block Transactions, which incorporates FINRA Rule 5270 as though it were part of the Exchanges Rules; and vi Rule 23130 Disruptive Quoting and Trading Activity Prohibited, which incorporates Exchange Rule 3220 by reference.

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BSTX Participants best execution obligations to their customers.158
Proposed Rule 23050 Prohibition against Trading Ahead of Customer Orders is substantially similar to FINRA 5320 and rules adopted by other exchanges,159 and generally prohibits BSTX Participants from trading ahead of customer orders unless certain enumerated exceptions are available and requires BSTX Participants to have a written methodology in place governing execution priority to ensure compliance with the Rule. The Exchange proposes to adopt each of the exceptions to the prohibition against trading ahead of customer orders as provided in FINRA Rule 5320 other than the exception related to trading outside of normal market hours, since trading on the Exchange would be limited to regular trading hours.
The Exchange proposes to adopt the order handling procedures requirement in proposed Rule 23050i consistent with the rules of other exchanges.160
Specifically, proposed Rule 23050i would provide that a BSTX Participant must make every effort to execute a marketable customer order that it receives fully and promptly and must cross customer orders when they are marketable against each other consistent with the proposed Rule.
The Exchange proposes to adopt a modified version of the exception set forth in FINRA Rule 5320.06 relating to minimum price improvement standards as proposed in Rule 23050h. Under proposed Rule 23050h, BSTX
Participants would be permitted to execute an order on a proprietary basis when holding an unexecuted limit order in that same security without being required to execute the held limit order provided that they give price improvement of $0.01 to the unexecuted held limit order. While FINRA Rule 5320.06 sets forth alternate, lower price improvement standards for securities priced below $1, the Exchange proposes to adopt a uniform price improvement requirement of $0.01 for Securities traded on the BSTX System consistent with the Exchanges proposed uniform minimum price variant of $0.01 set forth in proposed Rule 25030.
In addition, the Exchange proposes to adopt an exception for bona fide error 158 In addition, proposed Rule 23100 Publication of Transactions and Changes provides that the Exchange will disseminate transaction information to appropriate data feeds, BSTX Participants must provide information necessary to facilitate the dissemination of such information, and that an Exchange official shall be responsible for approving corrections to any reports transmitted over data feeds.
159 See e.g., Cboe BZX Rule 12.6.
160 See e.g., Cboe BZX Rule 12.6.07.

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transactions as proposed in Rule 25030g which would allow a BSTX
Participant to trade ahead of a customer order if the trade is to correct a bona fide error, as defined in the rule. This proposed exception is nearly identical to similar exceptions of other exchanges 161 except that other exchange rules also provide an exception whereby firms may submit a proprietary order ahead of a customer order to offset a customer order that is in an amount other than a round lot i.e., 100 shares. The Exchange is not adopting an exception for odd-lot orders under these circumstances because the minimum unit of trading for Securities pursuant to proposed Rule 25020 is one Security. The Exchange believes that there may be a notable amount of trading in amounts of less than 100
Securities i.e., trading in odd-lot amounts, and the Exchange accordingly does not believe that it is appropriate to allow BSTX Participants to trade ahead of customer orders just to offset an oddlot customer order.
The Exchange believes that the proposed Rule 23000 Series relating to trading practice rules is consistent with Section 6b5 of the Exchange Act 162
because these proposed rules are designed to prevent fraudulent and manipulative acts and practices that could harm investors and to promote just and equitable principles of trade.
The proposed rules in the Rule 23000
Series are substantially similar to the rules of other exchanges and generally include a variety of prohibitions against types of trading activity or other conduct that could potentially be manipulative, such as prohibitions against market manipulation, fictitious transactions, and the dissemination of false information. The Exchange has proposed to exclude certain provisions from, or make certain modifications to, comparable rules of other SROs, as detailed above, in order to account for certain unique aspects related to the proposed trading of Securities. The Exchange believes that it is consistent with applicable requirements under the Exchange Act to exclude these provisions and exceptions because they set forth requirements that would not apply to BSTX Participants trading in Securities and are not necessary for the Exchange to carry out its functions of facilitating Security transactions and regulating BSTX Participants.
Disciplinary Rules Rule 24000 Series With respect to disciplinary matters, the Exchange proposes to adopt Rule 161 See 162 15

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e.g., Cboe BZX Rule 12.5.05.
U.S.C. 78fb5.

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