Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Proposed Rule Change To Amend Certain of Its Rules Regarding Complex Orders and Complex Order Auctions To Accommodate Stop-Limit Complex Orders and Establish Stop Complex Order Auctions (“SCOA”)
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The Cboe Exchange proposes to introduce stop-limit complex orders, which are conditional complex orders that convert to limit orders once a designated trigger price is reached in either the Market-Maker SBBO, a trade in the same strategy, or the underlying security/index price. Only one trigger condition (SBBO/trade or underlying) can be selected per order. To handle these orders, Cboe is creating a new auction type called Stop Complex Order Auction (SCOA). SCOA is designed to manage multiple simultaneously triggered stop-limit complex orders by bundling those with the same trigger event into a single auction to maximize execution quantity and provide price improvement. Stop-limit complex orders will not be eligible for the existing Complex Order Auction (COA). The proposal amends Rule 5.33 and other rules to add definitions, processing logic, and safeguards. Market-Maker SBBO (using only appointed Market-Maker quotes) is introduced to prevent inappropriate triggering from customer orders.
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Key Changes
- Adds 'stop-limit complex order' as new instruction type in Rule 5.33(b)
- Introduces 'Market-Maker SBBO' term using only appointed Market-Maker quotes to prevent cascading triggers
- Creates new Stop Complex Order Auction (SCOA) under Rule 5.33(d)(2) specifically for stop-limit complex orders
+ 3 more changes with Pro
Obligations
What this law requires
Amend Rule 5.33 to define stop-limit complex orders and Stop Complex Order Auctions (SCOA), including additional terms needed to support these order types and auction mechanisms
Establish and implement SCOA processing logic as a new type of auction mechanism for complex orders that bundles simultaneously triggered stop-limit complex orders with the same trigger event into a single auction
Define and implement Market-Maker SBBO as the best bid and offer calculated using only appointed Market-Maker quotes in individual legs of a complex order, excluding customer single-leg limit orders
Amend Rule 5.21(b), Rule 5.25(c), and Rule 5.34(c) to include SCOA in references with other auction types and apply existing safeguards to SCOA
Configure stop-limit complex orders to accept only one trigger condition per order—either Market-Maker SBBO/trade trigger or underlying security/index price trigger—and prohibit selection of multiple trigger conditions simultaneously