SEC Approves Cboe Rule Change Allowing Solicitation of Appointed Market-Makers as Contra-Side Orders in AIM and SAM Auctions
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The SEC approved Cboe's proposed rule change to allow orders for Market-Makers who hold an appointment in a specific options class to be solicited as the contra-side Initiating Order in AIM, SAM, FLEX AIM, and FLEX SAM auctions for all option classes. Previously, this was prohibited except for SPX options. The change aims to increase available liquidity, enable more auctions to occur, improve price improvement opportunities for customer orders, and promote competition among liquidity providers. The Commission determined the rule is consistent with the Exchange Act, noting existing information barrier rules (Cboe Rule 8.10) remain in place to prevent misuse of material nonpublic information.
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Key Changes
- Permits solicitation of appointed Market-Makers as contra-side Initiating Orders in simple AIM, SAM, FLEX AIM and FLEX SAM auctions for all option classes
- Removes previous prohibition that applied to all classes except SPX Index options
- Expands pool of available liquidity providers for auction initiation
+ 3 more changes with Pro
Obligations
What this law requires
Cboe Exchange must permit orders for Market-Makers with an appointment in the applicable class to be solicited as contra-side Initiating Orders in AIM, SAM, FLEX AIM, and FLEX SAM auctions across all option classes
Cboe Exchange must amend Rules 5.37, 5.39, 5.73, and 5.74 to reflect the new permission for Market-Maker orders to be solicited as Initiating Orders in all auction types
Trading Permit Holders (TPHs) must comply with Cboe Rule 8.10, which prohibits misuse of material nonpublic information including advanced knowledge of auctioned orders
Cboe Exchange must surveil for and enforce violations of Cboe Rule 8.10 regarding misuse of material nonpublic information by TPHs
Initiating Trading Permit Holders must submit a contra-side Initiating Order for the same size as the Agency Order when submitting an Agency Order into AIM, SAM, FLEX AIM, or FLEX SAM auctions