Cboe C2 Exchange proposes to introduce new risk parameter

Maria Nikolova

A trading permit holder may specify a maximum number of times that the risk parameters are reached over a specified interval or absolute period.

The United States Securities and Exchange Commission (SEC) is inviting comments on proposals by Cboe C2 Exchange, Inc. to amend its provision related to its Risk Monitor Mechanism.

The Exchange proposes to amend Rule 6.14 to (i) make clarifying and miscellaneous non-substantive changes, (ii) provide the ability for Users to establish limits for a group of EFIDs, and (iii) adopt a new risk parameter.

The Exchange proposes to adopt a new risk parameter. In particular, under the proposed functionality, a TPH (trading permit holder) may specify a maximum number of times that the risk parameters (i.e., volume, notional, count and/or percentage) are reached over a specified interval or absolute period (“risk trips”). When a risk trip limit has been reached, the Risk Monitor Mechanism will cancel or reject a TPH’s orders or quotes.

C2 believes the proposed changes to its Risk Monitor Mechanism rule sufficiently allows TPHs to adjust and adopt parameter inputs in accordance with their business models and risk management needs.

Furthermore, the Exchange believes the proposal to adopt the new risk parameter based on number of times a risk parameter or group of risk parameters are reached will provide TPHs with an additional tool for managing risks. Overall, the proposed rule change provides TPHs more protections that reduce the risks from potential system errors and market events. As a result, the proposed changes, including the new risk parameter for the Risk Monitor Mechanism, have the potential to promote just and equitable principles of trade.

Those willing to comment on the proposals are invited to do so via the following means:

  • Use the Commission’s Internet comment form; or
  • Send an e-mail to [email protected]. Please include File Number SR-C2-2018-024 on the subject line.
  • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. (All submissions should refer to File Number SR-C2-2018-024).

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