SEC approves Cboe Options’ plans for electronic-only order type

Maria Nikolova

Cboe’s proposal concerns an electronic-only order type, which allows market participants to indicate they want a specific order to avoid manual handling.

Chicago Board Options Exchange (CBOE), now known as Cboe Options Exchange, a part of Cboe Global Markets Inc (NASDAQ:CBOE), has obtained a regulatory nod of approval for its proposal to introduce an electronic-only order type. On Friday, December 1, 2017, the United States Securities and Exchange Commission (SEC) published an order approving the proposed change to Cboe’s rules.

The proposed rule states:

“An electronic-only order is an order to buy or sell that is to be executed in whole or in part via electronic processing on the Exchange without routing the order to a PAR workstation or an order management terminal for manual handling on the Exchange floor. Electronic-only orders will be cancelled if routing for manual handling would be required under Exchange Rules.”

Cboe explains that orders that do not execute via electronic processing and are not entered into the electronic book are, by default, routed to either a Public Automated Routing (PAR) workstation or an Order Management Terminal (OMT) designated by the Trading Permit Holder (TPH) entering the order.

Currently, TPHs are free to set routing designations for their orders and move or cancel orders according to their needs. If an order is routed to a PAR or OMT and the TPH who entered the order prefers the order not be handled manually, they are free to resubmit the order electronically or cancel the order. However, this may result in a manual and time-consuming process of contacting a PAR broker or OMT operator and informing them of their instructions regarding an order.

For that matter, an electronic order type is simply creating a convenient way for market participants to indicate they want a specific order to avoid manual handling.

Cboe insists that the “electronic-only” will act as an order routing designation and does not substantially change how orders can be handled or processed today. The electronic-only designation aims to allow order entry firms and TPH to escape from potentially time-consuming steps of retrieving or resubmitting their orders from PAR or OMT.

The proposed rule change aims to eliminate impediments to and perfect the mechanism of a free and open market. Cboe argues that the proposed rule will not allow unfair discrimination between customers, issuers, brokers, or dealers as it is available to any TPH who routes an order to the Exchange electronically.

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