Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Functionality Relating to the Processing of Auction Responses

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104159; File No. SR-CBOE-2025-074]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Functionality Relating to the Processing of Auction Responses</SUBJECT> <DATE>September 30, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on September 30, 2025, Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change</HD> The Exchange proposes to amend its functionality relating to the processing of auction responses. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Commission's website ( <E T="03">https://www.sec.gov/rules/sro.shtml</E> ), the Exchange's website ( <E T="03"> https://www.cboe.com/us/options/ regulation/rule_filings/ </E> ), and at the principal office of the Exchange. <HD SOURCE="HD1">II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. <HD SOURCE="HD2">A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> The Exchange currently offers a variety of auction mechanisms which provide price improvement opportunities for eligible orders. Particularly, the Exchange offers the following auction mechanisms: Complex Order Auction (“COA”), <SU>3</SU> <FTREF/> Step Up Mechanism (“SUM”), <SU>4</SU> <FTREF/> Automated Improvement Mechanism (“AIM”), and FLEX SAM. <SU>11</SU> <FTREF/> The Exchange notes that eligible orders (“auctioned orders”) are electronically exposed for an Exchange-determined period (collectively referred to herein as “auction response period”) in accordance with the applicable Exchange Rule, during which time Users may submit responses (collectively referred to herein as “auction responses” or “auction response messages”) to an auction message. <FTNT> <SU>3</SU>   <E T="03">See</E> Rule 5.33(d). </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> Rule 5.35. </FTNT> <FTNT> <SU>5</SU>   <E T="03">See</E> Rule 5.37. </FTNT> <FTNT> <SU>6</SU>   <E T="03">See</E> Rule 5.38. </FTNT> <FTNT> <SU>7</SU>   <E T="03">See</E> Rule 5.39. </FTNT> <FTNT> <SU>8</SU>   <E T="03">See</E> Rule 5.40. </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> Rule 5.72(c). </FTNT> <FTNT> <SU>10</SU>   <E T="03">See</E> Rule 5.73. </FTNT> <FTNT> <SU>11</SU>   <E T="03">See</E> Rule 5.74. </FTNT> In June 2023, in order to provide responses to these auctions with increased opportunities to participate in the auction, even during periods of high message traffic, and thus potentially provide customers with additional opportunities for price improvement, the Exchange adopted new functionality that applies across all of its auction mechanisms to increase the likelihood that timely submitted auction responses may participate in the applicable auction, even during periods of high message traffic. <SU>12</SU> <FTREF/> Under this functionality, at the time an auction response period ends, the System continues to process its inbound queue for any messages that were received by the System before the end of the auction period (including auction responses) for up to an Exchange-determined period of time, not to exceed 100 milliseconds (which the Exchange may determine on a class-by-class basis which would apply to all auction mechanisms and which would be announced with reasonable advanced notice via Exchange Notice). <SU>13</SU> <FTREF/> That is, any auction responses that were in the queue before the conclusion of the auction (as identified by the Network Interface Card (“NIC”) timestamp on the message) would be processed as long as the Exchange-determined time on a class-by-class basis (not to exceed 100 milliseconds) is not exceeded. Only auction responses received prior to the execution of the applicable auction are eligible to be processed for that auction. The applicable auction will execute once all messages, including auction responses, received before the end time of the auction response period have been processed or the Exchange-determined maximum time limit of up to 100 milliseconds has elapsed, whichever occurs first. This continuation of processing the queue for an additional amount of time for messages that were received before the end of the auction allows for auction responses that would otherwise have been canceled due to the conclusion of the auction response period to still have an opportunity to participate in the auction. <FTNT> <SU>12</SU>   <E T="03">See</E> Rule 5.25(c); <E T="03">see also</E> Securities Exchange Act Release No. 97738 (June 15, 2023), 88 FR 40878 (June 22, 2023) (SR-CBOE-2022-051). This functionality applies to COA, SUM, AIM, SAM, C-AIM, C-SAM, FLEX Auction Process, FLEX AIM, and FLEX SAM. </FTNT> <FTNT> <SU>13</SU>  The auction response processing time is currently set to 900 milliseconds for S&P 500 Index options (“SPX options”) and 100 milliseconds for all other classes. <E T="03">See</E> Cboe Exchange Notices C2025042903, <E T="03">available at https://www.cboe.com/notices/content/?id=54332;</E> and C2024111903, <E T="03">available at https://www.cboe.com/notices/content/?id=51420.</E> </FTNT> In May 2025, the Exchange increased the permissible maximum length of this Exchange-determined time period for SPX options. <SU>14</SU> <FTREF/> Specifically, with respect to SPX options, this Exchange-determined period of time for this continuation of auction response processing plus the length of the auction response or exposure period, as applicable, <SU>15</SU> <FTREF/> may not exceed 1000 milliseconds (which the Exchange announces with reasonable advance notice via Exchange Notice). <SU>16</SU> <FTREF/> The Exchange increased the additional processing time so that more auction responses could be executed in auctions for SPX auctions, particularly in times of high message traffic. This increase in processing time is currently in place until December 31, 2025 and applies to non-FLEX SPX options only. <FTNT> <SU>14</SU>   <E T="03">See</E> Securities Exchange Act Release No. 102966 (May 1, 2025), 90 FR 19330 (May 7, 2025) (SR-CBOE-2025-031); <E T="03">see also</E> Cboe Exchange Notice C2025042903, <E T="03">available at https://www.cboe.com/notices/content/?id=54332.</E> </FTNT> <FTNT> <SU>15</SU>  Current lengths of auction response and exposure periods are <E T="03">available at cboe_options_product_configurations.xlsx</E> . </FTNT> <FTNT> <SU>16</SU>  The auction response processing time is currently set to 900 milliseconds (with auction timers set to 100 milliseconds) for S&P 500 Index options (“SPX options”) </FTNT> The proposed rule change proposes to make expand the recent proposed rule change to all non-FLEX classes, <SU>17</SU> <FTREF/> including SPX options, on a permanent basis. Specifically, the Exchange proposes to amend Rule 5.25(c) to provide that the Exchange-determined period of time  <SU>18</SU> <FTREF/> during which the System will, at the conclusion of an auction response or exposure period, continue to process any messages in its inbound queue that were received by the System before the end of the auction response or exposure period (as identified by each message's timestamp), plus the length of the auction response or exposure period, as applicable, may not exceed 1000 milliseconds. The Exchange believes the proposed maximum amount of additional time for processing will result in more auction responses being executed in all classes, particularly in times of high message traffic. <FTNT> <SU>17</SU>  As proposed, the auction response processing time will no longer apply to any FLEX auctions. </FTNT> <FTNT> <SU>18</SU>  The Exchange may determine this time period on a class-by-class basis. <E T="03">See</E> Rule 5.25(c). </FTNT> <HD SOURCE="HD3">2. Statutory Basis</HD> The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. <SU>19</SU> <FTREF/> Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5)  <SU>20</SU> <FTREF/> requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to r ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 32k characters. 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