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General Questions

  1. What changed with Regulation SHO?

    The Securities and Exchange Commission (SEC) adopted amendments to Regulation SHO effective May 10, 2010, with a compliance date of February 28, 2011. Amendments included a short sale-related circuit breaker that when triggered imposes a restriction on prices at which securities may be sold short as well as allowing for broker-dealers to mark certain qualifying orders "short exempt". For more details, refer to Amendments to Regulation SHO. Cboe began supporting these amendments in production on February 28, 2011.

  2. How does this impact Cboe order entry processing?

    Once Cboe receives an indicator from the SIPs that a short sale circuit breaker has been triggered for a security, Cboe will immediately begin to either reject or price slide orders with Side (FIX Tag 54) = 5 (Sell Short) that fail the short sale price test.

    The action taken may be determined by the member and is configurable at port or order levels. Orders will continue to be processed in this manner until the SIP submits appropriate messaging indicating the security has come out of the short sale circuit breaker.

  3. How does this impact IOCs on Cboe?

    During a short sale circuit breaker, when Cboe receives a short sale with TimeInForce (FIX Tag 59) = 3 (IOC), the order will be executed down to the permissible threshold. Once the permissible threshold has been reached, the remainder of the order will be canceled back.

  4. How does this impact ISOs on Cboe?

    During a short sale circuit breaker, when Cboe receives a short sale with ExecInst (FIX Tag 18) = f (ISO), the order will be executed down to the permissible threshold. If marked as IOC (TimeInForce = 3), the remainder will be canceled back once the permissible threshold has been reached. If the order is not marked as IOC, the order will either reject or price slide.

  5. How does price sliding work with respect to short sale orders for securities under a short sale circuit breaker?

    After a circuit breaker has been tripped, a short sale order less than or equal to the prohibited bid price will price slide and post at one tick above the prohibited bid price when it hits the permissible short sale threshold. Prior to posting, any hidden liquidity between the prohibited bid price and one tick above the prohibited bid price (e.g. Midpoint Peg orders) may be removed. Next, the order will be ranked and worked at its displayed price and will not be readjusted as the bid moves.

  6. How does a hidden short sale order that is booked behave when a short sale circuit breaker goes into effect and the hidden order locks or crosses the prohibited bid price?

    Behavior in this scenario depends on the price sliding setting for the port the order was submitted on. If price sliding is enabled on the port (the default), the order will price slide and post at one tick above the prohibited bid price. It will continue to be re-priced up as the bid goes up. If price sliding is disabled on the port, the order will be cancelled back to the user.

  7. With respect to reject vs. price slide behavior, which is the default?

    Price sliding is the default for non-IOC short sale orders that reach the permissible threshold during a short sale circuit breaker.

  8. How does one specify reject vs. price sliding action?

    The same flags and defaults used to control display price sliding functionality are used to control short sale circuit breaker actions. The default behavior can be set at the port level and overridden on the order via DisplayIndicator (FIX Tag 9479). By default, price sliding is enabled at the port level. The following DisplayIndicator values will control the behavior on an order-by-order basis:

    • DisplayIndicator = V: Enforce port level settings (default).
    • DisplayIndicator = S: Override port level settings on the order to enforce price sliding behavior.
    • DisplayIndicator = R: Override port level settings on the order to enforce reject actions.

    To configure at the port level, contact the Cboe Trade Desk (tradedesk@cboe.com - 913.815.7001).

  9. How does Cboe support marking of qualified orders as short exempt?

    Cboe will once again begin accepting orders where Side (FIX Tag 54) = 6 (Sell Short Exempt). Note that it remains the responsibility of the Broker/Dealer to determine when use of this tag is acceptable for submitting short exempt orders to the Cboe market. Cboe will not automatically reject or slide orders tagged as short exempt when a short sale circuit breaker is not in effect.

  10. Does Cboe provide notification to Members regarding short sale circuit breakers?

    Cboe provides administrative messages via its proprietary market data protocols. For more details, refer to the appropriate market data protocol specification at U.S. Equities Technical Specifications.

  11. When in a circuit breaker, will FIX ACKs for securities in a short sale circuit breaker reflect the status of security?

    No, but it is worth noting that if price sliding is enabled, the WorkingPrice (FIX Tag 9690) of a booked short sale order that was marketable will be re-priced to be less aggressive than the limit price initially defined. This action will be indicative that the security is under a short sale circuit breaker restriction.

  12. During which trading hours does the short sale circuit breaker apply on Cboe?

    Assuming the SIP has sent out the necessary messaging indicating a short sale circuit breaker is in effect for a security, Cboe honors the restriction during all trading hours, including pre/post market and regular trading hours.

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Cboe Exchange Regulation SHO Amendment Order Handling Scenarios and FAQ - General Questions | Cboe