SEC approves hard to borrow risk setting at CBOE exchanges

The SEC granted approval of proposed rule changes to amend CBOE exchanges’ rules in connection with a risk setting that users may elect to apply to their orders in hard to borrow securities in US equity securities. The rule amendment affects BYX, BZX, EDGA,  and EDGX.

Law firm Cadwalader explained that the technology allows a member firm to institute an automated block on traders at the member firm (or customers to whom it has granted direct market access) in stocks that the member firm has identified as hard to borrow. The SEC said that the proposed rule change would provide a “useful risk management tool,” but cautioned that it was not a substitute for a users’ own systems for compliance with applicable securities laws.

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