On March 12, 2026, the Securities and Exchange Commission published a notice in the Federal Register regarding a proposed rule change by Cboe BYX Exchange, Inc. The exchange seeks to amend Rule 11.22 to introduce the Clock Service, an optional product designed to synchronize subscriber time systems with those of the exchange for more precise latency measurements. This development addresses participant demands for advanced time synchronization amid evolving trading technologies. Filed on March 6, 2026, under Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4, the proposal became immediately effective, with the SEC soliciting comments to assess its implications for market fairness and efficiency.
Background and Purpose
The Clock Service emerges from the need for high-precision time synchronization in securities trading, where even minor discrepancies can affect latency calculations. Currently, exchanges and market participants rely on the U.S. Government's Global Positioning System signals to align their primary clocks, achieving accuracy around 30 nanoseconds. However, variations in GPS receivers and infrastructure can lead to inconsistencies, complicating accurate measurements of order traversal times.
Cboe BYX proposes this service to allow subscribers to align their clocks with the exchange's primary clock using White Rabbit technology and Precision Time Protocol. White Rabbit combines PTP with synchronous Ethernet for sub-nanosecond accuracy. The exchange's system already employs these technologies internally, synchronizing timestamps for orders and messages. By offering this externally via a dedicated 1 gigabit per second physical port, Cboe BYX aims to enable correlated latency assessments between participant and exchange systems.
This initiative responds to participant requests for tools to refine trading models and network performance. The filing notes that time synchronization services are established in various U.S. sectors, including finance, and cites a similar service offered by MIAX Emerald, LLC, approved by the SEC in 2022 (Securities Exchange Act Release No. 94915).
Key Players and Regulatory Framework
Cboe BYX Exchange, a self-regulatory organization, is the primary proponent, with the SEC overseeing the filing process. The proposal invokes Section 6(b)(5) of the Securities Exchange Act, requiring exchange rules to promote just and equitable trade principles, remove market impediments, and protect investors without unfair discrimination.
The filing argues the service aligns with these standards by facilitating precise latency measurements, potentially aiding compliance with clock synchronization rules like Cboe BYX Rule 4.6. It emphasizes the optional nature, available to members and non-members, with no mandatory adoption. The exchange plans a separate filing for fees, ensuring transparency.
Relevant precedents include the SEC's approval of MIAX Emerald's High Precision Network Time Signal Service, which also uses White Rabbit for sub-nanosecond synchronization (Securities Exchange Act Release No. 94335). This similarity underscores a growing industry trend toward advanced timing tools without altering core connectivity options.
Technical Details and Implementation
Under proposed Rule 11.22(m), the Clock Service would provide White Rabbit time signals over a 1 Gbps physical port, dedicated solely to this purpose. Subscribers could synchronize their devices to the exchange's clock, which derives time from GPS but can failover to external services for continuity.
Participants might use this for analyzing message traversal times, comparing their timestamps against exchange acknowledgments. For instance, the exchange sends order acknowledgments with microsecond timestamps, planned for nanosecond upgrades by March 2026. This could help subscribers optimize networks, rebalance connections, or enhance trade surveillance.
The filing highlights that subscribers may need third-party White Rabbit devices and licenses, not provided by the exchange. It distinguishes the service from trading data feeds, focusing purely on time signals without including market activity information.
Potential Implications and Perspectives
Short-term implications include improved tools for latency-sensitive traders, potentially leading to more efficient order routing and execution. By reducing clock offsets, participants could gain confidence in latency attributions, fostering system optimizations. However, the service's utility may vary: latency-insensitive firms, such as those focused on resting liquidity, might find it unnecessary, opting for existing GPS-based methods.
Long-term, this could enhance overall market quality by promoting innovation in time-sensitive trading strategies, indirectly benefiting liquidity and execution rates. From a competitive standpoint, it positions Cboe BYX alongside peers like MIAX Emerald, potentially spurring similar offerings elsewhere.
Perspectives differ among stakeholders. Proponents, including latency-focused participants, view it as a step toward market efficiency, aligning with technological advancements. Critics might argue it favors sophisticated firms with resources for additional hardware, though the filing counters this by noting its voluntary status and availability to all. Regulators, via the SEC's comment period, will weigh whether it truly avoids unfair discrimination, as required by law.
In summary, the proposal represents an incremental advancement in trading infrastructure, building on established technologies to address precision needs in high-speed markets.
