[Federal Register Volume 79, Number 101 (Tuesday, May 27, 2014)]
[Notices]
[Pages 30213-30215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12074]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72195; File No. SR-CBOE-2014-044]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Regulatory Cooperation

May 20, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 8, 2014, Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend its rules related to regulatory 
cooperation. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 15.9(a) to make explicit the 
Exchange's authority to enter into information sharing agreements with 
the Public Company Accounting Oversight Board (the ``PCAOB'').
    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (the ``Dodd-Frank Act'') \3\ amended the Sarbanes-Oxley Act of 
2002 (``Sarbanes-Oxley'') \4\ to give the PCAOB authority to oversee 
the audits of brokers and dealers registered with the Securities and 
Exchange Commission (the ``SEC'' or the ``Commission''). Among other 
things, Section 104(a)(2) of Sarbanes-Oxley authorizes the PCAOB to 
establish an inspection program by rule. In August 2011, the Commission 
approved Temporary Rule 4020T of the PCAOB to implement this new 
authority.\5\ By granting the PCAOB regulatory authority over the 
audits of registered brokers and dealers, Congress granted the PCAOB 
authority to receive financial data and related underlying data about 
registered broker-dealers, such as that which would be provided by the 
Exchange under the proposed rule change.
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    \3\ Public Law 111-203, 124 Stat 1376 (July 21, 2010).
    \4\ Public Law 107-204, 116 Stat. 745.
    \5\ See Securities Exchange Act Release No. 65163 (August 18, 
2011), 76 FR 52996 (August 24, 2011) (approving PCAOB temporary rule 
for an interim program of inspections related to registered public 
accounting firm audits of broker-dealers).
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    The Exchange has entered into an information sharing agreement with 
the PCAOB. The Exchange intends to share, for example, Trading Permit 
Holder FOCUS Report \6\ data with the PCAOB.

[[Page 30214]]

Under the information sharing agreement, the PCAOB has agreed to treat 
all information provided to it by the Exchange as confidential and to 
assert such confidentiality and other applicable privileges in response 
to requests for such information from third parties.\7\ Under the 
agreement shared information may be used by the recipient solely to 
fulfill its regulatory duties and purposes. The proposed rule makes 
explicit the Exchange's authority to enter into an agreement under such 
terms.
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    \6\ The ``FOCUS Report (Form X-17A-5) constitutes the basic 
financial and operational report required of those brokers or 
dealers subject to any minimum net capital requirement set forth in 
Rule 15c3-1.'' General Instructions to FOCUS Report Form X-17A-5 
Part IIA, OMB Number 3235-0123, available at: http://www.sec.gov/about/forms/formx-17a-5_2a.pdf.
    \7\ The recipient of shared information under the agreement may 
provide shared information to the SEC, if the information is 
accompanied by a Freedom of Information Act confidential treatment 
request, and to other self-regulatory or regulatory organizations 
pursuant to information sharing agreements that require the 
organizations to maintain the confidentiality of the shared 
information.
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    As discussed above, Congress has expressly granted the PCAOB 
authority to inspect broker-dealers and the Commission has approved the 
PCAOB's interim rule to implement that authority. The Exchange believes 
sharing information with the PCAOB, due to its audit oversight role 
over broker-dealers, including CBOE Trading Permit Holders, will assist 
the PCAOB in performing the oversight intended by Congress, under terms 
approved by the Commission.\8\ By explicitly permitting the Exchange to 
share confidential information with the PCAOB for the purposes stated 
in Rule 15.9, the proposed rule change will therefore make express the 
Exchange's authority to assist the PCAOB to fulfill its Congressional 
mandate, under terms approved by the Commission. Further, the proposed 
rule change will notify Trading Permit Holders of the Exchange's 
authority to enter into such information sharing agreements with the 
PCAOB.
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    \8\ See supra, note 5. The Exchange notes that if Temporary Rule 
4020T of the PCAOB is not renewed, the Exchange would no longer have 
authority to share information with PCAOB pursuant to CBOE Rule 
15.9(a).
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2. Statutory Basis
    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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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 remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    The proposed rule change is in the public's interest as it will 
explicitly authorize the Exchange to enter into an information sharing 
agreement with the PCAOB, thereby facilitating the sharing of 
information with the PCAOB. The ability to obtain information from the 
Exchange will better enable the PCAOB to perform its functions related 
to broker-dealer audit oversight. Better oversight of registered 
broker-dealer audits is in the public's interest and will serve to 
prevent fraudulent and manipulative acts and practices. Additionally, 
one of the essential purposes of the proposed rule change is to foster 
cooperation and coordination with persons engaged in regulating and 
processing information related to transactions in securities.
    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(1) of the Act,\12\ which provides that the Exchange 
be organized and have the capacity to be able to carry out the purposes 
of the Act and to enforce compliance by the Exchange's Trading Permit 
Holders and persons associated with its Trading Permit Holders with the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange. The PCAOB has agreed to reciprocate in sharing information of 
regulatory interest to the Exchange, which will provide the Exchange 
with more tools and information to enforce compliance by Trading Permit 
Holders and persons associated with Trading Permit Holders. As further 
evidence of its intent to reciprocate in sharing information with the 
Exchange, the PCAOB has filed a proposed change to its Rule 5108 to 
``conform to the Dodd-Frank amendments that permit the [PCAOB] to share 
confidential information with `a self-regulatory organization, with 
respect to an audit report for a broker or dealer that is under the 
jurisdiction of such self-regulatory organization.''' \13\
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    \12\ 15 U.S.C. 78f(b)(1).
    \13\ See Securities Exchange Act Release No. 34-71237 (January 
6, 2014), 79 FR 6272 (February 3, 2014) (notice of filing of 
proposed rules on amendments to conform the PCAOB's rules and forms 
to the Dodd-Frank Act and make certain updates and clarifications). 
The Commission notes that it has since taken action on the PCAOB 
proposal. See Securities Exchange Act Release No. 72087 (May 2, 
2014), 79 FR 26491 (May 8, 2014) (File No. PCAOB-2013-03) (notice of 
filing of Amendment No. 1, and order granting accelerated approval).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
designed to address any competitive issues but rather is designed to 
facilitate the sharing of information between PCAOB and the Exchange to 
better enable each to fulfill its respective regulatory duties and 
responsibilities.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule does not (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file the 
proposed rule change at least five business days prior to the date of 
filing of the proposed rule change or such shorter time as designated 
by the Commission,\14\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-4(f)(6) 
thereunder.\16\ At any time within 60 days of the filing of such 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the

[[Page 30215]]

Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
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    \14\ The Exchange has fulfilled this requirement.
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2014-044 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-CBOE-2014-044. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2014-044 and should be 
submitted on or before June 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12074 Filed 5-23-14; 8:45 am]
BILLING CODE 8011-01-P