[Federal Register Volume 84, Number 85 (Thursday, May 2, 2019)]
[Notices]
[Pages 18901-18903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08919]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85732; File No. SR-CBOE-2019-024]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 6.49A To Eliminate the Exchange's On-Floor Position Transfer
Procedure
April 26, 2019.
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 April 16, 2019, 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 and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 6.49A to eliminate the Exchange's on-floor position
transfer procedure. The text of the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (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 6.49A to delete the provisions
related to on-floor position transfers and amend the provision
regarding presidential exemptions. Rule 6.49A specifies the
circumstances under which Trading Permit Holders may effect transfers
of positions, both on and off the trading floor, notwithstanding the
prohibition in Rule 6.49(a).\5\ Rule 6.49A(a)(2) permits certain
position transfers to occur on the floor of the exchange or on another
options exchange. The procedures for such on-
[[Page 18902]]
floor position transfers are set forth in Rule 6.49A(b) and (c), as
well as Interpretations and Policies .01 through .03. The Exchange no
longer wants to make available on-floor transfers of positions, so the
proposed rule change deletes paragraphs (a)(2), (b), and (c), and
Interpretations and Policies .01 through .03 \6\ from Rule 6.49A.\7\
The on-floor position transfer procedure is administratively burdensome
on the Exchange, and is currently used by Trading Permit Holders on a
limited basis. As the Exchange noted when the rule was adopted, the
Exchange's ``on-floor'' procedure was intended to help ensure that
Trading Permit Holders with a need to transfer positions in bulk as
part of a sale or disposition of all or substantially all of a Trading
Permit Holder's assets or options positions were able to get the best
possible price for the positions while also ensuring that other Trading
Permit Holders have an adequate opportunity to make bids and offers on
the positions that are being transferred.\8\ In addition, the Exchange
noted the ``on-floor'' position transfer procedure could be used by
Market-Makers that, for reasons other than a forced liquidation, such
as an extended vacation, wished to liquidate their entire, or nearly
their entire, open positions in a single set of transactions, subject
to certain restrictions.\9\
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\5\ Rule 6.49 generally requires transactions of option
contracts listed on the Exchange for a premium in excess of $1.00 to
be effected on the floor of the Exchange or on another exchange.
\6\ The Exchange proposes to move the provision in
Interpretation and Policy .03 that states the on-floor transfer
procedure is not to be used repeatedly or routinely in circumvention
of the normal auction market process to proposed paragraph (g), as
that provision applies to both the current on-floor and off-floor
position transfer procedures.
\7\ The proposed rule change makes conforming changes to the
paragraph lettering and numbering in current subparagraph (a)(1)
(proposed subparagraph (a)). Because, as proposed, Rule 6.49A will
only relate to off-floor transfers, the proposed rule change renames
Rule 6.49A and adds a heading to proposed paragraph (a).
\8\ See Exchange Act Release No. 36647 (December 28, 1995), 61
FR 566 (January 8, 1996) (Order Approving and Notice of Filing and
Order Granting Accelerated Approval of Amendments No. 1 and 2 to a
Proposed Rule Change Relating to the Transfer of Positions on the
Floor of the Exchange in Cases of Dissolution and other Situations)
(SR-CBOE-95-36).
\9\ Id. Among other restrictions, repeated and frequent use of
the on-floor procedure in Rule 6.49A by a TPH is not permitted.
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For example, the Exchange's on-floor transfer of positions rule was
also intended to address the common situation in which a Designated
Primary Market-Maker (``DPM'') sold its business or in which a Market-
Maker, for reasons other than a forced liquidation, such as an extended
vacation, wished to liquidate its entire, or nearly entire, position in
a single set of transactions.\10\ Currently, because DPMs have been
largely consolidated in the hands of firms rather than individuals,
such transfers are, for the most part unnecessary; if an individual
takes an extended vacation, another member of the firm handles the
firm's book. Accordingly, the Exchange believes that the on-floor
transfer of positions procedure no longer serves the uses for which is
was originally adopted. The Exchange also notes that at least one other
options exchange with a trading floor and a transfer of positions rule
does not offer an on-floor transfer procedure.\11\
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\10\ Id.
\11\ See, e.g., Nasdaq OMX PHLX LLC (``Phlx'') 1058.
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Current paragraph (d) (proposed paragraph (b)) contains exemptions
to Rule 6.49A(a) that are approved by the Exchange's president.\12\ The
proposed rule change permits the President or a designee to grant an
exemption to the Rule 6.49(a) prohibition if, in his or her judgment,
allowing the off-floor transfer is necessary or appropriate for the
maintenance of a fair and orderly market and the protection of
investors and is in the public interest, including due to unusual or
extraordinary circumstances such as the market value of the Person's
positions will be comprised by having to comply with the requirement to
trade on the Exchange pursuant to the normal auction process or, when
in the judgment of President or his or her designee, market conditions
make trading on the Exchange impractical. The proposed rule change
updates language consistent with the change to only permit off-floor
transfers. Additionally, the additional circumstances in which the
President or a designee may grant an exemption are similar to those
that the President or a designee may consider when taking action under
emergency conditions pursuant to Rule 6.17.
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\12\ Similar to the rules of other exchanges, the proposed rule
change also lets a designee of the Exchange president grant an
exemption. See, e.g., Arca Rule 6.78-O(f).
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The proposed rule change makes no changes to permissible off-floor
position transfers.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\13\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \14\ 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) \15\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
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The Exchange believes that the proposed rule change to eliminate
the on-floor position transfer procedure promotes just and equitable
principles of trade, helps remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
promotes efficient administration of the Exchange, as it eliminates a
complex procedure that is of limited use to Trading Permit Holders
today but still imposes an administrative burden on the Exchange. The
proposed rule change removes impediments to and perfects the mechanism
of a free and open market, because it is similar to rules of other
options exchanges. The Exchange also notes that at least one other
options exchange with a trading floor and a transfer of positions rule
does not offer an on-floor transfer procedure,\16\ and at least one
other options exchange lets a designee of the Exchange president grant
an exemption.\17\ Additionally, the additional circumstances in which
the President or a designee may grant an exemption are similar to those
that the President or a designee may consider when taking action under
emergency conditions pursuant to Rule 6.17, and thus the proposed rule
change does not significantly expand the Exchange's President's
authority to take action when necessary or appropriate for the
maintenance of a fair and orderly market and to protect investors.
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\16\ See, e.g., Nasdaq OMX PHLX LLC (``Phlx'') 1058.
\17\ See, e.g., NYSE Arca, Inc. (``Arca'') Rule 6.78-O(f).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
[[Page 18903]]
Exchange does not believe the proposed rule change will impose any
burden on intramarket competition, as the current on-floor position
transfer procedure is of limited use to Trading Permit Holders today
but still imposes an administrative burden on the Exchange. The
proposed elimination of the on-floor position transfer promotes
efficient administration of the Exchange, as it eliminates this complex
procedure that is limited in application. Market participants will
still be able to effect transactions on the Exchange pursuant to the
normal auction process if an off-floor transfer is not permissible.
The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition. As discussed above, at least one
other options exchange with a trading floor and a transfer of positions
rule does not offer an on-floor transfer procedure,\18\ and at least
one other options exchange lets a designee of the Exchange president
grant an exemption.\19\ Additionally, the additional circumstances in
which the President or a designee may grant an exemption are similar to
those that the President or a designee may consider when taking action
under emergency conditions pursuant to Rule 6.17, and thus the proposed
rule change does not significantly expand the Exchange's President's
authority to take action when necessary or appropriate for the
maintenance of a fair and orderly market and to protect investors.
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\18\ See, e.g., Nasdaq OMX PHLX LLC (``Phlx'') 1058.
\19\ See, e.g., NYSE Arca, Inc. (``Arca'') Rule 6.78-O(f).
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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 written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\
Because the proposed rule change 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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\22\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6).
\22\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of 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. The
Exchange has satisfied this requirement.
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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 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(2)(B).
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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-2019-024 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-2019-024. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2019-024 and should be submitted on
or before May 23, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-08919 Filed 5-1-19; 8:45 am]
BILLING CODE 8011-01-P