[Federal Register Volume 84, Number 114 (Thursday, June 13, 2019)]
[Notices]
[Pages 27667-27669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12450]



[[Page 27667]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86065; File No. SR-CBOE-2019-029]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Rules Relating to Registration of Trading Permit Holders

June 7, 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 June 6, 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)(iii) 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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 its rules relating to registration of Trading Permit Holders. 
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 certain rules relating to the 
registration of its Trading Permit Holders (``TPHs'').
Qualifications of TPHs
    The Exchange first proposes to amend its rules that set forth the 
qualifications required to be an individual TPH or TPH organization. 
Particularly, Rule 3.2(b) currently provides, among other things, that 
an individual must be approved to engage in one or more of the 
following enumerated trading functions: (i) Market-Maker, (ii) Floor 
Broker, (iii) Proprietary Trading Permit Holder, (iv) DPM Designee, (v) 
FLEX Appointed Market-Maker and (vi) FLEX Qualified Market-Maker. 
Similarly, Rule 3.3(b) provides, in relevant part that a TPH 
organization must be approved to engage in one or more of the following 
trading functions: (i) TPH organization approved to transact business 
with the public, (ii) Clearing Trading Permit Holder, (iii) order 
service firm, (iv) Market-Maker; (v) Lead Market-Maker, (vi) Designated 
Primary Market-Maker, and (vii) Proprietary Trading Permit Holder.
    The Exchange proposes to eliminate subparagraph (b) of Rules 3.2 
and 3.3. The Exchange does not believe it is necessary to enumerate in 
the manner that it has the trading functions for which a TPH may be 
approved to engage in, nor is it required to do so. Indeed, the 
Exchange notes that other Exchanges with similar rules governing member 
qualifications do not include such a list, including its affiliate 
Exchanges.\5\ The Exchange believes eliminating the enumerated 
categories from its rules provides the Exchange more flexibility in the 
future should additional registration capacities be added or removed. 
In connection with the proposed change, the Exchange also proposes to 
eliminate cross references to Rules 3.2(b) and 3.3(b).\6\
---------------------------------------------------------------------------

    \5\ See Rules of Cboe C2, Exchange, Inc., Cboe BZX Exchange, 
Inc., Cboe BYX Exchange, Inc., Cboe EDGX Exchange, Inc. and Cboe 
EDGX Exchange, Inc. See also e.g., Nasdaq PHLX LLC Rule 910 and 
Nasdaq PHLX Rulebook generally. See also, NYSE Arca LLC Rules 2.2, 
2.3 and NYSE Arca Rulebook generally.
    \6\ The Exchange notes that Rule 3.10 references Rule 3.3(c) 
instead of Rule 3.3(b). The Exchange notes it inadvertently failed 
to update the reference and that indeed, subparagraph (c) of Rule 
3.3 no longer exists.
---------------------------------------------------------------------------

TPH Orientation and Qualification Examination
    The Exchange proposes to amend its rule governing the Exchange's 
Trading Permit Holder Orientation Program and Trading Permit Holder 
Qualification Exam. Rule 3.9(e) currently provides that any person 
applying pursuant to paragraph (a) of Rule 3.9 to have an authorized 
trading function \7\ is required to complete the Exchange's Trading 
Permit Holder Orientation Program (``TPH Orientation'') and to pass an 
Exchange Trading Permit Holder Qualification Exam (``TPH Exam''). The 
Exchange proposes to eliminate in its entirety the requirement to 
complete the TPH Orientation and take the TPH Exam. Particularly, the 
Exchange believes that the qualification requirements under Exchange 
Rule 3.6A adequately test TPH applicants' knowledge of the securities 
industry. For example, all representative-level applicants are now 
required to take the Securities Industry Essentials Examination 
(``SIE'') which assesses basic product knowledge; the structure and 
function of the securities industry markets, regulatory agencies and 
their functions; and regulated and prohibited practices in addition to 
passing the appropriate qualification examination (e.g., Series 57). 
Additionally, the Exchange notes that all TPHs are subject to 
continuing education requirements under Rule 9.3A, which, among other 
things, requires each TPH and TPH organization to maintain a continuing 
and current education program for its covered registered persons to 
enhance their securities knowledge, skills and professionalism. As 
such, the Exchange believes requiring such individuals to also attend a 
TPH Orientation and take a TPH Exam in order to participate on the 
Exchange is unnecessary and duplicative. The Exchange therefore seeks 
to eliminate these requirements.
---------------------------------------------------------------------------

    \7\ Currently, Floor Brokers, Market-Makers (which includes DPM 
Designees, FLEX Appointed Market-Makers and FLEX Qualified Market-
Makers), and Proprietary Traders applying pursuant to Rule 3.9 are 
subject to the TPH Orientation and TPH Exam.
---------------------------------------------------------------------------

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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirements that the rules of

[[Page 27668]]

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. 
In addition, the Exchange believes that the proposed rule change is 
consistent with Section 6(c)(3)(B) of the Act,\10\ which authorizes 
exchanges to prescribe standards of training, experience and competence 
for persons associated with exchange members, and gives exchanges the 
authority to bar a natural person from becoming a member or a person 
associated with a member, if the person does not meet the standards of 
training, experience and competence prescribed in the rules of the 
exchange.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(c)(3)(B).
---------------------------------------------------------------------------

    In particular, the Exchange believes eliminating from its rules a 
list of trading functions individual TPHs and TPH organizations may be 
approved to engage in is not a substantive change as it does not affect 
any rights or obligations of TPHs. Rather, the Exchange merely no 
longer wishes to maintain Rules 3.2(b) and 3.3(b) and notes it is not 
required to do so. As noted above, several other Exchanges similarly do 
not maintain any provisions similar to current Rules 3.2(b) and 3.3(b), 
including its affiliate Exchanges. Accordingly, the proposed rule 
change will also provide further harmonization across its affiliated 
exchanges with respect to its registration rules, which may alleviate 
potential confusion.
    Next, the Exchange notes that under Section 6(c)(3)(B) of the Act, 
the Exchange is authorized to prescribe standards of training, 
experience and competence for persons associated with exchange members. 
The Exchange believes the standards of training, experience and 
competence it has prescribed under its rules, not including the TPH 
Orientation and Exam are, on their own, an adequate prescription of 
training, experience and competence. Indeed, the Exchange believes the 
requirements related to training, experience and competence currently 
set forth under rules 3.6A, along with continuing education 
requirements set forth under Rule 9.3A, are designed to help ensure 
professionalism among market participants, prevent fraudulent and 
manipulative practices, and promote just and equitable principles of 
trade. Moreover, the Exchange believes the prescribed qualification 
exams required under Rule 3.6A align with the various trading functions 
and associated tasks that would be performed by a TPH applicant 
currently subject to the TPH Exam and tests knowledge of the most 
current laws, rules, regulations and skills relevant to the respective 
functions and associated tasks. The Exchange therefore believes that 
any TPH applicant that can satisfy such requirements has demonstrated 
that he or she has attained a sufficient level of competence and 
knowledge to participate on the Exchange. In sum, the Exchange has 
determined that the requisite knowledge necessary to participate on the 
Exchange can be assessed adequately by the qualification examinations 
prescribed under Rule 3.6A and that a TPH Orientation and Exam 
requirement provides no material improvements to the qualification 
process. Accordingly, the Exchange believes requiring such individuals 
to also complete the TPH Orientation and take the TPH Exam is redundant 
and unnecessary. Furthermore, the Exchange believes that it is in the 
interests of all market participants to provide consistent 
qualification and registration requirements across markets and notes 
that its affiliated markets do not have any exchange-specific testing 
requirements. The Exchange lastly notes that there is no requirement to 
develop or maintain an exchange-developed test for member applicants.

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. Particularly, the Exchange 
does not believe that the proposed rule change will impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed changes 
apply to all TPH applicants. The Exchange does not believe that the 
proposed rule change will impose any burden on intermarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act because the proposed change only affects those applying for 
membership to Cboe Options. To the extent that the proposed change 
makes Cboe Options a more attractive marketplace for market 
participants at other exchanges, such market participants are welcome 
to become Cboe Options market participants. Lastly, the Exchange notes 
that it believes the proposed changes will reduce the regulatory burden 
placed on market participants engaged in trading activities by 
eliminating a redundant and unnecessary exam. Indeed, the proposed rule 
change will provide further harmonization of registration requirements 
across various markets, including its affiliates, which will reduce 
burdens on competition by removing impediments to participation in the 
national market system and promoting competition among participants 
across the multiple national securities exchanges.

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 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, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
Rule 19b-4(f)(6) \12\ thereunder. At any time within 60 days of the 
filing of the 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) \13\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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:

[[Page 27669]]

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-2019-029 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2019-029. 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-2019-029 and should be submitted on 
or before July 5, 2019.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12450 Filed 6-12-19; 8:45 am]
 BILLING CODE 8011-01-P