[Federal Register Volume 84, Number 129 (Friday, July 5, 2019)]
[Notices]
[Pages 32225-32227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14280]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86234; File No. SR-C2-2019-017]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Trigger for Its Opening Rotation Process for Equity Options
June 28, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 24, 2019, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'')
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.
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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)(iii).
\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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to
amend the trigger for its opening rotation process for equity options.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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
On April 24, 2019, the Exchange filed a rule filing, SR-C2-2019-
009, which, among other things, amended its opening auction process.\5\
Specifically, the filing amended the events that will trigger the
opening rotation for equity options pursuant to Rule 6.11(d). As of
June 17, 2019, Rule 6.11(d) provides that after a time period (which
the Exchange determines for all classes) following the System's
observation after 9:30 a.m. of the first disseminated transaction price
for the security underlying an equity the System will initiate the
opening rotation for the series in that class.\6\
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\5\ See Securities Exchange Act Release No. 85788 (May 6, 2019),
84 FR 20673 (May 10, 2019) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the Exchange's
Opening Process and Add a Global Trading Hours Session for DJX
Options) (SR-C2-2019-009). The rule filing was part of Feature Pack
7, implemented on June 17, 2019, in connection with the migration of
Cboe Exchange, Inc. (``Cboe Options'') technology to the same
trading platform used by the Exchange, Cboe EDGX Exchange, Inc.
(``EDGX Options''), and Cboe BZX Exchange, Inc. (``BZX Options'') in
the fourth quarter of 2019.
\6\ The Exchange circulated an Exchange notice in advance of the
implementation of the rule changes pursuant to SR-C2-2019-009
describing such rule changes. See Exchange Notice No. C2019050201
(May 2, 2019). The Exchange also circulated an Exchange notice as a
reminder of the upcoming rule changes under SR-C2-2019-009. See
Exchange Notice No. C2019061200 (June 12, 2019).
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Prior to June 17, 2019, the System would initiate its opening
rotation for a series following the first transaction in the security
underlying an equity option disseminated by the primary market after
9:30. The Exchange now seeks to amend the opening rotation trigger for
equity options to revert back to the trigger used prior to the
implementation of SR-C2-2019-009. The Exchange understands its opening
rotation trigger event is not consistent with general practice in the
industry, which is to trigger an opening rotation based on disseminated
transactions from the primary market rather than any market. The
Exchange notes that the proposed change to reflect the prior opening
trigger event is the same as the rule language that existed before the
SR-C2-2019-009 amendments, previously filed with the Commission,
modified only to conform to other rule text under Rule 6.11(d) amended
by SR-C2-2019-009 that the Exchange does not intend to alter.
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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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The Exchange believes that the proposed rule change will serve to
remove impediments to and perfect the mechanism of a free and open
market and national market system because it will realign the trigger
for its opening rotation for equity options with the trigger used by
most other options exchanges.\10\ The proposed change will
[[Page 32226]]
benefit investors, as it will create consistency throughout the
industry and will implement an opening rotation trigger that was
previously in place under the Exchange Rules and thus, previously filed
with the Commission and already familiar to market participants.
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\10\ See Rules of Nasdaq BX, Chapter VI, Sec. 8(b); and Nasdaq
Stock Market Options Rules, Chapter VI, Sec. 8(b). See also http://www.nasdaqtrader.com/Content/BXOptions/BXOptions_FAQs.pdf; and
http://www.nasdaqtrader.com/content/ProductsServices/Trading/OptionsMarket/options_market_faqs.pdf.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed change will impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change will impose any burden on intramarket
competition that is not necessary in furtherance of the purposes of the
Act, because the proposed opening trigger will apply in the same manner
to all equity options. The proposed rule change impacts a System
process that occurs prior to the opening of trading, and merely
modifies when the System will initiate an opening rotation. The
remainder of the opening auction process will occur as it does today.
The Exchange also does not believe that the proposed change will impose
any burden on intermarket competition that is not necessary in
furtherance of the purposes of the Act, because use of the first
disseminated transaction price from the primary market as a trigger for
the opening rotation is consistent with the rules of other options
exchanges \11\ and with the Exchange Rules in place prior to June 17,
2019.
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\11\ Id.
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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 comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 \12\ and Rule 19b-4(f)(6)
thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). 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 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.[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT]
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has asked the Commission to waive the 30-day operative
delay. The Exchange has asked the Commission to waive the 30-day
operative delay. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because the proposed rule change will implement
functionality relating to the opening rotation trigger for equity
options that was previously in place on C2. As such, waiver of the 30-
day operative delay is consistent with the protection of investors and
the public interest as the proposed rule change will implement an
opening rotation trigger that was previously in place under an Exchange
Rule that is already familiar to market participants. Thus, as
represented by the Exchange, the proposed rule change does not
introduce any new or novel issues. For this reason, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Therefore, the
Commission hereby waives the operative delay and designates the
proposal as operative upon filing.\16\
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\16\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 to
determine whether the proposed rule change should be approved or
disapproved.
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-C2-2019-017 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-C2-2019-017. 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-C2-2019-017 and should be submitted on
or before July 26, 2019.
[[Page 32227]]
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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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14280 Filed 7-3-19; 8:45 am]
BILLING CODE 8011-01-P?>