[Federal Register Volume 84, Number 142 (Wednesday, July 24, 2019)]
[Notices]
[Pages 35702-35704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15672]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86411; File No. SR-CBOE-2019-037]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Rule 12.3 by Extending the Credit Option Margin Pilot Program 
Through July 20, 2020

July 18, 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 July 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)(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

    The Exchange proposes to amend Rule 12.3 by extending the Credit 
Option Margin Pilot Program through July 20, 2020. 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
    On February 2, 2011, the Commission approved the Exchange's 
proposal to establish a Credit Option Margin Pilot Program 
(``Program'').\5\ The proposal became effective on a pilot basis to run 
on a parallel track with FINRA Rule 4240 that similarly operates on an 
interim pilot basis.\6\
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    \5\ See Securities Exchange Act Release No. 63819 (February 2, 
2011), 76 FR 6838 (February 8, 2011) order approving (SR-CBOE-2010-
106). To implement the Program, the Exchange amended Rule 12.3(l), 
Margin Requirements, to make Cboe Option's margin requirements for 
Credit Options consistent with Financial Industry Regulatory 
Authority (``FINRA'') Rule 4240, Margin Requirements for Credit 
Default Swaps. Cboe Options Credit Options (i.e., Credit Default 
Options and Credit Default Basket Options) are analogous to credit 
default swaps.
    \6\ See Securities Exchange Act Release No. 59955 (May 22, 
2009), 74 FR 25586 (May 28, 2009) (Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change; SR-FINRA-
2009-012).
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    On January 17, 2012, the Exchange filed a rule change to, among 
other things, decouple the Program with the FINRA program and to extend 
the expiration date of the Program to January 17, 2013.\7\ The Program, 
however, continues to be substantially similar to the provisions of the 
FINRA program. Subsequently, the Exchange filed rule changes to extend 
the program until January 17, 2014, January 16, 2015, January 15, 2016, 
January 17, 2017, July 18, 2017, July 18, 2018 and July 18, 2019, 
respectively.\8\ The Exchange believes that extending the expiration 
date of the Program further will allow for further analysis of the 
Program and a determination of how the Program should be structured in 
the future. Thus, the Exchange is now currently proposing to extend the 
duration of the Program for an additional year until July 20, 2020.\9\
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    \7\ See Securities Exchange Act Release No. 66163 (January 17, 
2012), 77 FR 3318 (January 23, 2012) (SR-CBOE-2012-007).
    \8\ See Securities Exchange Act Release Nos. 68539 (December 27, 
2012), 78 FR 138 (January 2, 2013) (SR-CBOE-2012-125), 71124 
(December 18, 2013), 78 FR 77754 (December 24, 2013) (SR-CBOE-2013-
123), 73837 (December 15, 2014), 79 FR 75850 (December 19, 2014) 
(SR-CBOE-2014-091), 76824 (January 5, 2016), 81 FR 1255 (January 11, 
2016) (SR-CBOE-2015-118), 79621 (December 14, 2016) 81 FR 95236 
(December 27, 2016) (SR-CBOE-2016-089), 81083 (July 6, 2017) 82 FR 
32219 (July 12, 2017) (SR-CBOE-2017-051), and 83672 (July 19, 2018) 
83 FR 35305 (July 25, 2018) (SR-CBOE-2018-052).
    \9\ The Exchange is filing the proposed rule change for 
immediate effectiveness. The Exchange is proposing that the 
implementation date of the proposed rule change will be July 18, 
2019. The proposed rule change will expire on July 20, 2020, which 
is the same date FINRA's corresponding program expires.

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[[Page 35703]]

    Additionally, the Exchange believes that it is in the public 
interest to extend the expiration date of the Program because it will 
continue to allow the Exchange to list Credit Options for trading. As a 
result, the Exchange will remain competitive with the Over-the-Counter 
Market with respect to swaps and security-based swaps. In the future, 
if the Exchange proposes an additional extension of the Credit Option 
Margin Pilot Program or proposes to make the Program permanent, then 
the Exchange will submit a filing proposing such amendments to the 
Program.
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.\10\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \11\ 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 
facilitation 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) \12\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    In particular, the Exchange believes that the proposed rule change 
will further the purposes of the Act because, consistent with the goals 
of the Commission at the initial adoption of the program, the margin 
requirements set forth by the proposed rule change will help to 
stabilize the financial markets. In addition, the proposed rule change 
is substantially similar to existing FINRA Rule 4240.

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. Specifically, the Exchange 
believes that, by extending the expiration of the Program, the proposed 
rule change will allow for further analysis of the Program and a 
determination of how the Program shall be structured in the future. In 
doing so, the proposed rule change will also serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.

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:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. 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 \13\ and 
Rule 19b-4(f)(6) \14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, as required under Rule 
19b-4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of the 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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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange states that waiver of the 30-day operative delay 
will allow it to maintain the status quo, thereby reducing market 
disruption. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest, as it will allow the Program to continue uninterrupted, 
thereby avoiding investor confusion that could result from a temporary 
interruption of the Program. For this reason, the Commission designates 
the proposed rule change to be operative upon filing.\15\
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    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 will 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-CBOE-2019-037 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-2019-037. 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

[[Page 35704]]

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-2019-037 and 
should be submitted on or before August 14, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15672 Filed 7-23-19; 8:45 am]
 BILLING CODE 8011-01-P