[Federal Register Volume 84, Number 158 (Thursday, August 15, 2019)]
[Notices]
[Pages 41776-41779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17492]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86617; File No. SR-CBOE-2019-043]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Ability To Submit Frequent Trader Forms

August 9, 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 August 7, 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

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend the ability to submit Frequent Trader Forms. 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.

[[Page 41777]]

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 its fee schedule with respect to its 
Frequent Trader Program. By way of background, through the Frequent 
Trader Program, the Exchange offers transaction fee rebates to 
Customers and Professional Customers and Voluntary Professionals 
(origin codes ``C'' and ``W'', respectively) (collectively 
``Customers'') that meet certain volume thresholds in VIX, SPX 
(including SPXW) and RUT options, provided the Customer registers for 
the program (the ``Frequent Trader Program'' or ``Program''). Once 
registered, the Customer is provided a unique identification number 
(``FTID'') that can be affixed to each of its orders. The FTID allows 
the Exchange to identify and aggregate all electronic and manual trades 
during both the Regular Trading Hours and Global Trading Hours sessions 
from that Customer for purposes of determining whether the Customer 
meets any of the various volume thresholds. The Customer has to provide 
its FTID to the Trading Permit Holder (``TPH'') submitting that 
Customer's order to the Exchange (``executing agent'' or ``executing 
TPH'') and that executing TPH would have to enter the Customer's FTID 
on each of that Customer's orders.\5\
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    \5\ The Exchange notes that it is the responsibility of the 
Customer to request that the executing TPH affix its FTID to its 
order(s), and that it is voluntary for the executing TPH to do so.
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    The Exchange notes that there are instances however, in which a 
Customer's FTID was not or could not be, affixed to an order. For 
example, an executing TPH may receive an order with multiple contra 
parties, including parties that are also customers with their own 
unique FTIDs. The executing TPH's front end system however, may only 
allow it to input only one FTID on the order. Thus the other Customers 
to the trade would not have their FTID represented at the time of 
submission. Additionally, it is possible that an executing TPH 
inadvertently enters an incorrect FTID number on an order. Accordingly, 
the Exchange adopted a rule to provide executing TPHs the ability to 
submit to the exchange a form (the ``Frequent Trader Program--Volume 
Corrections Form'' or ``Form'') that would provide a mechanism for 
executing TPHs to identify transactions to the Exchange that should 
have been, but were not, associated with particular FTIDs. More 
specifically, the executing TPH would identify on the form the 
``correct'' FTID that should be associated with a specific transaction, 
so that such volume is properly counted towards the appropriate 
Customer's aggregated volume for purposes of determining what tier, if 
any, the customer meets. Currently, the Frequent Trader Program--Volume 
Corrections Form (``FT Form'') has to be submitted to the Exchange 
within 3 business days.\6\ The Exchange now proposes to modify the 
means in which TPHs submit the information required on the FT Form and 
shorten the submission deadline. Specifically, the Exchange proposes 
that instead of using the current FT Form, all TPHs must submit FTID 
information electronically to the Exchange in a form and manner 
prescribed by the Exchange.\7\ Such electronic submission must be 
received no later than 6:00 p.m. CT on the trade date. In order to 
provide some flexibility in the event of extenuating circumstances 
(such as a system issue), the Exchange additionally proposes to provide 
that, in extenuating circumstances as determined by the Exchange, the 
deadline may be extended until 6:00 p.m. CT on the business day 
following the trade date. The Exchange believes that it is no longer 
necessary to provide TPHs 3 days to submit the current form. 
Particularly, the Exchange believes that TPHs shouldn't need more than 
the trade date to submit FTID information electronically as it is not 
an overly burdensome process. The Exchange also notes that the Frequent 
Trader Program was established over three years ago and TPHs therefore 
should be familiar with the program and its requirements and more 
proficient in ensuring FTID information is submitted in a timely 
manner. Indeed, absent unusual circumstances, the Exchange believes all 
TPHs should be able to meet the modified deadline. The proposed rule 
change would streamline the process and result in the FTID information 
being submitted in a timelier manner.
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    \6\ See Securities Exchange Act Release No. 77659 (April 20, 
2016), 81 FR 24678 (April 26, 2016) (SR-CBOE-2016-037)
    \7\ The Exchange has issued an Exchange Trade Notice providing 
the details as to how TPHs may submit such information to the 
Exchange and any corresponding deadline. See Cboe Options Trade 
Notice, ``Frequent Trader ID Additions and Corrections--Change in 
Procedures'', Reference ID C2019060700, which sets forth the file 
format, information required and corresponding deadlines. To the 
extent the Exchange amends the process or deadline in the future, 
the Exchange will similarly issue Exchange a new Trade Notice 
describing the changes.
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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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    In particular, the Exchange notes that eliminating the 3 day 
submission period for FTID information to be submitted helps ensure 
that a Customer's real trading volume is more immediately and 
accurately represented, which helps streamline the administration of 
the Program. The Exchange believes that all TPHs should be able to 
prepare and submit such FTID information electronically to the Exchange 
on the trade date. The proposed change also ensures timely processing 
and finality. The establishment of this process will also make it 
easier for the Exchange to administer the Frequent Trader Program. 
Additionally, it has been approximately 3 years since the original FT 
Form was adopted and as such, TPHs should be familiar with the

[[Page 41778]]

Frequent Trader Program and should have systems and procedures in place 
to process to provide the required FTID information on the trade date. 
The Exchange also notes that the ability to provide FTID information 
electronically to the Exchange post-trade is merely an additional means 
to ensure FTPID information is relayed to the Exchange. TPHs still have 
the option of affixing FTIDs on the orders or may add or modify FTID 
information on post-trade records on the trade date via Cboe Trade 
Match (``CTM'') terminals. As such, the Exchange believes 
notwithstanding the proposed changes, that TPHs still are provided a 
variety of means to ensure FTID information is relayed to the Exchange 
in a timely, efficient manner, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and protecting investors and the public interest.

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 because the proposed change 
applies uniformly to all executing TPHs of Customer FTID orders and 
because it still provides for an alternative means for which a 
Customer's FTID that was not applied to that Customer's order at the 
time of entry is still submitted to the Exchange to be counted towards 
the Frequent Trader Program thresholds. The Exchange believes that the 
proposed rule change will not cause an unnecessary burden on 
intermarket competition because it only applies to trading on Cboe 
Options. To the extent that the proposed changes make Cboe Options a 
more attractive marketplace for market participants at other exchanges, 
such market participants are welcome to become Cboe Options market 
participants.

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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative upon filing. The Exchange states that 
in June 2019, TPHs received prior notice of the proposed change and 
proposed implementation date for the beginning of August.\15\ The 
proposal converts the paper-based process through which TPHs submit 
information required pursuant to the optional frequent trader fee 
incentive program and instead requires TPHs to submit that information 
electronically. Given the ministerial nature of this change, the 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\16\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See Cboe Options Trade Notice, ``Frequent Trader ID 
Additions and Corrections--Change in Procedures'', Reference ID 
C2019060700.
    \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-CBOE-2019-043 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-2019-043. 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-2019-043 and should be submitted on 
or before September 5, 2019.


[[Page 41779]]


    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17492 Filed 8-14-19; 8:45 am]
 BILLING CODE 8011-01-P