[Federal Register Volume 84, Number 186 (Wednesday, September 25, 2019)]
[Notices]
[Pages 50545-50558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20698]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87024; File No. SR-CBOE-2019-059]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Certain Rules Relating To Market-Makers Upon Migration to the Trading 
System Used by Cboe Affiliated Exchanges

September 19, 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 September 6, 2019, Cboe Exchange, Inc. filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization. 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.
---------------------------------------------------------------------------

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 and move certain current Rules in connection with Market-
Makers from the Exchange's currently effective Rulebook (``current 
Rulebook'') to the shell structure for the Exchange's Rulebook that 
will become effective upon the migration of the Exchange's trading 
platform to the same system used by the Cboe Affiliated Exchanges (as 
defined below) (``shell Rulebook''). 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
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc. 
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also 
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe 
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or 
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX 
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with 
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated 
Exchanges''). The Cboe Affiliated Exchanges are working to align 
certain system functionality, retaining only intended differences 
between the Cboe Affiliated Exchanges, in the context of a technology 
migration. The Exchange intends to migrate its trading platform to the 
same system used by the Cboe Affiliated Exchanges, which the Exchange 
expects to complete on October 7, 2019. The Exchange believes offering 
similar functionality to the extent practicable will reduce potential 
confusion for market participants.
    In connection with this technology migration, the Exchange has a 
shell Rulebook that resides alongside its current Rulebook, which shell 
Rulebook will contain the Rules that will be in place upon completion 
of the Cboe Options technology migration.
    The Exchange now proposes to update and amend its rules under 
Chapter 8 (Market-Makers, Trading Crowds and Modified Trading Systems). 
Specifically, the Exchange proposes to amend its rules regarding 
Market-Maker registration, class appointments, and obligations 
(applicable to Market-Makers generally and the various Market-Maker 
types, i.e. Designated Primary Market-Makers (``DPMs''), Primary 
Market-Makers (``PMMs''), and Lead Market-Makers (``LMMs'')) to conform 
to the corresponding Market-Makers rules of its affiliated options 
exchanges, C2, EDGX Options, and BZX Options (the ``Affiliated Options 
Exchanges'').\3\ The Exchange proposes these amendments to reflect the 
current Market-Maker functionality and general rule language of that of 
the Affiliated Options Exchanges to the extent necessary to retain 
intended differences unique to Cboe Options market-model, functionality 
and/or rule text. In conforming its Rule to that of is Affiliated 
Options Exchanges' rules, the Exchange proposes few substantive 
changes, which include proposed changes to the FLEX appointment 
process, updates to Market-Maker class appointments and obligations to 
such appointments to apply across Global Trading Hours (``GTH'') and 
Regular Trading Hours (``RTH''), updates to the

[[Page 50546]]

appointment cost structure, amendments to certain obligation 
provisions, including the bid/ask requirement, the series excluded from 
continuous quoting obligations and adding a ``good-standing'' rule, and 
updates to some of the rules in connection with DPMs, including 
segregation of accounts for DPM-related transactions accounts from a 
firms other accounts, the DPM net liquidating requirements, requirement 
to have two DPM designees, Exchange review of DPMs, as well as On-Floor 
terminations (which is also in connection with LMMs) and designations 
of classes in connection with DPMs and LMMs.
---------------------------------------------------------------------------

    \3\ The Exchange notes that the Affiliated Options Exchanges 
recently updated and harmonized their Market-Maker rules. The recent 
updates to BZX Option's Market-Maker rules will be implemented on or 
around October 1, 2019, and this filing refers to these updates. See 
Securities Exchange Act Release No. 85845 (May 13, 2019), 84 FR 
22541 (May 17, 2019) (Notice of Filing and Immediate Effectiveness 
of a Proposed Rule Change To Delay the Operative Date of Rule Change 
Pursuant to SR-CboeBZX-2019-025) (SR-CboeBZX-2019-043).
---------------------------------------------------------------------------

    The Exchange also proposes to make non-substantive changes to 
simplify, clarify, and generally update its Market-Maker rules by 
consolidating various provisions and rules (including select rules not 
covered under current Chapter 8 but pertain to Market-Maker 
requirements), simplifying rule language (e.g. revising run-ons and 
unnecessary clauses), updating the rule text to read in plain English, 
deleting duplicative and obsolete rule provisions, reformatting 
provision sequencing, numbering, and lettering, and revising headings. 
The Exchange also updates cross-references to rules not yet in the 
shell Rulebook but that will be in the shell Rulebook and implemented 
upon migration. The tables below list each rule under current Chapter 
8, along with the few additional rules related to Market-Makers that 
the Exchange proposes to consolidate with the Market-Maker rules, the 
proposed rule in the shell Rulebook to which the current rule will be 
moved, the corresponding rule of one or more of the Affiliated Options 
Exchanges to which the propose change conforms (if applicable), whether 
the proposed change is substantive or non-substantive, and finally, a 
description of the proposed rule change. The Exchange notes that all 
current provisions proposed to move to the corresponding proposed 
provisions in the shell Rulebook will also be deleted from the current 
rules upon migration.
Market-Maker Registration (Proposed Chapter 3, Section C)
    The proposed rule change moves current Chapter 8 rules related to 
registration (including approvals, eligibility, termination, etc.) and 
general Market-Maker functions, from the current Rulebook to Chapter 3, 
Section C (TPH Trading Functions) of the shell Rulebook as follows:
---------------------------------------------------------------------------

    \4\ The proposed rule change deletes Interpretation and Policy 
.01(b) because the Exchange already moved/consolidated participation 
entitlements and rates into shell Rulebook in Rule 5.32. See 
Securities Exchange Act Release No. 86374 (July 15, 2019), 84 FR 
34963 (July 19, 2019) Notice of Filing and Immediate Effectiveness 
of a Proposed Rule Change Relating to System Connectivity and Order 
Entry and Allocation Upon the Migration of the Exchange's Trading 
Platform to the Same System Used by the Cboe Affiliated Exchanges) 
(SR-CBOE-2019-033). The Exchange notes that SR-CBOE-2019-003 
inadvertently failed to remove Rule 8.13.01(b) when it consolidated 
into the shell Rulebook. The filing deleted the following 
provisions: Rule 8.13(c) (regarding entitlement rates for PMMs); 
Rule 8.15(c)-(d) (regarding participation entitlements for LMMs); 
Rule 8.87 (in its entirety, regarding participation entitlements for 
DPMs).
    \5\ As noted, on October 7, 2019 the Exchange's trading platform 
will be migrated to the same system used by the Cboe Affiliated 
Exchanges. The Exchange's trading system will still exist as a 
hybrid system but will no longer be referred to as the ``Hybrid 
Trading System.'' Instead, it will be defined as the ``System,'' 
pursuant to Rule 1.1 in the shell Rulebook, to mean ``the Exchange's 
hybrid trading platform that integrates electronic and open outcry 
trading of option contracts on the Exchange.'' The Exchange notes 
that the term ``Hybrid class'' is no longer relevant because as of 
2018, all classes listed for trading on the Exchange now trade on 
the same platform (prior to that, certain classes traded on the 
Exchange's Hybrid 3.0 platform, while most classes traded on the 
Exchange's Hybrid platform), making the distinction obsolete.

----------------------------------------------------------------------------------------------------------------
                                                         Corresponding
          Current rule               Proposed rule      other Exchange    Substantive change    Description of
                                                             rule                                   change
----------------------------------------------------------------------------------------------------------------
Rule 8.1 (Market-Maker Defined).  Rule 3.52 (Market-  C2 Rule 8.1, EDGX   N.................  Conforms language
                                   Makers).            Options Rule                            to that of the
                                                       22.2, BZX Options                       Affiliated
                                                       Rule 22.2.                              Options
                                                                                               Exchanges' rules.
                                                                                               Language defining
                                                                                               Market-Makers
                                                                                               deleted;
                                                                                               duplicative of
                                                                                               the definition
                                                                                               already in Rule
                                                                                               1.1.
Rule 8.2 (Registration of Market- Rule 3.52 (Market-  C2 Rule 8.1, EDGX   Y: see further      Conforms
 Makers).                          Makers).            Options Rule        discussion below..  registration
                                                       22.2, BZX Options                       process
                                                       Rule 22.2.                              provisions to
                                                                                               that of the
                                                                                               Affiliated
                                                                                               Options
                                                                                               Exchanges' rules.
Rule 8.13 (Preferred Market-      Rule 3.56 (PMMs)..  N/A...............  N.................  Moves Rule 8.13(a)
 Makers).                                                                                      and (b), and
                                                                                               Interpretation
                                                                                               and Policy .01(a)
                                                                                               to proposed rule,
                                                                                               deleted
                                                                                               Interpretation
                                                                                               and Policy .01(b)
                                                                                               regarding PMM
                                                                                               participation
                                                                                               entitlements,\4\
                                                                                               and renumbers
                                                                                               provisions,
                                                                                               changes headings,
                                                                                               and updates cross-
                                                                                               references.
                                                                                               Removes receipt
                                                                                               of PMM order
                                                                                               through complex
                                                                                               order book
                                                                                               (``COB'')/or
                                                                                               complex order
                                                                                               auctions as such
                                                                                               complex
                                                                                               entitlements are
                                                                                               infrequently
                                                                                               allocated, if at
                                                                                               all, and, in
                                                                                               addition to this,
                                                                                               complex orders
                                                                                               traded on the COB
                                                                                               or COA will not
                                                                                               have PMM
                                                                                               allocation in the
                                                                                               migrated system.
Rule 8.15 (Lead Market-Makers)..  Rule 3.55 (LMMs)..  N/A...............  N.................  Moves current Rule
                                                                                               8.15(a) and
                                                                                               Interpretation
                                                                                               and Policy .01 to
                                                                                               proposed rule and
                                                                                               renumbers
                                                                                               provisions,
                                                                                               changes headings,
                                                                                               and updates cross-
                                                                                               references. Moves
                                                                                               current Rule
                                                                                               6.1A(iii)(A) to
                                                                                               proposed rule,
                                                                                               which states that
                                                                                               the Exchange may
                                                                                               approve one or
                                                                                               more market-
                                                                                               Makers to act as
                                                                                               LMMs in each
                                                                                               class during GTH
                                                                                               for one-month
                                                                                               terms.
Rule 6.1A (Global Trading
 Hours), paragraph (e)(iii)(A).
Rule 8.81 (DPM Designees).......  Rule 3.54 (DPM      N/A...............  Y: see further      Deletes current
                                   Designees).                             discussion below.   8.1(d) which
                                                                                               provides that
                                                                                               each DPM must
                                                                                               have two
                                                                                               designees that
                                                                                               are nominees of
                                                                                               the DPM,
                                                                                               requirement is an
                                                                                               unnecessary
                                                                                               expense to DPMs.
                                                                                               Renumbers
                                                                                               provisions and
                                                                                               updates cross-
                                                                                               references and
                                                                                               updates language
                                                                                               to read in plain
                                                                                               English.
Rule 8.83 (Approval to Act as     Rule 3.53 (DPMs)..  N/A...............  N.................  Modifies the term
 DPM).                                                                                         ``appointment''
                                                                                               to
                                                                                               ``designation''
                                                                                               to clarify the
                                                                                               distinction
                                                                                               between a Market-
                                                                                               Maker approved to
                                                                                               act as a DPM and
                                                                                               its appointment
                                                                                               to options
                                                                                               classes (and
                                                                                               updates this term
                                                                                               throughout the
                                                                                               proposed Market-
                                                                                               Maker rules).
                                                                                               Updates the term
                                                                                               ``allocation'' of
                                                                                               ``securities'' to
                                                                                               ``appointment''
                                                                                               of classes, which
                                                                                               is consistent
                                                                                               with the terms
                                                                                               used throughout
                                                                                               Market-Maker
                                                                                               rules (this
                                                                                               update is made
                                                                                               throughout the
                                                                                               proposed Market-
                                                                                               Maker rules).
                                                                                               Removes language
                                                                                               in connection
                                                                                               with the ``Hybrid
                                                                                               Trading System''
                                                                                               and ``Hybrid
                                                                                               classes'' (and
                                                                                               makes same update
                                                                                               throughout the
                                                                                               proposed Market-
                                                                                               Maker rules.) \5\
                                                                                               Renumbers
                                                                                               provisions
                                                                                               (including adding
                                                                                               Interpretations
                                                                                               and Policies to
                                                                                               the rule text)
                                                                                               and updates cross-
                                                                                               references and
                                                                                               updates language
                                                                                               to read in plain
                                                                                               English.
Rule 8.88 (Review of DPM          Rule 3.53 (DPMs)..  N/A...............  N.................  Renumbers
 Operations and Performance).                                                                  provisions and
                                                                                               updates cross-
                                                                                               references and
                                                                                               headings and
                                                                                               updates language
                                                                                               to read in plain
                                                                                               English.
Rule 8.89 (Transfer of DPM        Rule 3.53 (DPMs)..  N/A...............  N.................  Moves to proposed
 Appointments).                                                                                rule to
                                                                                               consolidate rules
                                                                                               regarding
                                                                                               Exchange
                                                                                               approval,
                                                                                               transfer review,
                                                                                               and termination/
                                                                                               limitation of
                                                                                               status as DPM.
                                                                                               Renumbers
                                                                                               provisions and
                                                                                               updates cross-
                                                                                               references and
                                                                                               headings and
                                                                                               updates language
                                                                                               to read in plain
                                                                                               English. Updates
                                                                                               certain terms to
                                                                                               delineate between
                                                                                               Exchange
                                                                                               designation as a
                                                                                               DPM and DPM
                                                                                               appointment to a
                                                                                               class (makes this
                                                                                               change where
                                                                                               applicable
                                                                                               throughout the
                                                                                               rules).

[[Page 50547]]

 
Rule 8.90 (Termination,           Rule 3.53 (DPMs)..  N/A...............  N.................  Moves to proposed
 Conditioning, or Limiting                                                                     rule to
 Approval to Act as a DPM).                                                                    consolidate rules
                                                                                               regarding
                                                                                               Exchange
                                                                                               approval,
                                                                                               transfer review,
                                                                                               and termination/
                                                                                               limitation of
                                                                                               status as DPM.
                                                                                               Renumbers
                                                                                               provisions and
                                                                                               updates cross-
                                                                                               references and
                                                                                               headings, and
                                                                                               updates language
                                                                                               to read in plain
                                                                                               English.
Rule 24A.9 (FLEX Market-Maker     Rule 3.57 (FLEX     N/A...............  Y: see below for    Moves current Rule
 Appointments and Obligations).    Market-Makers).                         further detail.     24A.9(a) to
                                                                                               proposed rule
                                                                                               Changes current
                                                                                               ``FLEX Qualified
                                                                                               Market-Makers''
                                                                                               to ``FLEX Market-
                                                                                               Makers'' to
                                                                                               harmonize
                                                                                               language under
                                                                                               the Market-Maker
                                                                                               type rules to the
                                                                                               extent possible.
                                                                                               Removes current
                                                                                               Rule 24A.9(b)
                                                                                               regarding FLEX
                                                                                               Appointed Market-
                                                                                               Makers because
                                                                                               the Exchange
                                                                                               currently does
                                                                                               not have any FLEX
                                                                                               Appointed Market-
                                                                                               Makers nor a
                                                                                               participation
                                                                                               entitlement
                                                                                               established. To
                                                                                               the extent the
                                                                                               Exchange
                                                                                               determines in the
                                                                                               future to appoint
                                                                                               FLEX Market-
                                                                                               Makers as FLEX
                                                                                               Appointed Market-
                                                                                               Makers (or
                                                                                               similar role) and
                                                                                               establish a
                                                                                               participation
                                                                                               entitlement, the
                                                                                               Exchange will
                                                                                               submit a separate
                                                                                               rule filing.
----------------------------------------------------------------------------------------------------------------

    The majority of these rules are virtually identical (other than 
renumbering or reorganizing paragraphs, updating cross-references and 
headings, updating language to read in plain English, and making the 
types of non-substantive changes as described above), and are merely 
moving from the current Rulebook to the shell Rulebook. The Exchange 
intends to move the current rules indicated above to proposed Chapter 
3, Section C (TPH Trading Functions) of the shell Rulebook in order to 
consolidate into one location the rules that provide for the 
application, approval, and removal processes for its various Market-
Maker types. As indicated in the table above, the proposed change does 
not substantively alter the Market-Maker registration requirement 
provisions (current Rule 8.1(b) and Rule 8.2) but rather proposes to 
consolidate its current Market-Maker registration provisions into 
proposed Rule 3.52, which conforms its paragraphs and language to 
mirror that of the Affiliated Options Exchanges' corresponding rules 
(to the extent Affiliated Options Exchanges' have corresponding rules).
    The Exchange notes that the proposed Rule 3.52 permits the Exchange 
to impose limits to the number of Trading Permit Holders (``THPs'') 
that may become Market-Makers based on a non-exhaustive list of 
objective factors, including system constraints and capacity 
restrictions. This is consistent with the corresponding rules of the 
Affiliated Options Exchanges.\6\
---------------------------------------------------------------------------

    \6\ See C2 Rule 8.1; EDGX Options Rule 22.2; and BZX Options 
Rule 22.2.
---------------------------------------------------------------------------

    The proposed rule change removes the requirement that, at a 
minimum, the Exchange conduct a review of a DPM's operations or 
performance on an annual basis. This gives the Exchange more 
flexibility regarding when a full review or evaluation is warranted 
given the firm characteristics and infrastructure of DPM firms do not 
tend to change and the Exchange has various surveillances in place 
that, if they were to identify a lapse or failure in a DPM's compliance 
with its obligations, proposed Rule 3.53 allows the Exchange to 
initiate a review of a DPM's operations or performance at any time, as 
it currently may.
    Proposed Rules 3.53 and 3.55 amend language under current Rule 
8.83(g) and 8.15.01(c), respectively, which provide that a class in 
which an Off-Floor DPM and/or Off-Floor LMM has been appointed, the 
Exchange in its discretion may also appoint an On- Floor LMM, and, if 
the Exchange in its discretion determines to reallocate a class in 
which an Off-Floor DPM and/or Off-Floor LMM has been appointed, the On-
Floor LMM appointment will automatically terminate. The proposed rules 
update these rules to remove automatic termination and allow for the 
Exchange to terminate the On-Floor LMM appointment in its discretion 
because the performance of an Off-Floor DPM and/or Off-Floor LMM is not 
connected or indicative of the performance of an On-Floor LMM that may 
be high performing, therefore, automatic termination would be 
unnecessary and disruptive to the On-Floor LMM's appointment and 
obligations.
    The proposed rule change updates the FLEX Market-Maker approval and 
appointment process under proposed Rule 3.57(b). The proposed change 
removes the language in current Rule 24A.9(a) that provides for 
Exchange designation of two or more FLEX Market-Makers to each FLEX 
Index Option of a given class, and two or more FLEX Market-Makers to 
each FLEX Equity Option of a given class. The proposed change removes 
these provisions, as they are no longer necessary in the enhancement 
and maintenance of the Exchange's Market-Maker program or for FLEX 
classes. Instead, proposed Rule3.57(c) updates the language of current 
Rule 24A.9(a) in connection with FLEX appointments and Non-FLEX 
appointments. The current rule conditions a FLEX Market-Maker's 
appointment in a FLEX Index Option class or a FLEX Equity Option class 
on maintaining an appointment in one or more Non-FLEX Index Option 
classes or one or more Non-FLEX Equity Option classes, as applicable. 
Such Non-FLEX Option class appointment(s) need not be in a class(es) 
that has the same underlying index or security as the appointed FLEX 
Option. The proposed change updates the appointment process so that a 
Market-Maker approved for FLEX market-making will automatically receive 
an appointment in the same FLEX options class(es) as its Non-FLEX class 
appointments selected in relation to its general Market-Making 
responsibilities pursuant to proposed Rule 5.50. The proposed rule does 
not alter the obligations of a FLEX Market-Maker, as they will continue 
to be required to maintain an appointment in a Non-FLEX class. The 
proposed rule change simplifies the FLEX appointment process, but will 
continue to provide that each FLEX class will have appointed Market-
Makers to provide liquidity in that class, in addition to all other 
market participants.
    The proposed rule change deletes current Rule 8.83(b) which 
provides that each DPM shall have at least two DPM Designees who are 
nominees of the DPM. The Exchange has determined that for a DPM to 
maintain Trading Permits for two nominees is an unnecessary expense to 
a member organization designated to act as a DPM. Current Rule 3.8 
requires that each member organization have at least one nominee 
(which, upon migration, will be referred to as a ``Responsible Person'' 
for TPH organizations that hold electronic Trading Permits).\7\ The 
Exchange implemented Rule 8.83(b) in 1999 in order to ensure that a DPM 
is responsible for ensuring there is always a nominee available, if, 
for example, a nominee were to depart from the

[[Page 50548]]

organization.\8\ The Exchange notes the infrequency in which a DPM 
necessitated or could not provide for a ``back-up'' DPM over the last 
two decades and, therefore, that the benefit or protection potentially 
provided by this rule is far outweighed by the expense a DPM must incur 
to maintain two nominees. A DPM, like all member organizations, will 
continue to be required to maintain at least one nominee (or 
Responsible Person) and may choose to maintain multiple nominees (or 
Responsible Persons).
---------------------------------------------------------------------------

    \7\ The Exchange will implement a rule change to current Rule 
3.8 in anticipation of migration that will require a designation of 
a nominee only for floor-based Trading Permits. TPH organizations 
that hold electronic permits will be required to designate a 
``Responsible Person'', who must be affiliated with the TPH. The 
Exchange notes that it updates this reference where applicable in 
the proposed rules herein this filing.
    \8\ See Securities and Exchange Act No. 41325 (April 22, 1999), 
64 FR 23691 (May 3, 1999) (Notice of Filing of Proposed Rule Change 
by the Chicago Board Options Exchange, Inc. To Update and Reorganize 
Its Rules Relating to Designated Primary Market-Makers) (SR-CBOE-98-
54).
---------------------------------------------------------------------------

Market-Maker Appointments and Obligations (Proposed Chapter 5, Section 
D)
    The proposed rule change also moves current Chapter 8 rules related 
to Market-Maker appointments to classes and Market-Maker obligations 
from the current Rulebook to Chapter 5, Section D (Market-Maker 
Appointments and Obligations) of the shell Rulebook as follows:
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 51371 (March 15, 
2005), 70 FR 13557 (March 21, 2005) (Notice of Filing of Proposed 
Rule Change by the Chicago Board Options Exchange, Incorporated To 
Amend CBOE Rule 8.4 To Remove the Physical Trading Crowd Appointment 
Alternative for Remote Market-Makers and To Create an ``A+'' Tier 
Consisting of the Two Most Actively-Traded Products on the Exchange) 
(SR-CBOE-2005-23).
    \10\ The Exchange intends to move Interpretation and Policy .01 
and .01(c) to proposed Rule 4.14 of the shell Rulebook at a later 
date in anticipation of migration.
    \11\ The Exchange intends to move Interpretation and Policy .01 
and .01(c) to proposed Rule 4.14 of the shell Rulebook at a later 
date in anticipation of migration.

----------------------------------------------------------------------------------------------------------------
                                                      Corresponding
          Current rule             Proposed rule      other exchange      Substantive      Description of change
                                                           rule              change
----------------------------------------------------------------------------------------------------------------
Rule 8.3 (Appointment of Market- Rule 5.50 (Market- C2 Rule 8.2, EDGX  Y: see below for   Conforms to the
 Makers).                         Maker              Options Rule       further detail.    Affiliated Options
                                  Appointments).     22.3, BZX                             Exchanges'
                                                     Options Rule                          corresponding rules
                                                     22.3.                                 regarding
                                                                                           appointments to the
                                                                                           extent necessary to
                                                                                           adhere to existing
                                                                                           Exchange rule text,
                                                                                           maintain provisions
                                                                                           specific to Cboe
                                                                                           Options, and to
                                                                                           account for details/
                                                                                           descriptions included
                                                                                           in the Exchange's
                                                                                           Rules but not in the
                                                                                           applicable Affiliated
                                                                                           Options Exchanges'
                                                                                           rules. Incorporates
                                                                                           GTH appointment
                                                                                           costs. Removes
                                                                                           provisions in
                                                                                           connection with
                                                                                           Trading Permits as
                                                                                           they relate to
                                                                                           appointment costs,
                                                                                           which is consistent
                                                                                           with the fee schedule
                                                                                           and Exchange
                                                                                           functionality to be
                                                                                           implemented upon
                                                                                           migration. Deletes
                                                                                           obsolete provisions
                                                                                           and language
                                                                                           regarding Exchange-
                                                                                           appointed classes as
                                                                                           the Exchange does not
                                                                                           currently appoint and
                                                                                           Market-Makers already
                                                                                           choose appointments.
                                                                                           Removes current
                                                                                           language that refers
                                                                                           to the creation of
                                                                                           Virtual Trading
                                                                                           Crowds (``VTCs'') The
                                                                                           Exchange previously
                                                                                           maintained two
                                                                                           different assignment
                                                                                           types for appointment
                                                                                           costs, VTC and
                                                                                           Physical Trading
                                                                                           Crowd (``PTC'') \9\
                                                                                           and PTC appointments
                                                                                           have long been
                                                                                           eliminated,
                                                                                           therefore, there is
                                                                                           no longer a need to
                                                                                           discern VTC
                                                                                           appointments; all
                                                                                           appointments assign
                                                                                           appointment costs in
                                                                                           the same manner.
                                                                                           Deletes language that
                                                                                           allows the Exchange
                                                                                           to group classes and
                                                                                           make appointments to
                                                                                           those groupings
                                                                                           because the Exchange
                                                                                           does not invoke these
                                                                                           provisions and Market-
                                                                                           Makers already select
                                                                                           their own
                                                                                           appointments. Deletes
                                                                                           redundant language
                                                                                           and provisions
                                                                                           proposed or currently
                                                                                           elsewhere in the
                                                                                           rules, updates cross-
                                                                                           references, paragraph
                                                                                           numbering, headings,
                                                                                           and language to read
                                                                                           in plain English.
Rule 6.1A (Global Trading
 Hours), paragraph (e)
 (Appointments).
Rule 8.7 (Obligations of Market- Rule 5.51 (Market- C2 Rule 8.5, EDGX  N................  Moves current Rule
 Makers).                         Maker              Options Rule                          8.7(a) and (b) and
                                  Obligations).      22.5, BZX                             Interpretation and
                                                     Options Rule                          Policy .09 to
                                                     22.5.                                 proposed rule and
                                                                                           conforms to the
                                                                                           Affiliated Options
                                                                                           Exchanges' rules to
                                                                                           the extent necessary
                                                                                           to adhere to existing
                                                                                           Exchange rule text,
                                                                                           maintain provisions
                                                                                           specific to Cboe
                                                                                           Options rules, and to
                                                                                           account for details/
                                                                                           descriptions included
                                                                                           in the Exchange's
                                                                                           Rules but not in the
                                                                                           applicable rules of
                                                                                           the Affiliated
                                                                                           Options Exchanges.
                                                                                           Removes provisions
                                                                                           redundant of and/or
                                                                                           already encompassed
                                                                                           by a Market-Maker's
                                                                                           obligation to engage
                                                                                           in dealing to
                                                                                           maintain fair and
                                                                                           orderly markets.
                                                                                           Proposed Rule
                                                                                           5.51(e), which
                                                                                           provides that if the
                                                                                           Exchange finds any
                                                                                           substantial or
                                                                                           continued failure by
                                                                                           a Market-Maker to
                                                                                           engage in a course of
                                                                                           dealings, the Market-
                                                                                           Maker will be subject
                                                                                           to disciplinary
                                                                                           action or suspension
                                                                                           or revocation of its
                                                                                           registration or its
                                                                                           appointment(s), is
                                                                                           based on and
                                                                                           consistent with the
                                                                                           Affiliated Exchanges'
                                                                                           rules, as well as the
                                                                                           Exchange's current
                                                                                           authority to take
                                                                                           disciplinary action
                                                                                           for Market-Maker
                                                                                           failure to meet its
                                                                                           Market-Maker
                                                                                           obligations (e.g.
                                                                                           continuous quoting
                                                                                           requirements).
Rule 8.7 (Obligations of Market- Rule 5.52 (Market- C2 Rule 8.6, EDGX  Y: see below for   Moves current Rule
 Makers).                         Maker Quotes).     Options Rule       further details.   8.7(c) and (d), as
                                                     22.6, BZX                             well as
                                                     Options Rule                          Interpretations and
                                                     22.6.                                 Policies .03, .05,
                                                                                           .06, .09, .10, and
                                                                                           .11 to proposed rule.
                                                                                           Conforms proposed
                                                                                           quoting obligation
                                                                                           provisions to
                                                                                           Affiliated Options
                                                                                           Exchanges' quoting
                                                                                           obligation rules
                                                                                           (including for GTH)
                                                                                           to the extent
                                                                                           necessary to adhere
                                                                                           to existing Exchange
                                                                                           rule text, maintains
                                                                                           provisions specific
                                                                                           to the Exchange and
                                                                                           to account for
                                                                                           details/descriptions
                                                                                           included in the
                                                                                           Exchange's Rules but
                                                                                           not in the applicable
                                                                                           Affiliated Options
                                                                                           Exchanges' rules.
                                                                                           Moves the definition
                                                                                           of ``continuous
                                                                                           quoting obligations''
                                                                                           from current Rule 1.1
                                                                                           for consistency and
                                                                                           consolidation; this
                                                                                           includes the current
                                                                                           two-sided quote
                                                                                           requirement language
                                                                                           which is incorporated
                                                                                           into proposed Rule
                                                                                           5.52(c). Deletes Rule
                                                                                           6.1A(e)(iv), as this
                                                                                           was related separate
                                                                                           trading session
                                                                                           appointments and
                                                                                           Hybrid classes,
                                                                                           neither will be
                                                                                           applicable upon
                                                                                           migration. Proposed
                                                                                           rule does not
                                                                                           substantively alter
                                                                                           current obligations
                                                                                           but rather removes
                                                                                           redundancies and
                                                                                           makes the quoting
                                                                                           obligation rules
                                                                                           easier to follow by
                                                                                           consolidating current
                                                                                           provisions and
                                                                                           streamlining language
                                                                                           (which includes
                                                                                           removing the lengthy
                                                                                           and potentially
                                                                                           confusing examples
                                                                                           under current
                                                                                           8.7(d)(iii); the
                                                                                           Exchange instead
                                                                                           currently
                                                                                           disseminates notices
                                                                                           with such examples,
                                                                                           explanations, answers
                                                                                           to FAQ, and Exchange
                                                                                           contact information).
                                                                                           Deletes obsolete and
                                                                                           redundant language/
                                                                                           provisions, updates
                                                                                           cross-references,
                                                                                           paragraph lettering,
                                                                                           headings, and
                                                                                           language to read in
                                                                                           plain English.
Rule 1.1 (definition of
 ``continuous quoting
 obligations'').
Rule 6.1A (Global Trading
 Hours), paragraph (e)(iv).
N/A............................  Rule 5.53 (Good-   C2 Rule 8.4, EDGX  Y: see below for   Proposed rule conforms
                                  Standing for       Options Rule       further details.   to Market-Maker good
                                  Market-Makers).    22.4, BZX                             standing rules of the
                                                     Options Rule                          Affiliated Options
                                                     22.4.                                 Exchanges.

[[Page 50549]]

 
Rule 8.13 (Preferred Market-     Rule 5.56 (PMMs).  C2 Rule 8.6, EDGX  Y: update of the   Moves current 8.13(b)-
 Makers).                                            Options 22.6,      time-to-           (d) and
                                                     BZX Options 22.6.  expiration         Interpretations and
                                                                        language for       Policies .01(a)
                                                                        certain series     through .04 to
                                                                        excluded is the    proposed rule.
                                                                        only substantive   Codifies that PMM
                                                                        change made;       obligations are
                                                                        described below.   applicable only
                                                                                           during Regular
                                                                                           Trading Hours, which
                                                                                           is currently the
                                                                                           manner in which they
                                                                                           apply. Updates the
                                                                                           language in current
                                                                                           Rule 8.13 to clarify
                                                                                           that receipt of PMM
                                                                                           orders is the point
                                                                                           in time when a PMM
                                                                                           receives an
                                                                                           entitlement (i.e.
                                                                                           after being preferred
                                                                                           on an order), this is
                                                                                           currently that manner
                                                                                           in which receipt
                                                                                           functions. Conforms
                                                                                           time-to-expiration-
                                                                                           language for series
                                                                                           excluded to the
                                                                                           Affiliated Options
                                                                                           time-to-expiration
                                                                                           (i.e. from 9 months
                                                                                           to 270 days).
                                                                                           Renumbers provisions,
                                                                                           changes headings, and
                                                                                           updates cross-
                                                                                           references and
                                                                                           language to read in
                                                                                           plain English.
Rule 8.14 (Hybrid Trading        Rule 5.50 (Market- Consistent with    Y: see below for   Moves current Rule
 System Platforms & Market-       Maker              EDGX Options       further details.   8.14 to proposed
 Maker Participants).             Appointments)      Rule 22.2(c) *.                       paragraph (l).\10\
                                  paragraph (l).                                           Removes current Rule
                                                                                           8.14(a) as it is no
                                                                                           longer necessary
                                                                                           because all classes
                                                                                           now trade on the
                                                                                           System (Hybrid
                                                                                           Trading System).
                                                                                           Removes conditions in
                                                                                           current paragraph (b)
                                                                                           for Exchange
                                                                                           designation of
                                                                                           classes without a DPM/
                                                                                           LMM and updates rule
                                                                                           language to reflect
                                                                                           this change.
Rule 8.15 (Lead Market-Makers).  Rule 5.55 (LMMs).  N/A..............  N................  Moves current 8.15(b)-
                                                                                           (d) and
                                                                                           Interpretations and
                                                                                           Policies .02--.04 to
                                                                                           proposed rule,
                                                                                           deletes certain
                                                                                           provisions redundant
                                                                                           of Market-Maker
                                                                                           obligations under
                                                                                           proposed Rule 5.52
                                                                                           (current Rule 8.7, to
                                                                                           which a LMM must
                                                                                           already comply).
                                                                                           Codifies that LMM
                                                                                           obligations are
                                                                                           applicable only
                                                                                           during Regular
                                                                                           Trading Hours, which
                                                                                           is the current manner
                                                                                           in which LMM
                                                                                           obligations already
                                                                                           apply. Renumbers
                                                                                           provisions and
                                                                                           updates cross-
                                                                                           references and
                                                                                           headings, and
                                                                                           language to read in
                                                                                           plain English. Moves
                                                                                           current Rule
                                                                                           6.1A(iii)(B) to Rule
                                                                                           6.1A to proposed
                                                                                           5.55(b).
Rule 6.1A (Global Trading
 Hours), paragraph (iii)(B).
Rule 8.84 (Conditions on the     Rule 5.50 (Market- N/A..............  N................  Moves current rule to
 Allocations of Securities to     Maker                                                    proposed 5.50(k),
 DPMs).                           Appointments).                                           Interpretation and
                                                                                           Policy .02 to
                                                                                           5.50(i)(5), and
                                                                                           deletes current
                                                                                           Interpretation and
                                                                                           Policy .01(b) because
                                                                                           it is redundant of an
                                                                                           existing provision in
                                                                                           current Rule 8.95
                                                                                           with which current
                                                                                           Rule 8.84 is being
                                                                                           consolidated with in
                                                                                           proposed Rule 5.50.
                                                                                           Renumbers provisions
                                                                                           and updates cross-
                                                                                           references and
                                                                                           headings, and
                                                                                           language to read in
                                                                                           plain English.
Rule 8.85 DPM Obligations......  Rule 5.54 (DPMs).  N/A..............  Y: see below for   Moves current rule,
                                                                        further details.   including
                                                                                           Interpretations and
                                                                                           Policies, to proposed
                                                                                           rule. Codifies that
                                                                                           DPM obligations are
                                                                                           applicable only
                                                                                           during Regular
                                                                                           Trading Hours, which
                                                                                           is the current manner
                                                                                           in which DPM
                                                                                           obligations already
                                                                                           apply. Removes
                                                                                           segregation of
                                                                                           account requirements
                                                                                           for DPM-related
                                                                                           transactions. Deletes
                                                                                           current 8.85(a)(ii)
                                                                                           which states
                                                                                           obligations redundant
                                                                                           of those in
                                                                                           8.85(a)(i). Deletes
                                                                                           Rule 8.85(a)(iii)
                                                                                           which is redundant of
                                                                                           Market-Maker
                                                                                           obligations under
                                                                                           proposed rule 5.52
                                                                                           (current Rule 8.7, to
                                                                                           which a DPM must
                                                                                           already comply).
                                                                                           Changes ``Exchange
                                                                                           committee to
                                                                                           ``Exchange'' as the
                                                                                           Exchange, rather than
                                                                                           a specific committee,
                                                                                           requires DPM
                                                                                           Designees. Renumbers
                                                                                           provisions and
                                                                                           updates cross-
                                                                                           references and
                                                                                           headings and language
                                                                                           to read in plain
                                                                                           English
Rule 8.95 (Allocation of         Rule 5.50 (Market- N/A..............  N................  Deletes Interpretation
 Securities and Location of       Maker                                                    and Policy .04 which
 Trading Crowds and DPMs).        Appointments).                                           would be redundant of
                                                                                           Rule 8.84, also being
                                                                                           consolidated into
                                                                                           proposed Rule 5.50.
                                                                                           Deletes current
                                                                                           8.95(j) and
                                                                                           Interpretation and
                                                                                           Policy .03, which is
                                                                                           obsolete as it refers
                                                                                           to classes open for
                                                                                           trading prior to
                                                                                           1987. Renumbers
                                                                                           provisions and
                                                                                           updates headings and
                                                                                           cross-references and
                                                                                           language to read in
                                                                                           plain English.
Rule 21.19 (Obligations of       N/A..............  C2 Rule 8.6, EDGX  N................  Deletes current rule
 Market-Makers (Treasury Bonds                       Options Rule                          (which covers bid/ask
 and Notes)).                                        22.6, BZX                             requirements for
                                                     Options Rule                          government
                                                     22.6.                                 securities) to align
                                                                                           with proposed no bid/
                                                                                           ask requirement,
                                                                                           which is consistent
                                                                                           with the Affiliated
                                                                                           Options Exchanges. In
                                                                                           addition, the
                                                                                           Exchange delisted
                                                                                           government securities
                                                                                           in 2011, therefore,
                                                                                           Market-Maker
                                                                                           obligations in such
                                                                                           classes are no longer
                                                                                           relevant.
Rule 22.14 (Maximum Bid-Ask      N/A..............  N/A..............  N................  Deletes current rule
 Differentials; Market-Maker                                                               (which covers bid/ask
 Appointments & Obligations).                                                              requirements for
                                                                                           binary options) to
                                                                                           align with proposed
                                                                                           no bid/ask
                                                                                           requirement, which is
                                                                                           consistent with the
                                                                                           Affiliated Options
                                                                                           Exchanges. In
                                                                                           addition, the
                                                                                           Exchange delisted
                                                                                           binary options in
                                                                                           2015, therefore,
                                                                                           Market-Maker
                                                                                           obligations in such
                                                                                           classes are no longer
                                                                                           relevant.
29.17 (Market-Maker              N/A..............  N/A..............  N................  Deletes current rule,
 Appointments & Obligations).                                                              which provides for
                                                                                           certain Market-Making
                                                                                           obligations in
                                                                                           relation to Credit
                                                                                           Option classes as the
                                                                                           Exchange delisted
                                                                                           Credit Options in
                                                                                           2014, therefore, this
                                                                                           provision is no
                                                                                           longer relevant to
                                                                                           the current or
                                                                                           proposed Market-Maker
                                                                                           program.
Rule 24A.9 (FLEX Market-Maker    Rule 5.57 (FLEX    N/A..............  N................  Moves current Rule
 Appointments and Obligations).   Market-Makers).                                          21A.9(d) and (e) to
                                                                                           proposed rule.
                                                                                           Removes current Rule
                                                                                           21A.9(c) regarding
                                                                                           FLEX Appointed Market-
                                                                                           Maker obligations
                                                                                           because the Exchange
                                                                                           currently does not
                                                                                           have any FLEX
                                                                                           Appointed Market-
                                                                                           Makers. To the extent
                                                                                           the Exchange
                                                                                           determines in the
                                                                                           future to have FLEX
                                                                                           Appointed Market-
                                                                                           Makers in place, the
                                                                                           Exchange will submit
                                                                                           a separate rule
                                                                                           filing. Updates cross-
                                                                                           references, heading,
                                                                                           and language to read
                                                                                           in plain English.
Rule 8.7 (Obligations of Market- Rule 5.51 (Market- C2 Rule 8.5, EDGX  N................  Moves current Rule
 Makers).                         Maker              Options Rule                          8.7(a) and (b) and
                                  Obligations).      22.5, BZX                             Interpretation and
                                                     Options Rule                          Policy .09 to
                                                     22.5.                                 proposed rule and
                                                                                           conforms to the
                                                                                           Affiliated Options
                                                                                           Exchanges' rules to
                                                                                           the extent necessary
                                                                                           to adhere to existing
                                                                                           Exchange rule text,
                                                                                           maintain provisions
                                                                                           specific to Cboe
                                                                                           Options rules, and to
                                                                                           account for details/
                                                                                           descriptions included
                                                                                           in the Exchange's
                                                                                           Rules but not in the
                                                                                           applicable rules of
                                                                                           the Affiliated
                                                                                           Options Exchanges.
                                                                                           Removes provisions
                                                                                           redundant of and/or
                                                                                           already encompassed
                                                                                           by a Market-Maker's
                                                                                           obligation to engage
                                                                                           in dealing to
                                                                                           maintain fair and
                                                                                           orderly markets.
                                                                                           Proposed Rule
                                                                                           5.51(e), which
                                                                                           provides that if the
                                                                                           Exchange finds any
                                                                                           substantial or
                                                                                           continued failure by
                                                                                           a Market-Maker to
                                                                                           engage in a course of
                                                                                           dealings, the Market-
                                                                                           Maker will be subject
                                                                                           to disciplinary
                                                                                           action or suspension
                                                                                           or revocation of its
                                                                                           registration or its
                                                                                           appointment(s), is
                                                                                           based on and
                                                                                           consistent with the
                                                                                           Affiliated Exchanges'
                                                                                           rules, as well as the
                                                                                           Exchange's current
                                                                                           authority to take
                                                                                           disciplinary action
                                                                                           for Market-Maker
                                                                                           failure to meet its
                                                                                           Market-Maker
                                                                                           obligations (e.g.
                                                                                           continuous quoting
                                                                                           requirements).

[[Page 50550]]

 
Rule 8.7 (Obligations of Market- Rule 5.52 (Market- C2 Rule 8.6, EDGX  Y: see below for   Moves current Rule
 Makers).                         Maker Quotes).     Options Rule       further details.   8.7(c) and (d), as
                                                     22.6, BZX                             well as
                                                     Options Rule                          Interpretations and
                                                     22.6.                                 Policies .03, .05,
                                                                                           .06, .09, .10, and
                                                                                           .11 to proposed rule.
                                                                                           Conforms proposed
                                                                                           quoting obligation
                                                                                           provisions to
                                                                                           Affiliated Options
                                                                                           Exchanges' quoting
                                                                                           obligation rules
                                                                                           (including for GTH)
                                                                                           to the extent
                                                                                           necessary to adhere
                                                                                           to existing Exchange
                                                                                           rule text, maintains
                                                                                           provisions specific
                                                                                           to the Exchange and
                                                                                           to account for
                                                                                           details/descriptions
                                                                                           included in the
                                                                                           Exchange's Rules but
                                                                                           not in the applicable
                                                                                           the Affiliated
                                                                                           Options Exchanges'
                                                                                           rules. Moves the
                                                                                           definition of
                                                                                           ``continuous quoting
                                                                                           obligations'' from
                                                                                           current Rule 1.1 for
                                                                                           consistency and
                                                                                           consolidation; this
                                                                                           includes the current
                                                                                           two-sided quote
                                                                                           requirement language
                                                                                           which is incorporated
                                                                                           into proposed Rule
                                                                                           5.52(c). Deletes Rule
                                                                                           6.1A(e)(iv), as this
                                                                                           was related separate
                                                                                           trading session
                                                                                           appointments and
                                                                                           Hybrid classes,
                                                                                           neither will be
                                                                                           applicable upon
                                                                                           migration. Proposed
                                                                                           rule does not
                                                                                           substantively alter
                                                                                           current obligations
                                                                                           but rather removes
                                                                                           redundancies and
                                                                                           makes the quoting
                                                                                           obligation rules
                                                                                           easier to follow by
                                                                                           consolidating current
                                                                                           provisions and
                                                                                           streamlining language
                                                                                           (which includes
                                                                                           removing the lengthy
                                                                                           and potentially
                                                                                           confusing examples
                                                                                           under current
                                                                                           8.7(d)(iii); the
                                                                                           Exchange instead
                                                                                           currently
                                                                                           disseminates notices
                                                                                           with such examples,
                                                                                           explanations, answers
                                                                                           to FAQ, and Exchange
                                                                                           contact information).
                                                                                           Deletes obsolete and
                                                                                           redundant language/
                                                                                           provisions, updates
                                                                                           cross-references,
                                                                                           paragraph lettering,
                                                                                           headings, and
                                                                                           language to read in
                                                                                           plain English.
Rule 1.1 (definition of
 ``continuous quoting
 obligations'').
Rule 6.1A (Global Trading
 Hours), paragraph (e)(iv).
N/A............................  Rule 5.53 (Good-   C2 Rule 8.4, EDGX  Y: see below for   Proposed rule conforms
                                  Standing for       Options Rule       further details.   to Market-Maker good
                                  Market-Makers).    22.4, BZX                             standing rules of the
                                                     Options Rule                          Affiliated Options
                                                     22.4.                                 Exchanges.
Rule 8.13 (Preferred Market-     Rule 5.56 (PMMs).  C2 Rule 8.6, EDGX  Y: update of the   Moves current 8.13(b)-
 Makers).                                            Options 22.6,      time-to-           (d) and
                                                     BZX Options 22.6.  expiration         Interpretations and
                                                                        language for       Policies .01(a)
                                                                        certain series     through .04 to
                                                                        excluded is the    proposed rule.
                                                                        only substantive   Codifies that PMM
                                                                        change made;       obligations are
                                                                        described below..  applicable only
                                                                                           during Regular
                                                                                           Trading Hours, which
                                                                                           is currently the
                                                                                           manner in which they
                                                                                           apply. Updates the
                                                                                           language in current
                                                                                           Rule 8.13 to clarify
                                                                                           that receipt of PMM
                                                                                           orders is the point
                                                                                           in time when a PMM
                                                                                           receives an
                                                                                           entitlement (i.e.
                                                                                           after being preferred
                                                                                           on an order), this is
                                                                                           currently that manner
                                                                                           in which receipt
                                                                                           functions. Conforms
                                                                                           time-to-expiration-
                                                                                           language for series
                                                                                           excluded to the
                                                                                           Affiliated Options
                                                                                           time-to-expiration
                                                                                           (i.e. from 9 months
                                                                                           to 270 days).
                                                                                           Renumbers provisions,
                                                                                           changes headings, and
                                                                                           updates cross-
                                                                                           references and
                                                                                           language to read in
                                                                                           plain English.
Rule 8.14 (Hybrid Trading        Rule 5.50 (Market- Consistent with    Y: see below for   Moves current Rule
 System Platforms & Market-       Maker              EDGX Options       further details.   8.14 to proposed
 Maker Participants).             Appointments)      Rule 22.2(c) *.                       paragraph (l).\11\
                                  paragraph (l).                                           Removes current Rule
                                                                                           8.14(a) as it is no
                                                                                           longer necessary
                                                                                           because all classes
                                                                                           now trade on the
                                                                                           System (Hybrid
                                                                                           Trading System).
                                                                                           Removes conditions in
                                                                                           current paragraph (b)
                                                                                           for Exchange
                                                                                           designation of
                                                                                           classes without a DPM/
                                                                                           LMM and updates rule
                                                                                           language to reflect
                                                                                           this change.
Rule 8.15 (Lead Market-Makers).  Rule 5.55 (LMMs).  N/A..............  N................  Moves current 8.15(b)-
                                                                                           (d) and
                                                                                           Interpretations and
                                                                                           Policies .02--.04 to
                                                                                           proposed rule,
                                                                                           deletes certain
                                                                                           provisions redundant
                                                                                           of Market-Maker
                                                                                           obligations under
                                                                                           proposed Rule 5.52
                                                                                           (current Rule 8.7, to
                                                                                           which a LMM must
                                                                                           already
                                                                                           comply).Codifies that
                                                                                           LMM obligations are
                                                                                           applicable only
                                                                                           during Regular
                                                                                           Trading Hours, which
                                                                                           is the current manner
                                                                                           in which LMM
                                                                                           obligations already
                                                                                           apply. Renumbers
                                                                                           provisions and
                                                                                           updates cross-
                                                                                           references and
                                                                                           headings, and
                                                                                           language to read in
                                                                                           plain English. Moves
                                                                                           current Rule
                                                                                           6.1A(iii)(B) to Rule
                                                                                           6.1A to proposed
                                                                                           5.55(b).
Rule 6.1A (Global Trading
 Hours), paragraph (iii)(B).
Rule 8.84 (Conditions on the     Rule 5.50 (Market- N/A..............  N................  Moves current rule to
 Allocations of Securities to     Maker                                                    proposed 5.50(k),
 DPMs).                           Appointments).                                           Interpretation and
                                                                                           Policy .02 to
                                                                                           5.50(i)(5), and
                                                                                           deletes current
                                                                                           Interpretation and
                                                                                           Policy .01(b) because
                                                                                           it is redundant of an
                                                                                           existing provision in
                                                                                           current Rule 8.95
                                                                                           with which current
                                                                                           Rule 8.84 is being
                                                                                           consolidated with in
                                                                                           proposed Rule 5.50.
                                                                                           Renumbers provisions
                                                                                           and updates cross-
                                                                                           references and
                                                                                           headings, and
                                                                                           language to read in
                                                                                           plain English.
Rule 8.85 DPM Obligations......  Rule 5.54 (DPMs).  N/A..............  Y: see below for   Moves current rule,
                                                                        further details.   including
                                                                                           Interpretations and
                                                                                           Policies, to proposed
                                                                                           rule. Codifies that
                                                                                           DPM obligations are
                                                                                           applicable only
                                                                                           during Regular
                                                                                           Trading Hours, which
                                                                                           is the current manner
                                                                                           in which DPM
                                                                                           obligations already
                                                                                           apply. Removes
                                                                                           segregation of
                                                                                           account requirements
                                                                                           for DPM-related
                                                                                           transactions. Deletes
                                                                                           current 8.85(a)(ii)
                                                                                           which states
                                                                                           obligations redundant
                                                                                           of those in
                                                                                           8.85(a)(i). Deletes
                                                                                           Rule 8.85(a)(iii)
                                                                                           which is redundant of
                                                                                           Market-Maker
                                                                                           obligations under
                                                                                           proposed rule 5.52
                                                                                           (current Rule 8.7, to
                                                                                           which a DPM must
                                                                                           already comply).
                                                                                           Changes ``Exchange
                                                                                           committee to
                                                                                           ``Exchange'' as the
                                                                                           Exchange, rather than
                                                                                           a specific committee,
                                                                                           requires DPM
                                                                                           Designees. Renumbers
                                                                                           provisions and
                                                                                           updates cross-
                                                                                           references and
                                                                                           headings and language
                                                                                           to read in plain
                                                                                           English
Rule 8.95 (Allocation of         Rule 5.50 (Market- N/A..............  N................  Deletes Interpretation
 Securities and Location of       Maker                                                    and Policy .04 which
 Trading Crowds and DPMs).        Appointments).                                           would be redundant of
                                                                                           Rule 8.84, also being
                                                                                           consolidated into
                                                                                           proposed Rule 5.50.
                                                                                           Deletes current
                                                                                           8.95(j) and
                                                                                           Interpretation and
                                                                                           Policy .03, which is
                                                                                           obsolete as it refers
                                                                                           to classes open for
                                                                                           trading prior to
                                                                                           1987. Renumbers
                                                                                           provisions and
                                                                                           updates headings and
                                                                                           cross-references and
                                                                                           language to read in
                                                                                           plain English.
Rule 21.19 (Obligations of       N/A..............  C2 Rule 8.6, EDGX  N................  Deletes current rule
 Market-Makers (Treasury Bonds                       Options Rule                          (which covers bid/ask
 and Notes)).                                        22.6, BZX                             requirements for
                                                     Options Rule                          government
                                                     22.6.                                 securities) to align
                                                                                           with proposed no bid/
                                                                                           ask requirement,
                                                                                           which is consistent
                                                                                           with the Affiliated
                                                                                           Options Exchanges. In
                                                                                           addition, the
                                                                                           Exchange delisted
                                                                                           government securities
                                                                                           in 2011, therefore,
                                                                                           Market-Maker
                                                                                           obligations in such
                                                                                           classes are no longer
                                                                                           relevant.
Rule 22.14 (Maximum Bid-Ask      N/A..............  N/A..............  N................  Deletes current rule
 Differentials; Market-Maker                                                               (which covers bid/ask
 Appointments & Obligations).                                                              requirements for
                                                                                           binary options) to
                                                                                           align with proposed
                                                                                           no bid/ask
                                                                                           requirement, which is
                                                                                           consistent with the
                                                                                           Affiliated Options
                                                                                           Exchanges. In
                                                                                           addition, the
                                                                                           Exchange delisted
                                                                                           binary options in
                                                                                           2015, therefore,
                                                                                           Market-Maker
                                                                                           obligations in such
                                                                                           classes are no longer
                                                                                           relevant.
29.17 (Market-Maker              N/A..............  N/A..............  N................  Deletes current rule,
 Appointments & Obligations).                                                              which provides for
                                                                                           certain Market-Making
                                                                                           obligations in
                                                                                           relation to Credit
                                                                                           Option classes as the
                                                                                           Exchange delisted
                                                                                           Credit Options in
                                                                                           2014, therefore, this
                                                                                           provision is no
                                                                                           longer relevant to
                                                                                           the current or
                                                                                           proposed Market-Maker
                                                                                           program.

[[Page 50551]]

 
Rule 24A.9 (FLEX Market-Maker    Rule 5.57 (FLEX    N/A..............  N................  Moves current Rule
 Appointments and Obligations).   Market-Makers).                                          21A.9(d) and (e) to
                                                                                           proposed rule.
                                                                                           Removes current Rule
                                                                                           21A.9(c) regarding
                                                                                           FLEX Appointed Market-
                                                                                           Maker obligations
                                                                                           because the Exchange
                                                                                           currently does not
                                                                                           have any FLEX
                                                                                           Appointed Market-
                                                                                           Makers. To the extent
                                                                                           the Exchange
                                                                                           determines in the
                                                                                           future to have FLEX
                                                                                           Appointed Market-
                                                                                           Makers in place, the
                                                                                           Exchange will submit
                                                                                           a separate rule
                                                                                           filing. Updates cross-
                                                                                           references, heading,
                                                                                           and language to read
                                                                                           in plain English.
----------------------------------------------------------------------------------------------------------------

    As indicated above, many of the proposed rules are virtually 
identical (other than updating the rule text to plain English, updating 
cross-references, revising headings renumbering provisions, and, where 
applicable, deleting duplicative provisions as a result of 
consolidation, and making other types of non-substantive changes 
described above) and are merely moving from the current Rulebook to the 
shell Rulebook.
Proposed Rule 5.50 (Market-Maker Appointments)
    Proposed Rule 5.50 consolidates rules under current Chapter 8 in 
connection with class appointments, which includes appointment costs 
and class appointments to DPMs and Trading Crowds. Below describes in 
more detail the substantive changes proposed:
    Proposed Rule 5.50(a) provides that a registered Market-Maker may 
select class appointments to make markets in those classes during all 
trading sessions, i.e. Regular Trading Hours (``RTH'') \12\ and Global 
Trading Hours (``GTH'') \13\. Particularly, this proposed change 
removes current language, which provides that a Market-Maker may select 
class appointments in one or more trading sessions in order to 
harmonize its rules and processes with the Affiliate Options Exchanges, 
which allow for a Market-Maker selected class appointment that apply to 
classes during all trading sessions.\14\ In other words, if a Market-
Maker selects an appointment in Cboe Volatility Index (``VIX'') 
options, which series are open for trading during GTH and RTH, that 
appointment would apply during both trading sessions (and thus, the 
Market-Maker would have an appointment to make markets in VIX during 
both GTH and RTH). As a result, a Market-Maker continuous quoting 
obligations set forth in proposed Rule 5.52(d) (current Rule 8.7(d)) 
would apply to the class for an entire trading day. A Market-Maker with 
appointments in either GTH or RTH is required to provide continuous 
quotes in at least 60% of the series \15\ for 90% of the time it is 
quoting in those classes.\16\ The Exchange notes that a Market-Maker's 
continuous obligations will continue to function in this manner, 
therefore, the extension of obligations to appointed classes to trading 
sessions will have a de minimis, if any, impact on a Market-Maker's 
continuous quoting obligations, as they may continue to choose when to 
actively quote and have their obligations to their appointed classes 
apply.
---------------------------------------------------------------------------

    \12\ From 8.30 a.m. CT to 3:15 p.m. CT.
    \13\ From 2:00 a.m. CT to 8:15 a.m. CT.
    \14\ See C2 Rule 8.2; EDGX Options Rule 22.3; and BZX Options 
Rule 22.3. The Exchange notes that GTH session on the Affiliated 
Options Exchanges occurs from 7:30 a.m. CT to 8:15 a.m. CT.
    \15\ Proposed Rule 5.52(d) (current Rule 8.7(d).
    \16\ Proposed Rule 5.52(d) (current Rule 1.1).
---------------------------------------------------------------------------

    Proposed 5.50(b) states that a Market-Maker may enter an 
appointment request via an Exchange-approved electronic interface with 
the Exchange's systems by 2:30 a.m.\17\ for ``All Sessions'' \18\ 
classes, that is an option class the Exchange lists for trading during 
both GTH and RTH., which appointment becomes effective on the open of 
the Global Trading session, or by 9:00 a.m. for classes traded during 
Regular Trading Hours, which appointment becomes effective on the open 
of the Regular Trading session. Market-Makers already request 
appointments via an Exchange-approved electronic interface, therefore 
this proposed rule merely codifies the existing request process.\19\ 
This is consistent with the corresponding rules of the Affiliated 
Options Exchanges,\20\ but is amended to provide Market-Makers with 
flexibility regarding appointments between its two trading sessions, 
which are different in scope than those of the Affiliate Options 
Exchanges.
---------------------------------------------------------------------------

    \17\ All times are Eastern Time pursuant to Rule 1.6 in shell 
Rulebook.
    \18\ See Rule 1.1 in the shell Rulebook.
    \19\ See Cboe Release No. C2019071600 (2019), available at 
http://cdn.cboe.com/resources/release_notes/2019/Quarterly-Rebalance-of-Option-Class-Tiers-and-Online-Appointment-System-Q2-2019.pdf
    \20\ See C2 Rule 8.2; EDGX Options Rule 22.3; and BZX Options 
Rule 22.3.
---------------------------------------------------------------------------

    The proposed rule change (proposed Rule 5.50(g)(1)) also deletes 
language in current Rule 8.3(c)(iv) that allows for only 1.0 
appointment cost and one tier appointment per Trading Permit, as well 
as rule language relevant to this limitation. In anticipation of 
migration, the Exchange intends to update and simplify its fee 
schedule, and a Market-Maker firm will need only one Market-Making 
Trading Permit, regardless of the number of classes in which it chooses 
to have appointments.\21\ Upon migration, a Market-Maker firm will only 
be required to have one permit and will be charged for one or more 
``Appointment Units'' (which will scale from 1 ``unit'' to more than 5 
``units''), depending on which classes they elect appointments. 
Appointment Units will replace the standard 1.0 appointment cost, but 
function in the same manner. Appointment weights (which, in the 
proposed rule, replaces the term ``appointment costs'', but these terms 
are equivalent) for each appointed class will be summed for each 
Market-Maker in order to determine the total appointment units, to 
which fees will be assessed. This is the current manner in which the 
tier costs per class appointment are summed to meet the 1.0 appointment 
cost, the only difference will be that if a Market-Maker exceeds this 
``unit'' then their fees will be assessed under the ``unit'' that 
corresponds to the total of their appointment weights, as opposed to 
holding another Trading Permit because it exceeded the 1.0 ``unit''. 
The proposed rule also updates some of the appointment costs (and 
updates this term to reflect ``appointment weights'' in line with the 
fees schedule for migration) in order to align with the rebalanced 
Appointment Units upon migration. The proposed change is intended to 
provide for a more straightforward and efficient administration of the 
appointment unit process as it will remove the more burdensome process 
in obtaining Trading Permits and replace it with a simple, scaled 
appointment unit regime (which is reflective of the same scaled regimes 
Market-Makers are accustomed to within the Exchange's fees schedule). 
The Exchange believes that by making the appointment unit process less 
burdensome for Market-Makers, the proposed rule may potentially 
incentivize more market-making across classes.
---------------------------------------------------------------------------

    \21\ See Exchange Notice C2019081900 (August 19, 2019). Also, 
the Exchange intends to propose this change to the Fees Schedule in 
a separate rule filing.
---------------------------------------------------------------------------

    The proposed rule change removes the condition in current Rule 
8.14(b) that the Exchange may only designate classes to not have a DPM 
or LMM if

[[Page 50552]]

there are at least four Market-Makers quoting in the class that are 
subject to the continuous quoting obligations. When the Exchange 
implemented this condition, there were a limited number of classes 
trading on the Hybrid System and this condition was designed, at that 
time, to enhance the Exchange's Market-Making program in the select 
classes trading on Hybrid, which was relatively new to the Exchange. As 
discussed above, all classes now trade on the System (i.e. Hybrid), and 
Market-Makers select their own appointments which adequately cover all 
classes of options necessitating market-making liquidity. In addition 
to this, proposed Rule 5.52(g) (current Rule 8.7(d)(iv)) allows for the 
Exchange to call on a Market-Maker to submit a single quote or maintain 
continuous quotes in one or more series of a Market-Maker's appointed 
class whenever, in the judgment of the Exchange, it is necessary to do 
so in the interest of maintaining a fair and orderly market. The 
Exchange believes these rules provide for sufficient liquidity in 
classes trading on the Exchange. Also, the proposed change is 
consistent with the rules of EDGX Options, which currently has a DPM 
program and lists many of the same classes. Pursuant to EDGX Options 
rules, it may choose to appoint one DPM per class, yet its rules do not 
obligate it to do so, nor do they require for a requisite number of 
Market-Makers when EDGX does not choose to appoint a DPM to a 
class.\22\
---------------------------------------------------------------------------

    \22\ See EDGX Options Rule 22.2(c).
---------------------------------------------------------------------------

Proposed Rules Regarding Market-Maker Obligations
    The Exchange notes that the proposed rules in connection with 
Market-Marker obligations (presented in the table above) largely make 
non-substantive changes to update and simplify the rules by 
reorganizing and consolidating provisions, simplifying language, 
updating language to plain English and removing redundancies. For 
example, and as indicated in the table above, proposed Rule 5.51 only 
makes non-substantive changes to the rule governing a Market-Maker's 
general obligations (current Rule 8.7, in part), most of which remove 
redundant provisions that are already covered under the umbrella of a 
Market-Maker's obligation to engage in dealing to maintain fair and 
orderly markets. The proposed rules make only a few substantive changes 
to Market-Maker's obligations. The following provides an overview of 
the proposed substantive changes being made to the obligations for 
Market-Maker and Market-Maker types (which are described in further 
detail in the sections below):
     Adds exceptions under proposed Rule 5.52(a) to the current 
requirement (under current Rule 8.51) \23\ that a Market-Maker's quotes 
must be firm. These are consistent with the exceptions to the firm 
quote requirement for Market-Makers on the Affiliated Options 
Exchanges.
---------------------------------------------------------------------------

    \23\ The Exchange notes that current Rule 8.51, which governs 
Firm Disseminated Market Quotes will be maintained as is, and 
continue to apply to Market-Makers, but will be moved to the shell 
Rulebook at a later date.
---------------------------------------------------------------------------

     Amends language throughout proposed Rule 5.52 to reflect 
that a Market-Maker's current continuous quoting requirements (i.e., 
90% of the time a Market-Maker is quoting in its appointed classes) in 
60% of the series of the Market-Maker's appointed classes will now 
apply to all trading sessions (GTH and RTH). As indicated in the table 
above, the 90% continuous quoting requirement in 60% of appointed 
classes is currently the quoting requirement for Market-Makers. The 
proposed rule change does not alter this continuous electronic quoting 
obligation but merely incorporates the definition of continuous 
electronic quotes into this proposed rule, as opposed to having this 
term defined elsewhere in the Rules, as it is currently. The Exchange 
notes that DPMs, PMMs, and LMMs will also continue to have the same 
electronic quoting requirements which will continue to apply only 
during RTH, as they currently do.
     Updates the series excluded from a Market-Maker's 
continuous quoting obligations under proposed 5.52(d)(2), including: 
Amending the exclusion of ``9-month'' series to ``270-day series'' (and 
makes this proposed change where applicable throughout the rules); and 
adding that any intra-day add-on series on the day during which such 
series are added for trading and any Quarterly Options series are 
excluded from the continuous quoting obligation. The Exchange notes 
that it does not propose to add these series to be excluded from PMM, 
DPM, and LMM obligations.
     Removes the quote width requirements (current Rule 
8.7(d)(i)(A) and (ii)(A), Rule 21.19, and Rule 22.14). This is 
consistent with the Market-Maker quoting requirements on the Affiliated 
Options Exchanges.
     Adds proposed Rule 5.53 which governs good standing for 
Market-Makers and is consistent with rules of the Affiliated Options 
Exchanges.
     Removes the requirement under proposed Rule 5.54 that DPMs 
must segregate in a manner prescribed by the Exchange (i.e. segregated 
accounts) transaction made in a DPM capacity from other transactions/
activity.
Proposed Rule 5.52 (Market-Maker Quotes)
    Proposed Rule 5.52 consolidates overall the Market-Maker quoting 
obligations and amends obligations to 1) include quoting obligations 
under the Affiliated Options Exchanges' rules, and 2) update current 
quoting obligations to be consistent, the extent possible to maintain 
Exchange specific requirements, with the quoting obligations of the 
Affiliated Options Exchanges. The Exchange notes that, as proposed, a 
Market-Maker's obligations will be substantially similar to its current 
obligations.
    Proposed Rule 5.52(a) provides for the firm quote obligation for 
Market-Makers pursuant to Rule 602 of Regulation NMS, to which Market-
Makers must already comply pursuant to current Rule 8.51 (Firm 
Disseminated Market Quotes).\24\ Proposed Rule 5.52(a) mirrors the firm 
quoting provision for Market-Makers under the rules of the Affiliated 
Options Exchanges, and adds exceptions to firm quotes that are the same 
as the exceptions under corresponding rules of the Affiliated Options 
Exchanges.\25\ These proposed exceptions to a Market Maker's firm quote 
include system malfunction, unusual market conditions, and quotes 
during the pre-open.
---------------------------------------------------------------------------

    \24\ See supra note 25.
    \25\ See C2 Rule 8.6; EDGX Options Rule 22.6; BZX Options Rule 
22.6.
---------------------------------------------------------------------------

    Proposed Rule 5.52(d)(2), regarding continuous electronic quoting 
requirements incorporates obligations to appointed classes to the 
entire trading day (i.e., GTH and RTH, which is described in detail 
above) by removing or updating language that refers to ``Regular 
Trading Hours'' and ``per trading session'' and its amends its list of 
series of excluded from a Market-Maker's continuous quoting obligation 
to incorporates the exclusion of any intra-day add-on series on the day 
during which such series are added for trading and any Quarterly 
Options series. This exclusion is consistent with corresponding rules 
of the Affiliated Options Exchanges.\26\ As stated above,

[[Page 50553]]

proposed Rule 5.52(d)(2) also amends the current quoting exclusion of 
any series with an expiration of nine months or greater to an 
expiration of greater than 270 days, which is consistent with the time-
to-expiration language for the same exclusion under the Affiliated 
Options Exchanges' rules. The Exchange notes that Market Makers 
generally already monitor expirations by a defined count of 270 days, 
as opposed to a nine month count in which the number of days 
continuously varies. Therefore, this proposed change aligns the 
Exchange's rules with current industry practice already in place on the 
Affiliated Options Exchanges. The Exchange also applied this change in 
the PMM obligation rule (the only other location in the Market-Maker 
rules which refers to 9-month series), proposed Rule 5.56.
---------------------------------------------------------------------------

    \26\ Id; see also Securities Exchange Act Release No. 71129 
(December 18, 2013), 78 FR 77736 (December 18, 2013) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Modify BATS Options Market Maker Continuous Quoting Obligation 
Rules) (SR-BATS-2013-062), which adopted exclusions, including 
Quarterly Options series, to Market Maker's quoting obligations and 
noted that such exclusions were ``consistent with the rules of 
several other options exchanges'' and ``did not diminish the quoting 
obligation''. The Exchange also notes that these exclusions were 
adopted on EDGX Options when that exchange was established.
---------------------------------------------------------------------------

    The proposed rule change also removes the quote width requirements 
under current Rule 8.7(d)(i)(A) and (d)(ii)(A)), as well as reference 
to such determined quote widths throughout the proposed rules, 
including those for SPX, Interpretation and Policy .08 regarding bid/
ask determinations for indexes, and current Rule 24A.9(e). This is 
consistent with the corresponding rules of the Affiliated Options 
Exchanges \27\ and the manner in which Market-Makers on those exchanges 
are required to quote many of the same classes as Market-Makers on the 
Exchange. The Exchange notes that currently the quote width requirement 
for generally all classes is $10, however, Market-Makers consistently 
maintain two-sided quotes that are much tighter than the required 
width. Indeed, even if markets are experiencing period of stress or 
volatility, pursuant to proposed Rule 5.51 (current Rule 8.7), Market-
Makers remain obligated to maintain two sided markets and engage in a 
course of dealings that must be reasonable calculated to contribute to 
the maintenance of a fair and orderly market, which includes refraining 
from making bids or offers that are inconsistent with such course of 
dealings and updating quotations in response to changed market 
conditions. The Exchange may take disciplinary action against any 
substantial or continued failure of these obligations. Therefore, the 
Exchange does not believe that the continuing to provide for a quote 
width requirement is necessary nor will it impact the maintenance of 
fair and orderly markets because Market-Makers already quote at a bid/
ask spread much narrower than the requirements and are required to 
continuously fulfill their obligations to engage in a course of 
dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market. The Exchange also notes that under proposed 
Rule 5.51 (current Rule 8.7), in connection with a Market-Maker's 
obligations to maintain fair and orderly markets, it may not make bids 
or offers inconsistent with this requirement, and, if the Exchange 
finds any substantial or continued failure by a Market-Maker regarding 
this requirement, the Market-Maker will be subject to disciplinary 
action or suspension or revocation of its registration or 
appointment(s). As such, Market-Makers must continue to submit quotes 
in accordance with this standard.
---------------------------------------------------------------------------

    \27\ See supra note 27.
---------------------------------------------------------------------------

    The Exchange also notes a proposed non-substantive change (not 
presented in the table above) to delete the language under current 
8.7(d) which provides that Market-Makers remain subject to all 
obligations imposed by current Rule 8.7, and, to the extent another 
obligation contained elsewhere in current Rule 8.7 is inconsistent with 
an obligation contained in current paragraph (d) of Rule 8.7 (i.e., 
continuous quoting obligations) with respect to a class, current 
paragraph (d) shall govern. The Affiliated Options Exchanges' 
corresponding rules do not provide for the same, as a Market-Maker is 
expected to uphold all obligations under the rules and in no 
circumstance circumvent its other, equally important obligations (e.g., 
constituting a course of dealings reasonably calculated to contribute 
to the maintenance of a fair and orderly market) in order to 
continuously quote. Therefore, this proposed change will not impact a 
Market-Maker's obligations under any of the rules, but instead is 
designed to ensure that a Market-Maker upholds each of its obligations. 
The proposed change conforms the Exchange's rules to the Affiliated 
Options Exchanges' rules. Similarly, the proposed rule change removes 
Interpretation and Policy .02, which states that the obligations of a 
Market-Maker with respect to those classes of option contracts to which 
the Market-Maker holds an Appointment shall take precedence over his 
other Market-Maker obligations. The Exchange notes that a Market-
Maker's obligations only pertain to its appointed classes, which 
renders this provision unnecessary. This is also consistent with the 
quoting obligation provisions of the Affiliated Options Exchanges.
Proposed Rule 5.53 (Good Standing for Market-Makers)
    Proposed Rule 5.53, which covers good standing for Market-Makers, 
is identical to the corresponding rules of the Affiliated Options 
Exchange.\28\ The Exchange currently does not have a similar, 
consolidated rule that covers good standing for Market-Makers. This 
change is designed to harmonize Market-Maker requirements across the 
Exchange and the Affiliated Options Exchanges which provide clear 
requirements for Market-Makers to maintain good standing as a Market-
Maker. The proposed rule states that for a Market-Maker to remain in 
good standing, a Market-Maker must: (1) Continue to meet the 
requirements established in Exchange Act Rule 15c3-1(a)(6)(i), the 
general requirements for Trading Permit Holders set forth in Chapter 3 
of the Rules (as proposed), and the Market-Maker requirements set forth 
in Chapter 5 of the Rules (as proposed); (2) comply with the Rules as 
well as the Rules of the Clearing Corporation and the Federal Reserve 
Board; and (3) pay on a timely basis such participation, transaction, 
and other fees as the Exchange prescribes. The rule also provides that 
the Exchange may suspend or terminate a Trading Permit Holder's 
registration as a Market-Maker or a Market-Maker's appointment to a 
class, or otherwise withdraw the good standing of a Market-Maker as 
provided in the Rules, if the Market-Maker ceases to maintain any of 
these conditions for approval or violates any of its agreements with 
the Exchange or any of the provisions of the Rules. The proposed rule 
does not impose any new obligations or requirements for Market-Makers 
but are merely provides for the standards, currently in place under 
other rules or regulations, for which the Exchange may measure a 
Market-Maker's good standing.
---------------------------------------------------------------------------

    \28\ See C2 Rule 8.4; EDGX Options Rule 22.4; and BZX Options 
Rule 22.4.
---------------------------------------------------------------------------

Proposed Rule 5.54 (DPMs)
    The proposed rule deletes current Rule 8.85(a)(vi), which states 
that a DPM must segregate in a manner prescribed by the Exchange all 
transactions consummated by the DPM in securities allocated to the DPM 
and any other transactions consummated by or on behalf of the DPM that 
are related to the DPM's DPM business, and current Rule 8.85(c)(v), 
which states the DPM shall segregate in a manner prescribed by the 
Exchange the DPM's business and activities as a DPM from the DPM's 
other businesses and activities (i.e. segregated accounts for DPM-
related

[[Page 50554]]

transactions from the firm's general Market-Maker accounts or accounts 
in relation to other trading activities or capacities). This is 
consistent with EDGX Options Rules (which, of the Affiliated Options 
Exchanges, also has DPMs), which do not require DPMs to maintain 
segregated accounts for that of their general Market Maker or other 
trading activities. These provisions were implemented in the past to 
ensure the financial stability of, then, newly formed small DPM firms. 
Today, DPMs now need larger financial infrastructure to trade as a DPM 
and the Exchange determines if firms are appropriately situated act as 
a DPM pursuant to proposed Rule 3.53 (current Rule 8.83) by 
considering, among other things, the firms' adequacy of capital and 
operational capacity. This reduces the risk that a DPM's financial 
integrity would be adversely impacted by financial losses that may be 
incurred by the DPM in connection with its other businesses and 
activities.\29\ Finally, the proposed rule change removes current 
paragraph (e) regarding Trading Permits per appointment costs, in line 
with the changes made to the overall Market-Maker appointment costs and 
assignments under proposed Rule 5.50 (described in detail above).
---------------------------------------------------------------------------

    \29\ The Exchange also already surveils for a firm's DPM 
requirements by DPM-specific acronyms and firm IDs.
---------------------------------------------------------------------------

Miscellaneous Market-Maker Rules

----------------------------------------------------------------------------------------------------------------
                                                         Corresponding
          Current rule               Proposed rule      other exchange    Substantive change    Description of
                                                             rule                                   change
----------------------------------------------------------------------------------------------------------------
Rule 8.8 (Restriction on Acting   Rule 8.25           N/A...............  N.................  None (aside from
 as Market-Maker and Floor         (Restriction on                                             updating cross-
 Broker).                          Acting as Market-                                           references).
                                   Maker and Floor
                                   Broker).
Rule 8.9 (Securities Accounts     Rule 7.6            C2 Rule 8.7, EDGX   N.................  Conforms to
 and Orders of Market-Makers).     (Securities         Options Rule                            corresponding
                                   Accounts and        22.7, BZX Options                       rules of the
                                   Orders of Market-   Rule 22.7.                              Affiliated
                                   Makers).                                                    Options Exchanges
                                                                                               (including
                                                                                               Interpretation
                                                                                               and Policy .01 to
                                                                                               BZX/EDGX Rule
                                                                                               22.7). Maintains
                                                                                               provisions
                                                                                               specific to Cboe
                                                                                               Options rules.
                                                                                               Deletes
                                                                                               redundancies,
                                                                                               including those
                                                                                               provisions
                                                                                               already covered
                                                                                               under other Rules
                                                                                               (e.g. Rule
                                                                                               6.55.03), updates
                                                                                               language to read
                                                                                               in plain English
Rule 8.10 (Financial              Rule 11.6(b)        N/A...............  N.................  None.
 Arrangements of Market-Makers).   (Market-Maker
                                   Financial
                                   Requirements).
Rule 8.17 (Stopping of Option     Rule 5.58           N/A...............  N.................  None.
 Order).                           (Stopping of
                                   Option Orders) of
                                   Section D (Market-
                                   Maker
                                   Appointments and
                                   Obligations).
Rule 8.60 (Evaluation of Trading  N/A...............  N/A...............  N: however, see     Removes current
 Crowd Performance).                                                       below for further   rule which is no
                                                                           details.            longer in
                                                                                               practice by the
                                                                                               Exchange and
                                                                                               unnecessary given
                                                                                               the authority of
                                                                                               the Exchange to
                                                                                               evaluate and
                                                                                               determine
                                                                                               satisfactory
                                                                                               Market-Maker
                                                                                               performance and
                                                                                               fulfillment of
                                                                                               obligations, as
                                                                                               well as authority
                                                                                               to take
                                                                                               disciplinary
                                                                                               action for
                                                                                               failure to
                                                                                               satisfy Market-
                                                                                               Maker
                                                                                               requirements
                                                                                               through various
                                                                                               other Exchange
                                                                                               rules.
Rule 8.80 (DPM Defined).........  Rule 1.1..........  N/A...............  N.................  Replaces reference
                                                                                               to Rule 8.1 in
                                                                                               current Rule 1.1
                                                                                               with current Rule
                                                                                               8.1 language
                                                                                               which defines a
                                                                                               DPM.
Rule 8.86 (DPM Financial          Rule 11.6           C2 Rule 8.8.......  Y: see below for    Moves to proposed
 Requirements).                    (Financial                              further details.    Rule 11.6(a) and
                                   Arrangements of                                             removes the
                                   Market-Makers).                                             $100,000 net
                                                                                               liquidating
                                                                                               equity
                                                                                               requirement as it
                                                                                               is no longer
                                                                                               applicable to the
                                                                                               current DPM and
                                                                                               marketplace
                                                                                               structures.
                                                                                               Conforms Rule
                                                                                               11.6(a) to
                                                                                               corresponding C2
                                                                                               rule. The Market-
                                                                                               Maker language
                                                                                               covers all Maker-
                                                                                               Maker types, thus
                                                                                               DPMs.
----------------------------------------------------------------------------------------------------------------

Proposed Deletion of Current Rule 8.60
    The proposed rule change deletes current Rule 8.60 which provides 
for the Exchange evaluation of trading crowd performance. The current 
rule provides that the Exchange periodically evaluate the performance 
of DPMs, Market-Makers, and other Trading Permit Holders both 
individually and collectively as trading crowds in order to determine 
whether they are satisfactorily meeting their market responsibilities. 
The Exchange may do so by means of a survey, and, if the Exchange finds 
that such participant has failed to satisfy its Market-Making 
requirements then the Exchange may, among other things, suspend, 
terminate or restrict registration or appointment to a class or 
classes, reallocate (i.e. reappoint, as proposed) class(es) or restrict 
allocation of classes, and so on, and give notice and an opportunity 
for a market participant to have a formal hearing or informal hearing, 
depending on the action under consideration. The proposed rule change 
deletes current Rule 8.60 as it is no longer implemented by the 
Exchange. The Exchange does not take such surveys or make 
determinations pursuant to Rule 8.60 because the Exchange exercises its 
authority under other rules to ensure that Market-Makers (and Market-
Maker types) fulfil their Market-Making requirements, and to take 
appropriate disciplinary actions for a participant's failure to do so. 
The Exchange may make the same determinations and take action against a 
participant for failing to meet their respective Market-Maker 
obligations under the current rules (moved to proposed Rules 3.53, 
5.50, 5.51, 5.52, 5.53, 5.54, 5.55, and 5.56). Moreover, the Exchange 
must follow the notice provision to terminate or condition a 
participant's approval to act as a DPM under proposed Rule 3.53, as 
well as the notice and proceeding requirements for disciplinary actions 
under Chapter 17. Because the Exchange does not take surveys or make 
determinations under Rule 8.60, and instead, currently ensures that 
participants fulfill their respective Market-Making requirements 
pursuant to multiple other rules, the proposed rule change does not 
alter the manner in which the Exchange determines whether Market-Making 
requirements are met nor the actions and procedures necessary to 
discipline a participant for failure of such obligations. The proposed 
rule change merely removes a rule that is not essential to the function 
and continuity of the Exchange and its Market-Maker program.
Proposed Rule 11.6
    The proposed rule change moves current Rule 8.86 to proposed Rule 
11.6(a) and removes the $100,000 net liquidating equity requirement as 
it is no longer applicable to current DPM structures. This is 
consistent with corresponding C2 Rule 8.8. Current Rule 8.86 was 
enacted (almost 20 years ago) to ensure the financial stability of 
newly formed, small DPM firms who were not previously net capital 
computing firms, as a number of small firms were not net capital 
computing based on an exemption (i.e., the ``(b)(1) exemption'') in 
Exchange Act Rule 15c3-1. However, due to changes in the market and, as 
stated above, the large infrastructure

[[Page 50555]]

now needed to trade as a DPM, in which the Exchange determines if 
appropriately situated to act as a DPM pursuant to proposed Rule 3.53 
(current Rule 8.83), the number of firms who can be a DPM has decreased 
significantly and the size of DPM firms, including their adequacy of 
capital and operational capacity, has increased significantly. As a 
result, current DPMs have capital well beyond the $100,000 net 
liquidating requirement, which eliminates the need for the Exchange to 
surveil for compliance with this requirement and will enable the 
Exchange to better allocate its surveillance resources, focusing on 
enhanced surveillance in connection with Exchange rules permitting, 
requiring, or prohibiting liquidation and rules requiring liquidation 
in a reasonable and orderly fashion.
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.\30\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \31\ 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) \32\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(5).
    \32\ Id.
---------------------------------------------------------------------------

    In particular, the proposed rule changes are generally intended to 
add or align certain system functionality currently offered by the 
Exchange and the Cboe Affiliated Exchanges (specifically, the 
Affiliated Options Exchanges) in order to provide a consistent 
technology offering for the Cboe Affiliated Exchanges. A consistent 
technology offering, in turn, will simplify the technology 
implementation, changes and maintenance by Exchange participants that 
are also participants on the Affiliated Options Exchanges. The proposed 
rule change does not propose to implement new or unique functionality 
that has not been previously filed with the Commission or is not 
available on the Affiliated Options Exchanges. The Exchange notes that 
many of the proposed changes are generally based on rules of the 
Affiliated Options Exchanges and differ only to the extent necessary to 
conform to the Exchange's current rules, retain intended differences 
unique to Cboe Options market-model, functionality and/or rule text and 
not applicable to the Affiliated Options Exchanges. Where 
applicable,\33\ the Exchange has substantively mirrored the Affiliated 
Options Exchange rules or certain Market-Maker requirement language 
within the Affiliated Options Exchange rules, because consistent rules 
will simplify the regulatory requirements and increase the 
understanding of the Exchange's operations for TPHs that are also 
participants on the Cboe Affiliated Options Exchanges. The Exchange 
notes that the proposed changes to make its rules consistent with the 
Affiliated Options Exchange's rule do not impose new or novel 
obligations for Market-Makers or does not differ from the Exchange's 
current authority over Market-Makers; the proposed rules based on the 
Affiliated Options Exchanges' rules are substantially similar to the 
current rules. The proposed rule change would provide greater 
harmonization between the rules of the Cboe Affiliated Exchanges, 
resulting in greater uniformity, bolstered collective understanding of 
the Exchange's rules and the Affiliated Options Exchanges for 
participants, and less burdensome and more efficient regulatory 
compliance. As such, the proposed rule change would foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities and would remove impediments to and perfect the mechanism of 
a free and open market and a national market system.
---------------------------------------------------------------------------

    \33\ Proposed Rules 3.52, 5.50, 5.51, 5.52, 5.53, 5.56, 7.6, and 
11.6.
---------------------------------------------------------------------------

    The proposed change to harmonize the Exchange's rules and processes 
with the Affiliate Options Exchanges by allowing a Market-Maker to 
select class appointments that apply to classes during all trading 
sessions, thus applying Market-Maker obligations across all trading 
sessions, will remove impediments to and perfect the mechanism of a 
free and open market and a national market system by harmonizing the 
application of appointments with that of the Affiliated Options 
Exchange rules. The application class appointments to all trading 
sessions will not have an impact of the protection of investors or 
cause any additional burden to Market-Maker's because a Market-Maker's 
continuous obligations will continue to apply only when quoting in 
their appointed classes, therefore, the proposed change will have 
negligible, if any, impact on a Market-Maker's continuous quoting 
obligations as they may continue to choose when to actively quote and 
have their obligations to their appointed classes apply.
    The proposed changes to the appointment cost provisions (both in 
connection with Market-Makers, generally, and DPMs) will remove 
impediments to and perfect the mechanism of a free and open market and 
national market system because it will provide rules for investor that 
accurately reflect the structure of the Exchange's fees schedule upon 
migration.\34\ Furthermore, the Exchange believes that the proposed 
change will serve to incentivize more market-making across classes as 
Market-Makers will no longer be limited to a 1.0 appointment cost or 
having to acquire additional Trading Permits to select appointments in 
more classes, thereby benefitting all market participants.
---------------------------------------------------------------------------

    \34\ See supra note 23.
---------------------------------------------------------------------------

    The proposed change to remove the condition that a requisite number 
of Market-Makers where the Exchange determines to designate a class 
without a DPM or LMM removes impediments to and perfects the mechanism 
of a free and open market and national market system and, in general, 
protects investors, because it is consistent with the rules of EDGX 
Options (previously filed with the Commission) which also has a DPM 
program and lists many of the same classes. The Exchange believes that 
the current condition to this determination is no longer necessary 
given that all classes now trade on the System (i.e. Hybrid) and its 
Market-Maker program has grown to adequately cover the classes that 
necessitate market-maker liquidity. In addition to this, the rules 
allow for the Exchange to appropriately address the case where further 
market-making in a class might be needed. Therefore, the Exchange 
believes that the proposed change will not have any significant impact 
on the trading of classes and functions of the Exchange.
    The Exchange also believes that by making Market-Maker obligations 
consistent, to the extent possible while

[[Page 50556]]

maintaining Exchange specific rule text and obligations, with those of 
the Affiliated Options Exchanges the proposed rule change fosters 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, as well as removes impediments to and 
perfects the mechanism of a free and open market and national market 
system. The Exchange notes that the proposed changes to the Market-
Maker obligation provisions are substantially similar to the current 
obligations, therefore will have de minimus impact on market 
participants. The proposed changes do not alter the authority and/or 
discretion of the Exchange in connection with Market-Makers, 
significantly alter the obligations of Market-Makers, nor impose any 
significant additional burden. Instead, the Exchange believes the 
changes will result in greater uniformity for Market-Maker obligations 
across the Exchange and its affiliates, thereby bolstering 
participants' collective understanding of Market-Maker obligations 
across the affiliated exchanges and resulting in less burdensome 
regulatory compliance.
    In particular, the Exchange believes the proposed rule change to 
amend certain provisions in connection with a Market Makers' quoting 
obligations will remove impediments to and perfect the mechanism of a 
free and open market and a national market system. By conforming the 
quoting obligations, to the extent possible to maintain differences 
unique to the Exchange, to that of the Affiliated Options Exchange 
rules, the proposed change will remove impediments to and perfect the 
mechanism of a free and open market and national market system. As 
stated, the proposed rules in connection with Market-Marker obligations 
largely make non-substantive changes to update and simplify the rules 
by reorganizing and consolidating provisions, simplifying language, 
updating language to plain English and removing redundancies. For 
example, proposed Rule 5.51 makes only non-substantive changes to the 
rule governing a Market-Maker's general obligations, most of which 
remove redundant provisions that are already covered under the umbrella 
of a Market-Maker's obligation to engage in dealing to maintain fair 
and orderly markets. The proposed substantive changes that harmonize 
Market-Maker obligations with those of the Affiliated Options Exchange 
include adding exclusions to a Market-Maker's the firm quote 
requirement, removing the quote width requirement, adding certain 
series excluded from continuous quoting obligations, conforming the 
series expiration of 9 months to the 270-day period, adding provision 
governing good standing for Market-Makers, and removing the requirement 
that DPMs maintain segregated accounts for DPM-related transactions 
(addressed in the paragraph below). These proposed changes are 
reasonable and do not affect investor protection because the proposed 
changes do not present any novel or unique issues, as they have been 
previously filed with the Commission. Market-Makers continue to comply 
with the firm quote requirement under current Rule 8.51 and Rule 602 of 
Regulation NMS and the proposed exceptions to a Market-Maker's firm 
quote are consistent with the rules of the Affiliated Options Exchanges 
and remove impediments to and perfect the mechanism of a free and open 
market and national market system by providing exceptions to firm 
quotes with malfunctions and unusual market conditions arise. The 
proposed change from the 9 month expiration time to the 270 expiration 
time is an industry practice currently in place, as Market-Makers 
generally already monitor expirations by a defined count of 270 days, 
as opposed to a nine month count in which the number of days 
continuously varies. In addition, Market-Makers on the Affiliated 
Options Exchanges quote in many of the same classes available on the 
Exchange but do not have a bid/ask requirement when quoting on those 
exchanges. The Exchange notes that removing this requirement will not 
impact market participants because Market-Maker's already submit two-
sided quotes consistently at a much tighter spread than the Exchange-
determined quote widths and Market-Makers are obliged to continue to 
engage in dealings that maintain a fair and orderly market. The 
proposed rule providing for good standing requirements for Market-
Makers will serve to protect investors because it provides under a 
single rule the requirements, which are already in place pursuant to 
the rules and regulations, that the Exchange will refer to in order to 
determine if a Market-Maker is fit to continue making markets on the 
Exchange. This rule mirrors that of the Affiliated Options Exchanges' 
corresponding rules.
    The Exchange believes that the proposed updates to certain 
provisions of the DPM requirements, overall, serve to remove 
impediments to and perfect the mechanism of a free and open national 
market system. The proposed change to remove the requirement that each 
DPM has at least two Designees who are nominees of the DPM removes an 
unnecessary compliance burden for DPMs for which the cost of 
maintaining two designees far outweighs the benefit, if any, of the 
rule. Further, like all member organizations a DPM will continue to be 
required to maintain at least one nominee and may choose to maintain 
multiple nominees. The proposed removal of the net DPM liquidation 
requirement and the requirement that a firm segregate accounts between 
DPM-related transactions and that of its general Market-Maker account 
or accounts related to other trading activities or capacities 
requirement will also lift a compliance burden for DPMs as these 
provisions are no longer necessary to ensure financial integrity or to 
mitigate losses given the current financial status and infrastructure 
of DPMs. As stated, the Exchange determines if a DPM has the adequacy 
of capital and operational capacity necessary to perform and take on 
the potential risks as a DPM.
    The Exchange believes that removing the designation of two Market-
Makers in FLEX classes and instead automatically appointing FLEX class 
appointments when a Market-Maker (approved for FLEX) selects an 
appointment in the same Non-FLEX class will not alter the obligations 
of a FLEX Market-Maker, as they will continue to be required to 
maintain an appointment in a Non-FLEX class, which will then 
automatically appoint them the FLEX class. The proposed rule change 
removes impediments to and perfects the mechanism of a free and open 
market and national market system by simplifying the FLEX appointment 
process through the automatic FLEX class appointments in connection 
with a Market-Maker's selection of class appointments for its general 
Market-Making requirements, and continuing to ensure that each FLEX 
class will have appointed Market-Makers to provide liquidity in that 
class, in addition to all other market participants.
    The proposed change to allow the Exchange the discretion to 
terminate an On-Floor LMM (as opposed to automatic termination) when it 
decides to terminate the Off-Floor DPM and/or Off-Floor LMM in that 
class will serve to remove impediments to and perfect the mechanism of 
a free and open market and national market system by allowing an On-
Floor LMM that may be high performing to continue its appointment in 
that class instead of disrupting the On-Floor LMM's appointment and 
obligations by automatic termination.
    The proposed removal of the rule relating to the Exchange's 
evaluation of a trading crowd performance removes a

[[Page 50557]]

rule that is no longer in practice by the Exchange as the Exchange's 
evaluation, determinations, and ability to sanction Market-Makers and 
Market-Maker types are currently implemented under various other 
Market-Maker related rules.
    The Exchange believes the proposed reorganization of Rules to move 
all Rules that relate to Market-Makers and Market-Maker types, 
including: (1) Related to registration (as well as approvals, 
eligibility, termination, etc.) and general Market-Maker functions; (2) 
Market-Maker appointments; (3) Market-Maker obligations and 
entitlements; and 4) other rules in connection with Market-Makers under 
the same chapters, will also benefit investors and remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system. The majority of the changes in the proposed rule change 
move rules from the current Rulebook to the shell Rulebook with no 
substantive changes. Indeed, many of the proposed non-substantive 
changes removes impediments to and perfects the mechanism of a free and 
open market and national market system by providing up-to-date rules 
that accurately reflect the manner in which the Exchange, its Market-
Maker program, and its market participants currently function by 
removing provisions that are not invoked by the Exchange or currently 
in practice by its participants and are not necessary to, nor impact, 
the Exchange's Market-Maker program, which protects investors by 
providing accurate and up-to-date rules. The proposed non-substantive 
changes to the Rules also provide additional detail in the rule 
regarding current functionality, make the Rules more plain English, 
update cross-references and paragraph lettering and numbering, delete 
duplicative or unnecessary language and language that is no longer 
applicable to the current functions of the Exchange, simplify and 
streamline rule language, and update terms to provide consistency 
throughout the proposed Market-Maker rules, all of which benefits 
investors. The Exchange believes these changes and transparency the 
proposed changes provide will protect investors, as they provide more 
clarity and reduce complexity within the Rules, making the rule easier 
to understand and comply with.

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 Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition, as they will apply to all potential Market-Makers and 
Market-Maker types (i.e. applicants), and all Market-Makers and Market-
Maker types in the same manner. The Exchange reiterates that a majority 
of the proposed rule change is intended to harmonize the Exchange rules 
with that of the Affiliated Options Exchanges' rules. Thus, the 
Exchange believes this proposed rule change will reduce the burden on 
Exchange participants by providing consistent rules among the 
affiliated exchanges upon migration. Such proposed rule changes in this 
filing conform to the approved rules of the Affiliated Options 
Exchanges, which have already been filed with the Commission. In 
addition to this, the Exchange does not believes that the other 
proposed changes will impose any burden on intramarket competition 
because such changes serve to update and remove provisions or 
requirements that are no longer necessary in the function and 
maintenance of the Exchange and its Market-Maker program, or are 
already ensured and/or implemented via other rules of the Exchange. As 
such, these proposed changes will not impose any burden on intramarket 
competition, but rather, will serve to relieve certain compliance 
burdens for Market-Makers or surveillance burdens for the Exchange, 
which will make available more market-making resources to allocate 
toward classes that may need and consume more liquidity, or more 
enhanced surveillance resources to monitor for Market-Maker compliance, 
including general obligations, quoting obligations, and account 
maintenance.
    The Exchange does not believe 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 majority 
of the proposed change to the Market-Maker rules (i.e., registration, 
appointments, good standing, general obligations, and quoting 
obligations) is based on the rules of the Affiliated Options Exchange, 
previously filed with the Commission. The Exchange also notes that to 
the degree that other exchanges have varying obligations for Market-
Makers, market participants on other exchanges are welcome to become 
Market-Makers on the Exchange if they determine that this proposed rule 
change has made market making on Cboe Options more attractive or 
favorable. The proposed changes to the rules that reflect functionality 
that will be in place come October 7, 2019, will not impose any burden 
on intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act but rather provide clear, 
accurate rules for market participants surrounding the completion of 
migration.
    The proposed non-substantive changes are not intended to have any 
impact on competition, as they do not impact trading on Cboe Options.

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 rule 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, provided that the self-regulatory organization 
has given 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,\35\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \36\ and Rule 19b-4(f)(6) 
thereunder.\37\
---------------------------------------------------------------------------

    \35\ The Exchange has fulfilled this requirement.
    \36\ 15 U.S.C. 78s(b)(3)(A).
    \37\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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.

[[Page 50558]]

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-2019-059 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-2019-059. 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-2019-059 and should be submitted on 
or before October 16, 2019.
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20698 Filed 9-24-19; 8:45 am]
 BILLING CODE 8011-01-P