[Federal Register Volume 84, Number 189 (Monday, September 30, 2019)]
[Notices]
[Pages 51693-51696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21103]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87079; File No. SR-CBOE-2019-062]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Certain Clearing Editor Functionality in Rule 6.6 of the Shell Rulebook

September 24, 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 18, 2019, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
and II below, which Items have been prepared by the Exchange. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend certain Clearing Editor functionality in Rule 6.6 of the shell 
Rulebook.
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the Secretary, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On September 5, 2019, the Exchange filed a rule filing, SR-CBOE-
2019-056, which, amended Exchange Rules in connection with the Cboe 
Trading Match System (``CTM'').\5\ Pursuant to SR-CBOE-2019-056, which 
will be effective on October 7, 2019, the Exchange proposed to 
harmonize current Rule 6.67, in connection with the CTM, with C2 Rule 
6.31, which provides for the ``Clearing Editor'' and is functionally 
equivalent to the Exchange's current CTM. Under SR-CBOE-2019-056, Rule 
6.6 in the shell Rulebook will govern the Exchange's Clearing Editor 
and Rule 6.67 will be deleted from the current Rulebook, upon 
migration.\6\ SR-CBOE-2019-056

[[Page 51694]]

intended to amend the rule to conform to the Clearing Editor 
functionality and rule language of that of C2 to the extent necessary 
to retain intended differences unique to Cboe Options market-model, 
functionality, and/or rule text. However, the Exchange now proposes to 
update Rule 6.6 in the shell Rulebook to describe additional 
functionality that is unique to the Exchange that was inadvertently not 
included in that previously filing. In order to coincide with the 
effective date of SR-CBOE-2019-056 and the migration of the Exchange's 
trading platform to the same system used by the Cboe Affiliated 
Exchanges,\7\ the Exchange also intends to implement this proposed rule 
change on October 7, 2019.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 86920 (September 10, 
2019) (Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to the Cboe Trade Match System) (SR-CBOE-2019-
056).
    \6\ Cboe Options intends to migrate its trading platform to the 
same system used by the Cboe Affiliated Exchanges (i.e., together 
with Cboe Options, C2 Exchange, Inc. (``C2''), 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'')) which the Exchange expects to 
complete on October 7, 2019. 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.
    \7\ See id.
---------------------------------------------------------------------------

    In particular, the Exchange inadvertently removed paragraph (b) 
under current Rule 6.67, which currently applies to both trades 
executed electronically and in open outcry, which is unique to Cboe 
Options, and will continue to apply to trades executed in open outcry 
upon migration. Specifically, current Rule 6.67(b) permits Trading 
Permit Holders (``TPHs'') to change certain fields in CTM (Clearing 
Editor, as proposed), including series, quantity, buy or sell, and 
premium price, only if they provide notice to the Exchange. While the 
Exchange notes the removal this provision as it relates to trades 
executed electronically and in conformity with C2 Rule 6.31 is 
accurate, it will continue to apply to open outcry trades post-
migration. Therefore, the Exchange now proposes to amend Rule 6.6 in 
the shell Rulebook and add Rule 6.6(d), which is substantively the same 
as current Rule 6.67(b) that was inadvertently removed under SR-CBOE-
2019-056. Specifically, proposed Rule 6.6(d) states that, in addition 
to the fields listed in paragraph (b), Trading Permit Holders may 
change the following fields through the Clearing Editor for trades 
executed in open outcry: (1) Series, (2) Quantity, (3) Buy or Sell; or 
(4) Price. Each of these changes must be accompanied by a Reason Code. 
Notification of changes made pursuant to this paragraph (d) will 
automatically be sent to the Exchange with the submission of the 
changes through the Clearing Editor. The proposed rule change updates 
the language to make it explicit that proposed Rule 6.6(d) applies only 
to trades executed in open outcry. It also updates the term premium 
price to price and Customer ID (in Rule 6.6(a)) to Client Order ID, as 
these terms more accurately reflect the names of the fields that are 
displayed on an order \8\ and in the Clearing Editor, as well as the 
term origin code to Capacity code, which is in line with the language 
in Rule 6.6 and definition currently in the shell Rulebook.\9\ The 
current rule provides that notification of the change shall be made as 
soon as practicable, but no later than 15 minutes after the change has 
been made. The proposed rule change does not incorporate this language 
because, upon migration, the Exchange will automatically receive 
notification of changes to the fields listed under proposed Rule 6.6(d) 
when a TPH submits changes through use of the Clearing Editor. The 
automatic notification will include a Reason Code associated with each 
change in which a TPH will be prompted to provide in the Clearing 
Editor when making changes pursuant to proposed Rule 6.6(d).\10\ 
Therefore, the Exchange notes that the proposed rule does not 
substantively alter the notification requirement attached to proposed 
Rule 6.6(d), but only updates it to accurately reflect the manner in 
which notice will automatically be submitted to the Exchange through 
use of the Clearing Editor.
---------------------------------------------------------------------------

    \8\ See Cboe Options FIX Specifications, available at: https://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf.
    \9\ See Rule 1.1 in the shell Rulebook.
    \10\ Example Reason Codes include: Input Error; Unmatched Trade; 
Unknown; Manual Add; Other Text Required; Trade Nullification; Trade 
Adjustment; Error Account; and System Issue.
---------------------------------------------------------------------------

    In addition, the proposed rule change adds certain Cboe Options-
specific fields to the list of fields that do not require a reason code 
under proposed Rule 6.6(b). The Exchange now proposes to incorporate 
Strategy ID,\11\ Frequent Trader ID,\12\ Compression Trade ID,\13\ and 
ORS ID \14\ to the list of fields that a TPH may change through the 
Clearing Editor (for both trades executed electronically and in open 
outcry) without notice to the Exchange. These fields are unique to 
orders executed on Cboe Options \15\ and TPHs currently submit all 
updates to such fields to the Exchange populated via a form post-
execution today.\16\ Upon migration, the Exchange functionality will 
allow for automated entry for these fields, just like all other order 
fields. Therefore, the proposed amendment merely intends to make it 
explicit that TPHs may continue to submit updates to these fields post-
execution. The Exchange also proposes to clarify that a TPH may make a 
change from a Capacity code (C) to any other Capacity code only if the 
change is accompanied by a Reason Code and, like proposed paragraph 
(d), makes it explicit that notice of such change will automatically be 
sent to the Exchange with the submission of the change through the 
Clearing Editor. This is substantially the same manner in which current 
Rule 6.67 functions, where both Rule 6.67(a) and (b) are applicable to 
trades executed electronically and on open outcry (therefore, changing 
a customer Capacity code is permissible under current Rule 6.67 for all 
trades executed if notification is provided to the Exchange). The 
Exchange proposes to maintain that a TPH may change the Capacity code 
from a customer Capacity code to any other Capacity code for trades 
executed electronically or in open outcry, however, it still must 
provide notification to the Exchange via a prompted Reason Code and, 
like changes made pursuant to proposed paragraph (d), will 
automatically provide such notification to the Exchange when the change 
is submitted through the Clearing Editor.
---------------------------------------------------------------------------

    \11\ Strategy ID indicates whether an order qualifies for 
certain treatment for various strategies provided under the 
Exchange's Fees Schedule. See Cboe Exchange, Inc. Fees Schedule (for 
example, footnote 13).
    \12\ Frequent Trader ID is a unique identification number which 
can be appended by executing agents to orders submitted to the 
Exchange on behalf of those customers registered for the Frequent 
Trader Program. See Cboe Exchange, Inc. Fees Schedule, ``Frequent 
Trader Program'' Table.
    \13\ Compression Trader ID indicates whether an order qualifies 
for certain treatment in connection with facilitating a compression 
of options positions. See Cboe Exchange, Inc. Fees Schedule, 
footnote 41.
    \14\ ORS ID indicates whether an order qualifies for certain 
treatment under the ORS Program. See Cboe Options Exchange, Inc. 
Fees Schedule, ``Order Router Subsidy Program'' Table.
    \15\ See supra note 8.
    \16\ The Exchange notes that TPHs may currently update Frequent 
Trader ID via CTM. See Securities Exchange Act Release No. 86617 
(August 9, 2019), 84 FR 41776 (August 15, 2019) Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend the 
Ability To Submit Frequent Trader Forms (SR-CBOE-2019-043).
---------------------------------------------------------------------------

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.\17\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \18\ 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

[[Page 51695]]

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) \19\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
---------------------------------------------------------------------------

    The proposed rule change is substantively the same as the manner in 
which the CTM rules and post-execution functionality and/or processes 
work today. The proposed change merely amends the rule proposed under 
SR-CBOE-2019-056 to permit changes in certain fields that TPHs are 
already permitted to change through the Clearing Editor or other post-
execution forms. The proposed change is intended to correct an 
inadvertent omission from Rule 6.6 in the shell Rulebook of a provision 
from Rule 6.67 in the current Rulebook that currently applies to open 
outcry executions, and will continue to apply to open outcry executions 
upon migration. Likewise, the Exchange notes that TPHs may currently 
update fields that require notification for trades executed in open 
outcry and make changes made from customer Capacity code (C), with the 
same requisite notice. Therefore, the proposed change does not alter 
the manner in which the current rule functions but instead removes 
impediments to and perfects the mechanism of a free and open market and 
national market system by continuing to allow for these functions, 
along with automatic notification containing reason codes transmitted 
to the Exchange through submission of the changes in the Clearing 
Editor, upon migration. Additionally, the Exchange notes that the 
proposed amendment to add certain fields for which updates do not 
require notification to the rule will remove impediments to and perfect 
the mechanism of a free and open market and national market system 
because TPHs may already submit updates to these fields (in paper form) 
post-execution and the rule is designed to continue to allow TPHs to 
make such updates post-execution in electronic form upon migration.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed change will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed amendment merely 
updates Rule 6.6 in the shell Rulebook to continue to allow for certain 
post-execution changes, which are currently permitted on the Exchange, 
through the use of the Clearing Editor after October 7, 2019. The 
Exchange notes that all proposed changes and current changes made 
pursuant to Rule 6.6 occur post-execution, therefore will not have any 
impact on trading. As the same post-execution changes are already 
permitted and made via processes and functionality currently in place 
on the Exchange, the Exchange believes this proposed filing to allow 
for the continuation of the same post-execution changes through use of 
the Clearing Editor will have no impact on competition. The Exchange 
also notes that the proposed change is intended to reduce the 
compliance burden on TPHs by providing them with functionality that 
allows for automatic input and notification to the Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay. The 
Exchange believes that waiver of the operative delay is consistent with 
the protection of investors and the public interest because, as the 
Exchange discussed above, its proposal complements its recent filing, 
SR-CBOE-2019-056, in which it conformed the rule governing the Clearing 
Editor to that of C2 but inadvertently omitted from that proposal 
current Cboe-specific provisions that the Exchange wishes to maintain 
post migration. Accordingly, its proposal is designed to preserve 
current functionality in order to continue to permit TPHs to make 
certain post-execution changes after October 7, 2019 through the use of 
the Clearing Editor. The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because the proposal does not raise any new or novel 
issues, and waiver will allow the changes in this filing to align with 
the proposed amendments to Rule 6.6 that the Exchange adopted pursuant 
to SR-CBOE-2019-056, thereby minimizing disruptions to TPHs and their 
customers with respect to post-execution functionality and processes 
available on the Exchange. Therefore, the Commission hereby waives the 
operative delay and designates the proposal as operative upon 
filing.\24\
---------------------------------------------------------------------------

    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or

[[Page 51696]]

     Send an email to [email protected]. Please include 
File Number SR-CBOE-2019-062 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-2019-062. 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-2019-062 and should be submitted on 
or before October 21, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21103 Filed 9-27-19; 8:45 am]
BILLING CODE 8011-01-P