[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Notices]
[Pages 54231-54234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22017]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87216; File No. SR-CBOE-2019-073]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Make
Minor Updates and Consolidate Various Exchange Rules in Connection With
Regulatory Reports, Records, and Audits on the Exchange, and Move Those
Rules From the Currently Effective Rulebook to Proposed Chapter 7 of
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
October 3, 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 27, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to make minor updates and consolidate various Exchange Rules in
connection with regulatory reports, records, and audits on the
Exchange, and move those Rules from the currently effective Rulebook
(``current Rulebook'') to proposed Chapter 7 of 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. Cboe Options 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. 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 proposes to consolidate current rules in connection
with regulatory reports, records, and audits, including the rules
related to the Consolidated Audit Trail (``CAT''), on the Exchange into
sections of proposed Chapter 7 in the shell Rulebook. The Exchange
notes that in addition to consolidating and moving the various rules
related to reports, records, and audits to proposed Chapter 7, the
proposed rule change deletes the rules from the current Rulebook. The
proposed rule change moves and, where applicable, consolidates the
rules as follows:
Chapter 7--Regulatory Reports, Records, and Audits
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Section A. General
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7.1 Maintenance, Retention, and
Furnishing of Books, Records, and
Other Information
7.1(a)................................. 15.1 Maintenance, Retention and
Furnishing of Books, Records,
and Other Information,
including 15.1.01.
7.1(b)................................. 15.1.02.
7.1(c)................................. 15.1.03.
7.1(d)................................. 15.1.04.
[[Page 54232]]
7.1(e)................................. 28.16 (corporate debt security
Market-Makers), including
28.16.01, provision regarding
current Rule 15.1.
7.1(f)................................. 21.30 (government securities
options Market-Makers),
including 21.30.01, provision
regarding current Rule 15.1.
7.1(g)................................. 23.15 (interest rate options
Market-Makers), including last
sentence of paragraph,
provision regarding current
Rule 15.1.
7.2 Reports of Uncovered Short 15.3 Reports of Uncovered Short
Positions. Positions.
7.3 Financial Reports.................. 15.5 Financial Reports
7.3(a)................................. 15.5.01.
7.3(b)................................. 15.5.02.
7.4 Audits............................. 15.6 Audits.
7.5 Automated Submission of Trading 15.7 Automated Submission of
Data. Trading Data.
7.6 Securities Accounts and Orders of ...............................
Market-Makers (note: Rule 7.6(a)-(c)
currently in shell Rulebook).
7.6(d)................................. 28.16 (corporate debt security
options Market-Makers),
provision regarding current
Rule 8.9.
7.6(e)................................. 21.20 (government securities
options Market-Makers),
provision regarding current
Rule 8.9.
7.6(f)................................. 23.15 (interest rate options
Market-Makers), provision
regarding current Rule 8.9.
7.7 Risk Analysis of Market-Maker
Accounts
7.7(a)-(b)............................. 15.8(a)-(b) Risk Analysis of
Market-Maker Accounts.
7.7(c)................................. 15.8.01.
7.8 Risk Analysis of Portfolio Margin 15.8A Risk Analysis of
Accounts. Portfolio Margin Accounts.
7.9 Regulatory Cooperation............. 15.9 Regulatory Cooperation.
7.10 Fingerprint-Based Background 15.10 Fingerprint-Based
Checks of Exchange Directors, Background Checks of Exchange
Officers, Employees, and Others. Directors, Officers,
Employees, and Others.
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Section B. Consolidated Audit Trail (CAT) Compliance Rule
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7.20 Definitions....................... 6.85 Definitions.
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7.21 Clock Synchronization............. 6.86 Clock Synchronization.
7.22 Industry Member Data Reporting.... 6.87 Industry Member Data
Reporting.
7.23 Customer Information Reporting.... 6.88 Customer Information
Reporting.
7.24 Industry Member Information 6.89 Industry Member
Reporting. Information Reporting.
7.25 Time Stamps....................... 6.90 Time Stamps.
7.26 Clock Synchronization Rule 6.91 Clock Synchronization Rule
Violation. Violation.
7.27 Connectivity and Data Transmission 6.92 Connectivity and Data
Transmission.
7.28 Development and Testing........... 6.93 Development and Testing.
7.29 Recordkeeping..................... 6.94 Recordkeeping.
7.30 Timely, Accurate, and Complete 6.95 Timely, Accurate, and
Data. Complete Data.
7.31 Compliance Dates.................. 6.96 Compliance Dates.
7.32 Fee Dispute Resolution............ 6.97 Fee Dispute Resolution.
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The proposed rule change makes only non-substantive changes to the
rules being moved into the shell Rulebook in order to update and/or
incorporate headings that better align with the consolidated rules,
update cross-references to other rule text that will be implemented
upon migration, update certain technical text formatting that will be
used in the Rules upon migration (specifically, changing all times to
Eastern Time without time zone indication pursuant to Rule 1.6 in the
shell Rulebook which states that unless otherwise specified, all times
in the Rules are Eastern Time), incorporate defined terms in the shell
Rulebook, and reformat the paragraph lettering and numbering.
The proposed rule also makes non-substantive changes in connection
with removing redundant rule language. The proposed rule change removes
the list of cross-referenced Rules that contain specific maintenance
and furnishing of information requirements under current Rule 15.1.01.
The Exchange believes that because the current list of cross-referenced
Rules is extensive, but not an exhaustive list (as the current rule
states that Trading Permit Holders (``TPHs'') must comply with all
applicable recordkeeping and reporting requirements whether or not
listed), and contains rules that are no longer in existence or have
since been moved or changed (e.g., Rule 6.59 is no longer in the
current Rulebook), the current list is potentially confusing and
unnecessarily cumbersome for market participants as written. Instead,
the Exchange maintains the language in current Rule 15.1.01 (and moves
it to proposed 7.1(a)) that provides that Trading Permit Holders must
comply with all applicable recordkeeping and reporting requirements
under the Rules. By maintaining the language in the current rule that
covers all Rules that require record retention and reporting
requirements, the proposed change does not substantively alter the
Rule. Also, the Exchange believes that by providing language that
succinctly covers all Rules that require or will require record
maintenance or reporting, the proposed rule change will mitigate any
potential investor confusion, both upon effectiveness of this proposed
change and whenever a new or changed rule is incorporated into the
Exchange Rulebook. The proposed change also incorporates the term
``maintenance'', alongside the term production, in proposed Rule 7.1(d)
and (c) (current Rules 15.1.02 and 15.1.03) [sic] which accurately
reflects the existing obligations under the Rules, and in accordance
with Rule 7.1 (current Rule 15.1), regarding maintenance, retention,
and furnishing of books, records, and other information. In addition,
the
[[Page 54233]]
proposed rule change separates the provisions in Rule 28.16 (regarding
Market-Makers in Corporate Debt Security options), Rule 21.30
(regarding Market-Makers in Government security options), and Rule
23.15 (regarding Market-Makers in interest rate options) that are
directly related to current Rule 15.1 from the provisions that are
directly related to current Rule 8.9, and moves them into the
applicable rule in the shell Rulebook. The proposed rule change also
removes the language under current Rules 28.16 and 21.30 which states
that the respective rules supplement current Rule 8.9 (Rule 7.6 in the
shell Rulebook) and Rule 15.1 (proposed Rule 7.1) and the
Interpretations and Policies thereunder. This language is redundant
given the fact that these rules are being consolidated into the rules
in which they reference. Finally, the Exchange notes that it makes a
non-substantive change to the language, ``See Rule 17.50(g)(2)'', in
current Rule 15.3 (proposed Rule 7.2), to instead state that Trading
Permit Holders may be subject to fines pursuant to Rule 13.15(g)(2)
(the updated cross-reference in the shell Rulebook) for violations of
this Rule. This does not alter the current application of Rule
17.50(g)(2) (or shell Rule 13.50(g)(2)) but merely adds context which
provides additional clarity to investors regarding the specific matter
to which the cross-referenced rule governs and/or pertains.
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.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ 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) \7\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
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The proposed rule change does not make any substantive changes to
the rules and is merely intended to consolidate and update the
Exchange's rules in anticipation of the technology migration on October
7, 2019. The Exchange believes that the non-substantive proposed
changes, which update technical text and formatting (e.g., paragraph
headings, time-related references, and verbiage to accurately reflect
the maintenance and production requirements), update rule cross-
references (as well as provide added context surrounding one such
cross-reference in order to provide additional clarity), consolidate
and reorganize rules and rule paragraphs and/or Interpretations and
Policies, incorporate defined terms, and remove redundant and/or
cumbersome provisions that are potentially confusing for market
participants, particularly in light of the consolidated shell Rulebook
format, will foster cooperation and coordination with those
facilitating transactions in securities and remove impediments to and
perfect the mechanism of a free and open market and national market
system by simplifying the Exchange Rules and Rulebook as a whole, and
making its Rules easier to follow and understand, which will also
result in less burdensome and more efficient regulatory compliance.
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 reiterates that
the proposed rule change is being proposed in the context of a
technology migration of the Cboe Affiliated Exchanges, and not as a
competitive filing. The Exchange does not believe that the proposed
rule change will impose any burden on intramarket competition because
it does not make any substantive changes to the current Exchange Rules.
The proposed rule change merely intends to provide consolidated rules
upon migration, which are consistent with the technical text and
formatting in the shell Rulebook that will be in place come October 7,
2019. The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition because the proposed rules
are the same as the Exchange's current rules, all of which have all
been previously filed with the Commission.
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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \10\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the Exchange may implement the proposed rule change at the time of its
anticipated October 7, 2019 system migration. The Exchange believes
that waiver of the operative delay is appropriate because, as the
Exchange discussed above, its proposal does not make any substantive
changes to the Exchange's rules, but merely relocates current rules
regarding reporting, records, and audit to Chapter 7 of the Shell
Rulebook. 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 makes only non-substantive
[[Page 54234]]
changes to the rules. Therefore, the Commission hereby waives the
operative delay and designates the proposal as operative upon
filing.\12\
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2019-073 on the subject line.
PaperComments
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-2019-073. 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-2019-073 and should be submitted on
or before October 30, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22017 Filed 10-8-19; 8:45 am]
BILLING CODE 8011-01-P