[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
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                           Section A. General
------------------------------------------------------------------------
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.
------------------------------------------------------------------------
        Section B. Consolidated Audit Trail (CAT) Compliance Rule
------------------------------------------------------------------------
7.20 Definitions.......................  6.85 Definitions.
------------------------------------------------------------------------
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.
------------------------------------------------------------------------

    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