[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Notices]
[Pages 54702-54704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22146]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87228; File No. SR-CBOE-2019-070]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Certain Rules in Connection With Market-Makers in the Shell Rulebook

October 4, 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 26, 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 the 
Substance of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend certain rules in connection with Market-Makers in 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 6, 2019, the Exchange filed a rule filing, SR-CBOE-
2019-059,\5\ operative upon the October 7, 2019 technology 
migration.\6\ This rule filing amended the Exchange rules related to 
its Market-Maker program, including Market-Maker registration, 
appointments, and obligations. Pursuant to SR-CBOE-2019-059, the 
updated Market-Maker rules reside in the Exchange's shell Rulebook, 
and, upon migration, the rules in shell Rulebook will take effect and 
the Market-Maker rules in the currently effective Rulebook will be 
deleted.\7\ Specifically, under SR-CBOE-2019-059, Rule 5.50 will govern 
appointment costs (or ``weights'', as amended by SR-CBOE-2019-059) and 
Rule 7.6 will govern the identification of securities accounts of 
Market-Makers. In SR-CBOE-2019-059, the Exchange inadvertently 
neglected to update the Global Trading Hours (``GTH'') appointment 
weights in light of the amended rules which will apply a Market-Maker's 
selected class appointments across the entire trading day (i.e., both 
GTH and Regular Trading Hours (``RTH'')), and inadvertently neglected 
to update some instances in which the rules refer to appointment costs. 
It also inadvertently did not include language specific to Cboe Options 
when conforming Rule 7.6 to the corresponding rules of its affiliated 
exchanges, C2, EDGX Options, and BZX Options (collectively, the 
``Affiliated Options Exchanges''). The proposed changes intended to 
remedy the aforementioned are described in greater detail below. In 
order to coincide with the effective date of SR-CBOE-2019-059 and the 
migration of the Exchange's trading platform to the same system used by 
the Cboe Affiliated Exchanges,\8\ the Exchange also intends to 
implement this proposed rule change on October 7, 2019.
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    \5\ See Securities Exchange Act Release No. 87024 (September 19, 
2019) (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) 
(SR-CBOE-2019-059).
    \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.
    \8\ Id.
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    In particular, SR-CBOE-2019-059 updated Rule 5.50(g) in the shell 
Rulebook to reflect the manner in which appointment weights will 
function upon migration. SR-CBOE-2019-059 also updated the rules to 
allow a Market-Maker to select class appointments that will apply to 
classes during all trading sessions beginning October 7, 2019.\9\ In 
removing separate class appointments between the two trading sessions, 
the Exchange inadvertently failed to remove the separate appointment 
weights for options classes during GTH. Therefore, the Exchange now 
proposes to remove separate appointment weights for the GTH trading 
session from the appointment weight table under Rule 5.50(g). In 
addition to this, SR-CBOE-2019-059 updated the term appointment costs 
to appointment weights, but inadvertently failed to update all such 
references throughout updated Rule 5.50(g). The Exchange now proposes 
to update the remaining references to appointment costs in Rule 5.50(g) 
to appointment weights.
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    \9\ See Rule 5.50(a) in the shell Rulebook.
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    SR-CBOE-2019-059 also conformed Rule 7.6 in the shell Rulebook to 
the corresponding rules of the Affiliated Options Exchanges. Rule 7.6 
governs the identification of a Market-Maker's securities accounts. In 
conforming this rule to the Affiliated Options Exchanges' corresponding 
rules, the Exchange inadvertently did not

[[Page 54703]]

maintain the language which provides that, in a manner prescribed by 
the Exchange, ``upon request'' each Market-Maker must file with the 
Exchange a list identifying all accounts enumerated in the same 
provision. This specification is not currently in the corresponding 
rules of the Affiliated Options Exchanges, but the Exchange intends to 
maintain this provision for post-migration. Therefore, the Exchange now 
proposes to include the existing language in currently effective Rule 
8.9 into shell Rule 7.6(a) in order to continue this account 
identification process for Market-Makers post-migration. The proposed 
change to include the Exchange request provision will simply allow 
Market-Makers to continue to identify accounts in the manner to which 
they are accustomed and currently adhere, instead of taking on a 
potential additional compliance burden in identifying all accounts to 
the Exchange notwithstanding an Exchange request.
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.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    The proposed rule change to remove separate appointment weights for 
the GTH trading session under Rule 5.50(g) will foster cooperation and 
coordination with persons facilitating transactions in securities and 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it will mitigate any 
potential confusion for Market-Makers upon migration when they will be 
able to select class appointments that apply to classes across all 
trading sessions. The proposed change protects investors by aligning 
the term appointment weight and the appointment weight table with the 
correct term that will be used, and the class appointment process that 
will be in place, post-migration. Additionally, the proposed change to 
incorporate the Cboe Options-specific request language into the rule 
governing identification of Market-Maker accounts is substantively the 
same as the manner in which the current account identification process 
works today. The proposed change is intended to correct an inadvertent 
omission from Rule 7.6(a) in the shell Rulebook that currently applies 
to Market-Makers and does not alter the manner in which the current 
rule functions. Instead, it will remove impediments to and protect the 
mechanism of a free and open market and national market system by 
allowing Market-Makers to continue to identify accounts upon the 
request of the Exchange, without taking on any potential additional 
compliance burden notwithstanding an Exchange request.

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 change is not 
intended as a competitive filing, but merely aligns the appointment 
weight table with the appointment process that will be in effect upon 
the October 7, 2019 migration. Additionally, the proposed change amends 
the rules to continue to allow for Market-Makers to identify accounts 
upon Exchange request post-migration, consistent with the process 
currently in place. The Exchange also notes that, as stated above, the 
proposed change is intended mitigate any potential compliance burden on 
Market-Makers by continuing to allow for account identification upon 
Exchange request. The Exchange notes that neither the GTH appointment 
weights (because they will not be relevant to the post-migration class 
appointment structure and just provides Market-Makers with uniform 
quoting ability per appointment across the trading day \13\) nor the 
account identification procedures have any impact on trading on the 
Exchange.
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    \13\ See supra note 9.
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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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 \16\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ 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 this proposed rule change to make additional 
changes to conform to changes it recently adopted in SR-CBOE-2019-059 
and have both sets of changes operative for its anticipated October 7, 
2019 system migration. The Commission believes that waiver of the 
operative delay is consistent with the protection of investors and the 
public interest because the proposal does not raise any new or novel 
issues. Therefore, the Commission hereby waives the operative delay and 
designates the proposal as operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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

[[Page 54704]]

action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule change 
should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2019-070 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-2019-070. 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 such 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-2019-070, and should be submitted 
on or before October 31, 2019.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22146 Filed 10-9-19; 8:45 am]
 BILLING CODE 8011-01-P