[Federal Register Volume 86, Number 38 (Monday, March 1, 2021)]
[Notices]
[Pages 12052-12053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04092]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91193]


Order Granting Application by Cboe C2 Exchange, Inc. for 
Exemption Pursuant to Section 36(a) of the Exchange Act From the Rule 
Filing Requirements of Section 19(b) of the Exchange Act With Respect 
to Certain Rules Incorporated by Reference

February 23, 2021.
    Cboe C2 Exchange, Inc. (``C2'' or the ``Exchange'') has filed with 
the Securities and Exchange Commission (the ``Commission'') an 
application for an exemption under Section 36(a)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ from the rule filing 
requirements of Section 19(b) of the Exchange Act \2\ with respect to 
certain rules of Cboe Exchange, Inc. (``Cboe'') that the Exchange seeks 
to incorporate by reference.\3\ Section 36(a)(1) of the Exchange 
Act,\4\ subject to certain limitations, authorizes the Commission to 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class thereof, from any provision of the Exchange 
Act or rule thereunder, if necessary or appropriate in the public 
interest and consistent with the protection of investors.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
    \3\ See letter from Rebecca Tenuta, Counsel, Cboe C2 Exchange, 
Inc. to Vanessa Countryman, Secretary, Commission, dated February 9, 
2021 (``Exemptive Request'').
    \4\ 15 U.S.C. 78mm(a)(1).
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    The Exchange filed a proposed rule change \5\ under Section 19(b) 
of the Exchange Act to update various C2 Rules and Chapters to reflect 
changes to the Cboe Options rulebook. Namely, in the proposed rule 
change, the Exchange proposed to incorporate by reference rule changes 
made to each Cboe Options rule cross-referenced in the following C2 
chapters or sections: Chapter 3, Section B (TPH Registration); \6\ 
Chapter 4, Section A (Equity and ETP Options); \7\ Chapter 4, Section B 
(Index Options); \8\ Chapter 5 (Business Conduct); \9\ Chapter 6, 
Section E (Intermarket Linkage); \10\ Chapter 6, Section F (Exercises 
and Deliveries); \11\ Chapter 7, Section A; \12\ Chapter 7, Section B; 
\13\ Chapter 9 (Doing Business with the Public); \14\ Chapter 10 
(Margin Requirements); \15\ Chapter 1 (Net Capital Requirements); \16\ 
Chapter 12 (Summary Suspension); \17\ Chapter 13 (Discipline); \18\ 
Chapter 14 (Arbitration); \19\ and Chapter 15 (Hearings and Review) 
\20\ (the ``Cboe Incorporated Rules'').
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    \5\ See Securities Exchange Act Release No. 87646 (December 2, 
2019), 84 FR 66938 (December 6, 2019) (SR-C2-2019-025).
    \6\ Incorporates by reference Cboe Options Chapter 3, Section B.
    \7\ Incorporates by reference Cboe Options Chapter 4, Section A.
    \8\ Incorporates by reference Cboe Options Chapter 4, Section B.
    \9\ Incorporates by reference Cboe Options Chapter 8.
    \10\ Incorporates by reference Cboe Options Chapter 5, Section 
E.
    \11\ Incorporates by reference Cboe Options Chapter 6, Section 
B.
    \12\ Incorporates by reference Cboe Options Chapter 7, Section 
A.
    \13\ Incorporates by reference Cboe Options Chapter 7, Section 
B.
    \14\ Incorporates by reference Cboe Options Chapter 9. See also 
Securities Exchange Act Release No. 87646 (December 2, 2019), 84 FR 
66938 (December 6, 2019) (SR-C2-2019-025), which relocated former 
Rule 3.19 to Rule 9.20 in order to include Cboe Options Rule 9.20 in 
C2 Chapter 9's incorporation of Cboe Options Chapter 9 by reference, 
as former Rule 3.19 is identical to Cboe Options Rule 9.20 and it is 
within the same category of exchange rules otherwise incorporated 
into C2 Chapter 9 by reference to Cboe Options Chapter 9 (i.e., rule 
related to doing business with the public).
    \15\ Incorporates by reference Cboe Options Chapter 10.
    \16\ Incorporates by reference Cboe Options Chapter 11.
    \17\ Incorporates by reference Cboe Options Chapter 12.
    \18\ Incorporates by reference Cboe Options Chapter 13.
    \19\ Incorporates by reference Cboe Options Chapter 14.
    \20\ Incorporates by reference Cboe Options Chapter 15.
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    The Commission notes it previously granted C2 an exemption from the 
rule filing requirements of Section 19(b) of the Act for the rules of 
the Cboe set forth in the C2 rules referenced above.\21\ Since that 
time, the Cboe has renumbered and relocated the previously incorporated 
rules within its rulebook. As a result, C2 has submitted this exemptive 
request to reflect rule number changes in the Cboe Options rulebook. 
Specifically, the Exchange is now requesting, pursuant to Rule 0-12 
under the Exchange Act,\22\ that the Commission grant an exemption from 
the rule filing requirements of Section 19(b) of the Exchange Act for 
changes to the Chapters 3-7 and 9-15 of the Exchange's rules that are 
effected solely by virtue of a change to a Cboe Incorporated Rule. The 
Exchange requests that it be permitted to incorporate by reference 
changes made to the Cboe Incorporated Rules without the need for the 
Exchange to file separately the same proposed rule change pursuant to 
Section 19(b) of the Exchange Act.\23\
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    \21\ See Securities Exchange Act Release Nos. 61152 (December 
10, 2009), 74 FR 66699 (December 16, 2009); and 80339 (March 29, 
2017), 82 FR 16442 (April 4, 2017).
    \22\ 17 CFR 240.0-12.
    \23\ See Exemptive Request, supra note 3.
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    The Exchange represents that the Cboe Incorporated Rules are not 
trading rules.\24\ Moreover, the Exchange states that it proposes to 
incorporate by reference a category of rules (rather than individual 
rules within a category).\25\ The Exchange also represents that, as a 
condition of this exemption, the Exchange will provide written notice 
to its applicants and members whenever Cboe proposes a change to a Cboe 
Incorporated Rule.\26\
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    \24\ Id.
    \25\ Id.
    \26\ The Exchange states that it will provide such notice via a 
posting on the same website location where the Exchange posts its 
own rule filings pursuant to Rule 19b-4(l) within the timeframe 
required by such Rule. In addition, the Exchange states that the 
website posting will include a link to the location on Cboe's 
website where the applicable proposed rule change is posted. Id.
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    According to the Exchange, this exemption is necessary and 
appropriate to maintain consistency between C2 rules and the Cboe 
Incorporated Rules, thus helping to ensure identical regulation of C2 
Permit Holders that are also Cboe Trading Permit Holders with respect 
to the incorporated provisions as

[[Page 12053]]

well as helping to ensure that C2-only Permit Holders are subject to 
consistent regulation as Cboe Trading Permit Holders.\27\ The Exchange 
believes that, without such an exemption, such Permit Holders could be 
subject to two different standards.\28\
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    \27\ See Exemptive Request, supra note 3.
    \28\ See id.
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    The Commission has issued exemptions similar to the Exchange's 
request.\29\ In granting similar exemptions, the Commission stated that 
it would consider future exemption requests, provided that:
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    \29\ See, e.g., Securities Exchange Act Release Nos. 86896 
(September 6, 2019), 84 FR 48186 (September 12, 2019) (order 
granting exemptive request from Nasdaq BX, Inc. relating to rules of 
The Nasdaq Stock Market LLC incorporated by reference) (``Nasdaq BX 
Order''); 86422 (July 22, 2019), 84 FR 36151 (July 26, 2019) (order 
granting exemptive request from Nasdaq BX, Inc., Nasdaq GEMX, LLC, 
Nasdaq ISE, LLC, Nasdaq MRX, LLC, and Nasdaq Phlx LLC relating to 
rules of The Nasdaq Stock Market LLC incorporated by reference); 
80338 (March 29, 2017), 82 FR 16464 (April 4, 2017) (order granting 
exemptive request from MIAX PEARL, LLC relating to rules of Miami 
International Securities Exchange, LLC incorporated by reference); 
and 72650 (July 22, 2014), 79 FR 44075 (July 29, 2014) (order 
granting exemptive requests from NASDAQ OMX BX, Inc. and the NASDAQ 
Stock Market LLC relating to rules of NASDAQ OMX PHLX LLC 
incorporated by reference).
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     A self-regulatory organization (``SRO'') wishing to 
incorporate rules of another SRO by reference has submitted a written 
request for an order exempting it from the requirement in Section 19(b) 
of the Exchange Act to file proposed rule changes relating to the rules 
incorporated by reference, has identified the applicable originating 
SRO(s), together with the rules it wants to incorporate by reference, 
and otherwise has complied with the procedural requirements set forth 
in the Commission's release governing procedures for requesting 
exemptive orders pursuant to Rule 0-12 under the Exchange Act; \30\
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    \30\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) 
(``Commission Procedures for Filing Applications for Orders for 
Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final 
Rule'').
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     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\31\
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    \31\ See Nasdaq BX Order, supra note 29.
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    The Commission believes that the Exchange has satisfied each of 
these conditions. Further, the Commission also believes that granting 
the Exchange an exemption from the rule filing requirements under 
Section 19(b) of the Exchange Act will promote efficient use of the 
Commission's and the Exchange's resources by avoiding duplicative rule 
filings based on simultaneous changes to identical rule text sought by 
more than one SRO. The Commission therefore finds it appropriate in the 
public interest and consistent with the protection of investors to 
exempt the Exchange from the rule filing requirements under Section 
19(b) of the Exchange Act with respect to the above-described rules it 
incorporates by reference. This exemption is conditioned upon the 
Exchange promptly providing written notice to its applicants and 
members whenever Cboe changes a Cboe Incorporated Rule.
    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\32\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in the Exemptive Request, provided that the 
Exchange promptly provides written notice to its applicants and members 
whenever Cboe proposes to change a Cboe Incorporated Rule.
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    \32\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(76).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04092 Filed 2-26-21; 8:45 am]
BILLING CODE 8011-01-P