[Federal Register Volume 86, Number 57 (Friday, March 26, 2021)]
[Notices]
[Pages 16247-16249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06232]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91385; File No. SR-CFE-2021-007]


Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice 
of a Filing of a Proposed Rule Change Regarding Position Limit Rule 
Updates

March 22, 2021.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 15, 2021 Cboe 
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which Items have been 
prepared by CFE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. CFE also 
has filed this proposed rule change with the Commodity Futures Trading 
Commission (``CFTC''). CFE filed a written certification with the CFTC 
under Section 5c(c) of the Commodity Exchange Act (``CEA'') \2\ on 
March 15, 2021.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to update certain of its rule provisions 
relating to position limits.
    The rule amendments included as part of this proposed rule change 
are to apply to all products traded on CFE, including both non-security 
futures and any security futures that may be listed for trading on CFE. 
The scope of this filing is limited solely to the application of the 
proposed rule change to security futures that may be traded on CFE. 
Although no security futures are currently listed for trading on CFE, 
CFE may list security futures for trading in the future.
    The text of the proposed rule change is attached as Exhibit 4 to 
the filing but is not attached to the publication of this notice.

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

    In its filing with the Commission, CFE 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. CFE 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
    CFE Rule 412 (Position Limits) governs CFE position limits and 
position limit exemptions. The CFTC recently amended its position limit 
regulations in Part 150 \3\ of the CFTC Regulations.\4\ Among other 
things, revised Part 150 \5\ imposes federal position limits for 
``referenced contracts,'' which include (1) 25 ``core referenced 
futures contracts'' (made up of nine ``legacy agricultural contracts'' 
(e.g., CBOT Corn) and 16 ``non-legacy contracts'' (e.g., ICE Cocoa)), 
(2) futures contracts and options on futures contracts directly or 
indirectly linked to a core referenced futures contract, and (3) 
``economically equivalent swaps.'' CFE does not currently offer for 
trading any products that are subject to the requirements of revised 
Part 150 \6\ of the CFTC Regulations. Instead, CFE offers for trading 
futures on excluded commodities, which are not within the scope of 
revised Part 150 \7\ of the CFTC Regulations. Although the changes to 
Part 150 \8\ of the CFTC Regulations do not apply to CFE's products, 
CFE is proposing to make the following three updates to Rule 412 in 
light of the changes made by the CFTC to Part 150 \9\ of the CFTC 
Regulations. CFE is proposing to make these updates to Rule 412 in 
order to align certain language of Rule 412 with the language of 
revised Part 150 \10\ of the CFTC Regulations and to make clear that 
CFE will adhere to the applicable provisions of Part 150 \11\ if CFE 
were ever to list a product that is subject to the provisions of Part 
150.\12\
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    \3\ 17 CFR part 150.
    \4\ See CFTC Final Rule Regarding Position Limits for 
Derivatives, 86 FR 3236 (January 14, 2021).
    \5\ 17 CFR part 150.
    \6\ 17 CFR part 150.
    \7\ 17 CFR part 150.
    \8\ 17 CFR part 150.
    \9\ 17 CFR part 150.
    \10\ 17 CFR part 150.
    \11\ 17 CFR part 150.
    \12\ 17 CFR part 150.
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    Rule 412(b) currently provides that position limits shall be as 
established by the Exchange from time to time as permitted by CFTC 
Regulations 150 \13\ and 41.25 \14\ as applicable. The reference in 
Rule 412(b) to CFTC Regulation 150 \15\ is intended to refer to Part 
150 \16\ of the CFTC Regulations. CFTC Regulation 41.25 \17\ governs 
position limits for security futures products. In addition to being 
able to establish position limits for products governed by Part 150 
\18\ of the CFTC Regulations as permitted by Part 150 \19\ and for 
security futures products as permitted by CFTC Regulation 41.25,\20\ 
CFE is also able to establish position limits for other products as 
permitted by CFTC Regulation 38.300.\21\ CFTC Regulation 38.300 \22\ 
restates Designated Contract Market (``DCM'') Core Principle 5 
(Position Limitations or Accountability) under Section 5 of the CEA 
\23\ and applies to all products offered for trading by a DCM. CFTC 
Regulation 38.300 \24\ provides, in relevant part, that to reduce the 
potential threat of market manipulation or congestion (especially 
during trading in the delivery month), a DCM shall adopt for each 
contract of the DCM, as is necessary and appropriate, position 
limitations or position accountability for speculators. In order to 
more clearly reflect the reference to Part 150 \25\ of the CFTC 
Regulations in Rule 412(b) and to also reference CFTC Regulation 38.300 
\26\ in Rule 412(b), the proposed rule change proposes to revise Rule 
412(b) to provide that CFE position limits shall be as established by 
the Exchange from time to time as permitted by CFTC Regulation 
38.300,\27\ Part

[[Page 16248]]

150 \28\ of the CFTC Regulations, and CFTC Regulation 41.25,\29\ as 
applicable.
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    \13\ 17 CFR part 150.
    \14\ 17 CFR 41.25.
    \15\ 17 CFR part 150.
    \16\ 17 CFR part 150.
    \17\ 17 CFR 41.25.
    \18\ 17 CFR part 150.
    \19\ 17 CFR part 150.
    \20\ 17 CFR 41.25.
    \21\ 17 CFR 38.300.
    \22\ 17 CFR 38.300.
    \23\ 7 U.S.C. 7(d)(5).
    \24\ 17 CFR 38.300.
    \25\ 17 CFR part 150.
    \26\ 17 CFR 38.300.
    \27\ 17 CFR 38.300.
    \28\ 17 CFR part 150.
    \29\ 17 CFR 41.25.
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    The proposed rule change also proposes to remove from Rule 412(c) 
and Rule 412(d)(i) references to prior CFTC Regulation 1.3(z) \30\ 
which has been superseded by revisions to Part 150 \31\ of the CFTC 
Regulations. Prior CFTC Regulation 1.3(z) \32\ previously included a 
definition of the term ``bona fide hedging transaction for excluded 
commodities,'' but with the CFTC's amended position limit regulations, 
CFTC Regulation 1.3 \33\ no longer contains a definition for bona fide 
hedge transaction. Accordingly, the proposed rule change proposes to 
remove a reference to prior CFTC Regulation 1.3(z) \34\ in current Rule 
412(c) which provides that the term ``bona fide hedge transaction'' 
means any transaction or position in a particular contract based the 
requirements of CFTC Regulation 1.3(z).\35\ The proposed rule change 
also proposes to remove references to prior CFTC Regulation 1.3(z) \36\ 
in current Rule 412(d)(1) [sic] which requires representations in a 
position limit exemption request for a bona fide hedge transaction with 
respect to satisfaction of the requirements of CFTC Regulation 
1.3(z).\37\ The proposed rule change also proposes to revise Rule 
412(c) and Rule 412(d)(1) [sic] to refer to a ``bona fide hedge 
transaction or position'' instead of to a ``bona fide hedge 
transaction'' consistent with how the CFTC now refers to this term.\38\
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    \30\ 17 CFR 1.3(z).
    \31\ 17 CFR part 150.
    \32\ 17 CFR 1.3(z).
    \33\ 17 CFR 1.3.
    \34\ 17 CFR 1.3(z).
    \35\ 17 CFR 1.3(z).
    \36\ 17 CFR 1.3(z).
    \37\ 17 CFR 1.3(z).
    \38\ See 17 CFR 150.1(a).
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    Finally, the proposed rule change proposes to revise Rule 412(c) to 
provide that to the extent that a contract is subject to federal 
position limits or otherwise subject to the provisions Part 150 \39\ of 
the CFTC Regulations, the Exchange shall adhere to the applicable 
provisions Part 150 \40\ of the CFTC Regulations, including any 
applicable definitions and requirements, in relation to any position 
limit exemption requests relating to that contract. As noted above, 
Part 150 does not apply to futures on excluded commodities, which are 
the only products that CFE currently lists for trading. Thus, while CFE 
does not currently offer for trading any contract subject to federal 
position limits or otherwise subject to the provisions of Part 150 \41\ 
of the CFTC Regulations, this provision makes clear that CFE will 
comply with the applicable provisions of Part 150 \42\ in the event 
that CFE were to list this type of contract for trading in the future. 
Additionally, this provision makes clear that CFE will apply the 
definitions included in Part 150 \43\ of the CFTC Regulations to the 
extent that they are applicable. As a result, CFE is not including or 
cross-referencing those specific definitions in Rule 412.
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    \39\ 17 CFR part 150.
    \40\ 17 CFR part 150.
    \41\ 17 CFR part 150.
    \42\ 17 CFR part 150.
    \43\ 17 CFR part 150.
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    CFE is proposing to make these three targeted updates to Rule 412 
now so that its provisions are not out of date. CFE may propose further 
updates to Rule 412 in the future if it were to ever list for trading 
any contract subject to the provisions of Part 150 \44\ of the CFTC 
Regulations or in light of how other DCMs that offer trading in 
products not subject to the provisions of Part 150 \45\ of the CFTC 
Regulations may amend their position limit rules in light of the 
revisions that the CFTC has made to its position limit regulations.
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    \44\ 17 CFR part 150.
    \45\ 17 CFR part 150.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\46\ in general, and furthers the 
objectives of Sections 6(b)(1) \47\ and 6(b)(5) \48\ in particular, in 
that it is designed:
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    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(1).
    \48\ 15 U.S.C. 78f(b)(5).
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     To enable the Exchange to enforce compliance by its 
Trading Privilege Holders and persons associated with its Trading 
Privilege Holders with the provisions of the rules of the Exchange,
     to prevent fraudulent and manipulative acts and practices,
     to promote just and equitable principles of trade,
     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.
    The Exchange believes that the rule updates included in the 
proposed rule change will contribute to CFE's ability to enforce CFE's 
rule provisions regarding position limits and position limit exemptions 
and thus contribute to the protection of investors and the public 
interest. The proposed rule updates are consistent with the position 
limit regulations adopted by the CFTC and remove superseded references 
in CFE's rules. The proposed rule updates will also provide additional 
clarity to Trading Privilege Holders regarding the application of CFE's 
rule provisions relating to position limits and position limit 
exemptions. Additionally, the Exchange believes that the proposed rule 
change is equitable and not unfairly discriminatory in that the rule 
amendments included in the proposed rule change would apply equally to 
all Trading Privilege Holders.

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

    CFE does not believe that the proposed rule changes will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. Specifically, the Exchange believes that the 
proposed rule change will not burden intra-market competition because 
the proposed rule updates will apply equally to all Trading Privilege 
Holders. The Exchange also believes that the proposed rule change will 
not burden inter-market competition since the proposed rule change is 
consistent with CFTC regulations and will enhance CFE's ability to 
carry out its responsibilities as a self-regulatory organization.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The proposed rule change will become operative on March 29, 2021. 
At any time within 60 days of the date of effectiveness of the proposed 
rule change, the Commission, after consultation with the CFTC, may 
summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Act.\49\
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    \49\ 15 U.S.C. 78s(b)(1).
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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:

[[Page 16249]]

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-CFE-2021-007 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-CFE-2021-007. 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-CFE-2021-007, and should be submitted on 
or before April 16, 2021.
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    \50\ 17 CFR 200.30-3(a)(73).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06232 Filed 3-25-21; 8:45 am]
BILLING CODE 8011-01-P