[Federal Register Volume 89, Number 67 (Friday, April 5, 2024)]
[Notices]
[Pages 24051-24054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07225]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99877; File No. SR-CboeEDGX-2024-018]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Rule 2.8 Regarding Voluntary Termination of Rights as an Exchange 
Member

April 1, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 19, 2024, Cboe EDGX Exchange, Inc. (``Exchange'') filed with 
the Securities and Exchange Commission (``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 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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to 
amend Rule 2.8, related to the voluntary termination of rights as an 
Exchange Member (``Member'').\5\ The text of the proposed rule change 
is provided below.
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    \5\ See Exchange Rule 1.5(n). The term ``Member'' is defined as 
``any registered broker or dealer that has been admitted to 
membership in the Exchange.''
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(Additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe EDGX Exchange, Inc.
* * * * *
Rule 2.8. Voluntary Termination of Rights as a Member
    A Member may voluntarily terminate its rights as a Member only by a 
written resignation addressed to the Exchange's Secretary or another 
officer designated by the Exchange. [Such resignation shall not take 
effect until 30 days after all of the following conditions have been 
satisfied: (i) receipt of such written resignation; (ii) all 
indebtedness due the Exchange shall have been paid in full; (iii) any 
Exchange investigation or

[[Page 24052]]

disciplinary action brought against the Member has reached a final 
disposition; and (iv) any examination of such Member in process is 
completed and all exceptions noted have been reasonably resolved; 
provided, however, that the Board may declare a resignation effective 
at any time] Each terminating Member must promptly (a) make any 
outstanding filings required under the Rules, and (b) pay any 
outstanding fees, assessments, charges, fines, or other amounts due to 
the Exchange, the Commission, or the Securities Investor Protection 
Corporation.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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
    The Exchange proposes amendments to Rule 2.8 (Voluntary Termination 
of Rights as a Member). Rule 2.8 sets forth the requirements for a 
Member's voluntary termination of its rights as a Member. Currently, 
Rule 2.8 provides that a Member's voluntary termination of its rights 
as a Member shall not take effect until 30 days after all of the 
following conditions have been satisfied: (i) receipt of such written 
resignation; (ii) all indebtedness due the Exchange shall have been 
paid in full; (iii) any Exchange investigation or disciplinary action 
brought against the Member has reached a final disposition; and (iv) 
any examination of such Member in process is completed and all 
exceptions noted have been reasonably resolved. The Rule further 
provides that the Board may declare a resignation effective at any 
time.
    The Exchange proposes to amend Rule 2.8 to remove conditions set 
forth in Rule 2.8(iii) and (iv), requiring that any Exchange 
investigation or disciplinary action brought against the Member has 
reached a final disposition and that any examination of such Member in 
process is completed and all exceptions noted have been reasonably 
resolved. The Exchange further proposes to amend Rule 2.8 to align the 
voluntary termination rules with that of its affiliates, Cboe Exchange, 
Inc. (``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2''). 
Specifically, Cboe Options Rule 3.16 and C2 Rule 3.7 require a 
terminating Trading Permit Holder to promptly make any outstanding 
filings required under the respective Rules and pay any outstanding 
fees, assessments, charges, fines, or other amounts due to each 
Exchange, the Commission, or the Securities Investor Protection 
Corporation. The Exchange notes that its affiliates do not maintain a 
30-day notice period for terminating members, and now proposes to 
remove the requirement from the Exchange's Rules. Under Rule 2.8, as 
amended, the Exchange would require receipt of written resignation, 
completion of any outstanding filings required under the Rules, and 
payment of any outstanding fees, assessments, charges, fines, or other 
amounts due to the Exchange, the Commission, or the Securities Investor 
Protection Corporation, in order for a Member's voluntary termination 
of its Member rights to take place.
    The Exchange notes that, under Rule 8.1(b), any Member or person 
associated with a Member shall continue to be subject to the 
disciplinary jurisdiction of the Exchange following the termination of 
such person's membership or association with a Member with respect to 
matters that occurred prior to such termination, provided that written 
notice of the commencement of an inquiry into such matters is given by 
the Exchange to such former Member or former associated person within 
one year of receipt by the Exchange of the latest written notice of the 
termination of such person's status as a Member or person associated 
with a Member.\6\ Thus, notwithstanding the proposed amendments to Rule 
2.8, the Exchange continues to, under Rule 8.1, maintain disciplinary 
jurisdiction for matters relevant to any in-process examinations or 
investigations or disciplinary actions brought against a Member that 
voluntary terminates its membership rights under Rule 2.8, as amended, 
so long as the Exchange provides written notice to the former Member 
(or associated person) within one year of receipt of written notice of 
termination.\7\
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    \6\ The notice requirement does not apply to a person who at any 
time after a termination again subjects himself or herself to the 
disciplinary jurisdiction of the Exchange by becoming a Member or a 
person associated with a Member.
    \7\ For the avoidance of doubt, if a Member voluntarily 
terminates its membership rights under Rule 2.8, as amended, while 
an examination or investigation or disciplinary action is in-
process, the Exchange will continue to maintain disciplinary 
jurisdiction over the Member following their termination, subject to 
the provisions of Rule 8.1.
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    As such, the Exchange believes the proposed amendments will not 
result in any practical changes to the Exchange's disciplinary 
jurisdiction from an Exchange or Member perspective. Rather, the 
proposed amendments are designed to facilitate a more efficient 
voluntary termination process, by allowing Members to terminate their 
Member status and therefore cease being subject to Member obligations 
notwithstanding any ongoing disciplinary actions and exams (which may 
continue for an indeterminate period of time), given the Exchange, via 
Rule 8.1, maintains jurisdiction over the firm following such 
termination for disciplinary matters.
    Further, the Exchange notes there is no provision under the 
Securities Exchange Act of 1934 (the ``Act'') which requires that 
termination be conditioned on final disposition or exam completion. As 
noted above, the proposed rule change aligns the Exchange's voluntary 
termination requirements with those of its affiliates, Cboe Options and 
C2. Under Cboe Options Rule 3.16 (Obligations of Terminating TPHs), 
each terminating Trading Permit Holder is obligated to promptly (i) 
return to the Exchange all Exchange badges, including trading and 
access badges, that were issued to the Trading Permit Holder by the 
Exchange with respect to that Trading Permit Holder's terminating 
Trading Permit Holder status, (ii) make any outstanding filings 
required under Exchange rules, and (iii) pay any outstanding fees, 
assessments, charges, fines, or other amounts due to the Exchange, the 
Securities and Exchange Commission, or the Securities Investor 
Protection Corporation.\8\ The Exchange further notes that at least one 
other exchange has similar obligations for terminating members, in that 
it does not require that

[[Page 24053]]

termination be conditioned on final disposition or exam completion.\9\
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    \8\ Cboe Options Rule 3.1(c)(1) requires a Trading Permit Holder 
seeking to terminate that holder's Trading Permit must notify the 
Exchange, prior to the deadline announced by the Exchange and in a 
form and manner prescribed by the Exchange, that the holder is 
terminating that Trading Permit at the end of its term.
    \9\ See MIAX Options Exchange Rule 206 (Obligations of 
Terminating Members).
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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. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(1) of the Act,\13\ which 
provides that the Exchange be organized and have the capacity to be 
able to carry out the purposes of the Act and to enforce compliance by 
the Exchange's Members and persons associated with its Members with the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
    \13\ 15 U.S.C. 78f(b)(1).
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    In particular, the Exchange believes the proposed amendments to the 
conditional requirements for voluntary termination of Membership will 
make the termination process more efficient by allowing Members to 
terminate their Member status and therefore cease being subject to 
Member obligations notwithstanding any ongoing disciplinary actions and 
exams (which may continue for an indeterminate period of time), given 
the Exchange maintains jurisdiction over the firm following such 
termination for disciplinary matters under Exchange Rules. The Exchange 
believes the proposed amendments result in a termination process that 
allows for proper disciplinary jurisdiction while also ensuring that 
termination is not unduly prolonged due to an administrative 
technicality within the termination requirements, to the benefit of 
investors and the public interest. Further, the Exchange believes the 
proposed changes will serve to avoid wasting Member and Exchange 
resources on maintaining memberships that are no longer utilized, but 
unable to be terminated due to ongoing disciplinary action or 
examination process.
    As noted above, the Exchange continues to maintain disciplinary 
jurisdiction over terminated firms following termination for matters 
that occurred prior to termination, provided written notice of the 
commencement of an inquiry into such matters is provided to the 
terminated Member within one year of the Member's written notice of 
termination. Therefore, the Exchange believes that the termination 
requirements set forth in Rule 2.8(iii) and (iv) are unnecessarily 
duplicative, given the Exchange maintains disciplinary jurisdiction 
over terminated members via Rule 8.1(b) with respect to matters that 
occurred prior to such termination, thereby ensuring the Exchange may 
continue to enforce compliance by the Exchange's Members and persons 
associated with its Members with the Act, the rules and regulations 
thereunder, and the rules of the Exchange.
    Further, the Exchange believes the proposed rule changes are just, 
equitable and not unfairly discriminatory because they conform to the 
process used by its affiliated options exchange, thereby providing 
consistency across the Cboe family options exchanges in regards to 
termination requirements. Such consistent requirements may, in turn, 
simplify the termination process for members of the Exchange that are 
also participants on Cboe affiliated exchanges. The Exchange believes 
this consistency will promote a fair and orderly national options 
market system.
    The proposed changes also apply uniformly to all Members that may 
choose to voluntarily terminate their membership. As noted above, in 
addition to the Exchange's affiliates, at least one other exchange also 
has similar termination requirements as those proposed by the 
Exchange.\14\ As such, the proposed rule change would foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and would remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \14\ See supra note 9. See also Cboe Options Rule 3.16 and C2 
Rule 3.7.
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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. This proposal does not 
create an unnecessary or inappropriate intra-market burden on 
competition because the proposed change will apply uniformly to all 
Members that choose to voluntarily terminate their membership. Further, 
the proposed change is not designed to address any competitive issues. 
Indeed, this proposal does not create an unnecessary or inappropriate 
inter-market burden on competition because it merely amends the 
requirements for voluntary termination of rights as a Member and 
conforms to the requirements of the Exchange's affiliated options 
exchanges, Cboe Options and C2, as well as at least one other 
exchange.\15\ Finally, as noted above, the Exchange believes the 
proposed rule amendments will not result in any practical changes to 
the Exchange's disciplinary jurisdiction from an Exchange or Member 
perspective, given the Exchange maintains disciplinary jurisdiction 
over terminated Members following their termination, subject to the 
provisions of Rule 8.1.
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    \15\ Id.
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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)(iii) of the Act \16\ and Rule 
19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange 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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[[Page 24054]]

    At any time within 60 days of the filing of such 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.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeEDGX-2024-018 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-CboeEDGX-2024-018. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeEDGX-2024-018 and should 
be submitted on or before April 26, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-07225 Filed 4-4-24; 8:45 am]
BILLING CODE 8011-01-P