[Federal Register Volume 90, Number 184 (Thursday, September 25, 2025)]
[Notices]
[Pages 46286-46288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-18550]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104012; File No. SR-CBOE-2025-065]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 7.10 Relating to Fingerprint-Based Background Checks
September 22, 2025.
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 September 9, 2025, Cboe Exchange, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. 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.
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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 amend Rule. 7.10. The text of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (https://www.sec.gov/rules/sro.shtml), the
Exchange's website (https://www.cboe.com/us/options/regulation/rule_filings/bzx/ [sic]) and at the principal office of the Exchange.
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
[[Page 46287]]
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 to amend Rule 7.10 (Fingerprint-Based
Background Checks of Exchange Directors, Officers, Employees and
Others).\3\ Rule 7.10 describes the Exchange's current practice of
conducting fingerprint-based criminal records checks of (i) directors,
officers and employees of the Exchange, and (ii) temporary personnel,
independent contractors, consultants, vendors and service providers
(collectively, ``Contractors'') who have or are anticipated to have
access to facilities and records. The Exchange now proposes to amend
Rule 7.10 to conform to the language in Section 17(f)(2) of the
Securities Exchange Act of 1934 (``Act'').\4\
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\3\ As part of the proposed rule change, the Exchange proposes
to rename Rule 7.10 to ``Fingerprint-Based Background Checks of
Exchange Partners, Directors, Officers and Employees.''
\4\ 15 U.S.C. 78q(f)(2).
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By way of background, access to the Federal Bureau of
Investigation's (``FBI'') database of fingerprint based criminal
records is permitted only when authorized by law. Numerous federal and
state laws authorize employers to conduct fingerprint-based background
checks that make use of the FBI's database. Notably, Section 17(f)(2)
of the Act and SEC Rule 17f-2 \5\ require partners, directors, officers
and employees of members of national securities exchanges, brokers,
dealers, transfer agents, and clearing agencies to be fingerprinted and
authorize SROs to maintain facilities for processing and storing
fingerprint cards and criminal record information received from the FBI
database with respect to such cards. Section 17(f)(2) explicitly
directs the Attorney General of the United States (i.e., the FBI, which
is the fingerprint processing arm of the Office of the Attorney General
of the United States) to provide SROs designated by the Securities and
Exchange Commission (the ``Commission'') with access to criminal
history record information. Section 17(f)(2) was amended by the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010 (``Dodd-
Frank Act'') to also require partners, directors, officers and
employees of registered securities information processors, national
securities exchanges and national securities associations to be
fingerprinted.\6\ Following this amendment, the Exchange and other
securities markets adopted rules to obtain fingerprints from certain
enumerated parties.\7\
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\5\ 17 CFR 240.17f-2(c).
\6\ See Section 929S of the Dodd-Frank Act.
\7\ See International Securities Exchange (``ISE'') Rulebook
Options 6E, Section 8; New York Stock Exchange (``NYSE'') American
Rule 3.11E; and Nasdaq Stock Market, Inc. (``Nasdaq'') Rulebook
General 2, Section 13.
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The Exchange now proposes to amend Rule 7.10 in order to more
closely align with the requirements for national securities exchanges
as provided in Section 17(f)(2) of the Act. As noted above, Rule 7.10
currently applies to (i) directors, officers and employees of the
Exchange, and (ii) Contractors. Section 17(f)(2) of the Act, however,
does not specifically apply to independent contractors nor temporary
employees, but instead references only ``partners, directors, officers,
and employees'' of the Exchange. Thus, the Exchange proposes to amend
Rule 7.10 to add reference to ``partners'' of the Exchange and to
delete references to ``temporary personnel, independent contractors,
consultants, vendors and service providers who have or are anticipated
to have access to its facilities and records (collectively,
``Contractors'')'' in order to conform to the requirements (and
respective authority) of Section 17(f)(2) of the Act.
In addition, in order to still safeguard the security of the
facilities, systems, data, and information of the Exchange, the
Exchange proposes to amend its rule to require all Contractors who have
or are anticipated to have unescorted access to the facilities and
records of the Exchange to have been subject to a background screening
process by their associated employer.\8\ Finally, the Exchange proposes
related technical changes to Rule 7.10(c) and (d).
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\8\ The Exchange currently includes in its professional services
agreements a provision that requires third-party Contractors to
represent and warrant that the Contractor has in place, and shall
maintain, a suitable background screening policy and process
consistent with applicable law which has been followed for each of
its personnel prior to assigning, permissioning or permitting such
personnel to have access to Exchange confidential information or
performing services for the Exchange. The Exchange expects such
background check to focus on, among other things, education
verification, employment history verification, and criminal records.
To the extent a Contractor would have ``escorted'' electronic
access, such Contractor would be unable to view non-public systems,
data, or information of the Exchange unless accompanied by an
authorized Exchange employee who supervises and controls their
access.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\9\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \10\ 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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As noted above, Section 17(f)(2) of the Act, as amended by the
Dodd-Frank Act, only references authority for Exchanges to submit
fingerprints of its ``partners, directors, officers and employees'' for
identification and processing and does not specifically apply to
Contractors. Accordingly, the proposed rule change conforms Rule 7.10
to conform to the language in Section 17(f)(2) and more accurately
reflects the Exchange's authority under Section 17(f)(2) of the Act, as
amended by the Dodd-Frank Act, to require its partners, directors,
officers, and employees to be fingerprinted and submit those
fingerprints (or cause the fingerprints to be submitted) to the
Attorney General for identification and appropriate processing.
The Exchange believes the proposed changes to Rule 7.10, including
the codification of the Exchange's background screening requirements
related to Contractors are consistent with the foregoing requirements
of Section 6(b)(5) in that it will allow the Exchange to remain
compliant with applicable federal law, specifically Section 17(f)(2) of
the Act, while helping the Exchange to identify and exclude persons
(including persons with criminal records) that may pose a threat to the
safety of Exchange personnel or the security of facilities and records,
thereby enhancing business continuity, workplace safety and the
security of the Exchange's operations. Further, the proposed change is
designed to provide transparency as to
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the Exchange's background screening requirements related to
Contractors. For these reasons, the proposal is designed to protect
investors as well as the public interest.
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 proposed rule change is
not intended to address competitive issues, but rather update the
Exchange's existing fingerprint rule to conform with Section 17(f)(2)
of the Act as amended by the Dodd-Frank Act \11\ and provide
transparency as to the Exchange's background screening requirements
related to Contractors.
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\11\ See Section 929S of the Dodd-Frank Act.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) \13\ thereunder.
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; or (iii) become operative for 30
days after 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) \15\ thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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 under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission
may 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 proposed
rule change may become operative immediately upon filing. The Exchange
states that the proposed rule change conforms the Exchange's
fingerprinting rules with the language of Section 17(f)(2) of the Act.
The Exchange also states that it will be able to continue to safeguard
the physical security of the facilities, systems, data, and information
of the Exchange because the proposal will require Contractors who have
or are anticipated to have unescorted access to the facilities of the
Exchange to have been subject to a background screening process by
their associated employer. For these reasons, and because the proposed
rule change does not raise any novel legal or regulatory issues, the
Commission finds that waiving the 30-day operative delay is consistent
with the protection of investors and the public interest. Therefore,
the Commission hereby waives the 30-day operative delay and designates
the proposed rule change 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 has also 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.
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-CBOE-2025-065 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-2025-065. 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 filing 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-CBOE-2025-065 and should be submitted on
or before October 16, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12) and (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18550 Filed 9-24-25; 8:45 am]
BILLING CODE 8011-01-P