Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Trading Permit Holder Qualifications, 29131-29136 [2015-12143]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 97 (Wednesday, May 20, 2015)]
[Notices]
[Pages 29131-29136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12143]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74963; File No. SR-CBOE-2015-012]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
Trading Permit Holder Qualifications

May 14, 2015.
    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 May 4, 2015, Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III 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

    The Exchange proposed to amend its rules related to Trading Permit 
Holder requirements and direct access to the Exchange's Hybrid Trading 
System (the ``System''). The text of the proposed rule change is 
provided below.
(Additions Are Italicized; Deletions Are [Bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 3.4. Foreign Trading Permit Holders

    [(a) ]A Trading Permit Holder that does not maintain an office in 
the United States responsible for preparing and maintaining financial 
and other reports required to be filed with the Securities and Exchange 
Commission and the Exchange must:
    ([i]a) prepare all such reports, and maintain a general ledger 
chart of account and any description thereof, in English and U.S. 
dollars;
    ([ii]b) reimburse the Exchange for any expense incurred in 
connection with examination of the Trading Permit Holder to the extent 
that such expenses exceed the cost of examining a Trading Permit Holder 
located within the continental United States; and
    ([iii]c) ensure the availability of an individual fluent in English 
knowledgeable in securities and financial matters to assist the 
representatives of the Exchange during examinations.

Rule 3.4A. Additional Trading Permit Holder Qualifications

    (a) In addition to the qualifications set forth in Rules 3.2 
through 3.4, a Trading Permit Holder applicant:
    (i) must be domiciled in (with respect to individuals), or 
organized under the laws of (with respect to organizations), a 
jurisdiction expressly approved by the Exchange. When determining 
whether to approve a jurisdiction, the Exchange will consider whether:
    (A) The applicant will be able to supply the Exchange with such 
information with respect to its dealings with the Exchange as set forth 
in the Rules;
    (B) the Exchange will be able to examine the applicant's books and 
records to verify the accuracy of any information so supplied;
    (C) approval of the applicant as a Trading Permit Holder will 
comply with all applicable laws, rules and regulations; and
    (D) other factors that the Exchange reasonably and objectively 
determines may impact the applicant's ability to comply with the Rules 
and the Act or the Exchange's ability to accept Trading Permit Holders 
from the applicable jurisdiction.
    This approval may be limited to one or more specified categories of 
Trading Permit Holders or Trading Permit Holder activities in a 
jurisdiction or be contingent upon the satisfaction of specified 
conditions by all applicants from a jurisdiction to the extent such 
limits or conditions are necessary to satisfy clauses (A) through (D);
    (ii) will be subject to the jurisdiction of the federal courts of 
the United States and the courts of the state of Illinois; and
    (iii) prior to acting as agent for a customer, must be able to 
provide information regarding the customer and the customer's trading 
activities to the Exchange in response to a regulatory request for 
information pursuant to the Rules. To the extent an individual or 
organization is required by an applicable law, rule or regulation to 
obtain written consent from a customer to permit the provision of this 
information to the Exchange, the applicant must obtain such consent.
    (b) The Exchange may at any time determine that a Trading Permit 
Holder can no longer comply with this Rule 3.4A. In that event, the 
Trading Permit Holder will have three months following the date of that 
determination to come into compliance with this Rule 3.4A. If a Trading 
Permit Holder does not come into compliance during that time period, 
the Exchange may terminate the Trading Permit Holder's status as a 
Trading Permit Holder.
* * * * *

Rule 6.20A. Sponsored Users

    (a)-(b) No change.
    (c) A Sponsoring Trading Permit Holder must ensure that a Sponsored 
User satisfies the requirements set forth in Rule 3.4A(a) and only 
directly accesses the System from an approved jurisdiction as set forth 
in Rule 6.23A(d).

. . . Interpretations and Policies:

    .01 No change.
* * * * *

Rule 6.23A. Trading Permit Holder Connectivity

    (a)-(c) No change.
    (d) The Hybrid Trading System shall be available for entry and 
execution of orders only to Trading Permit Holders, [and ]persons 
associated with Trading Permit Holders, and Sponsored Users (pursuant 
to Rule 6.20A) with authorized access. Such persons may only directly 
access the System from a jurisdiction expressly approved by the 
Exchange pursuant to Rule 3.4A(a). The Exchange will require a Trading 
Permit Holder to enter into a software user or license agreement with 
the Exchange in such form or forms as the Exchange may prescribe in 
order to obtain authorized access to the Hybrid Trading System, if the 
Trading Permit Holder elects to use an API for which the Exchange has 
determined such an agreement is necessary.
    (e)-(f) No change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

[[Page 29132]]

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 to amend its rules related to Trading Permit 
Holder requirements and direct access to the System. The Exchange 
recently launched Extended Trading Hours.\3\ To accommodate the 
potential interest of non-U.S. persons or organizations to become 
Trading Permit Holders or Trading Permits Holders to access the System 
from other jurisdictions in connection with the launch of Extended 
Trading Hours, the proposed rule change adds Rule 3.4A to set forth 
additional qualifications applicable to all Trading Permit Holder 
applicants, amends Rule 6.20A to add a requirement regarding access by 
Sponsored Users and amends Rule 6.23A to add a requirement regarding 
access to the System.
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    \3\ See Securities Exchange Act Release No. 34-73704 (November 
28, 2014), 79 FR 72044 (December 4, 2014) (SR-CBOE-2014-062) 
(approval of rules adopting Extended Trading Hours).
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    Rules 3.2 and 3.3 set forth qualifications for individuals and 
organizations, respectively, to become Trading Permit Holders. For an 
individual to be a Trading Permit Holder, Rule 3.2 requires the 
individual to (i) be at least 21 years of age, (ii) be registered as a 
broker or dealer pursuant to Section 15 of the Act or be associated 
with a Trading Permit Holder organization that is registered as a 
broker or dealer pursuant to Section 15 of the Act, and (iii) meet the 
other qualification requirements for being a Trading Permit Holder 
under the Exchange's bylaws and rules. Similarly, for an organization 
to be a Trading Permit Holder, Rule 3.3 requires the organization to 
(i) be a corporation, partnership, or limited liability company, (ii) 
be registered as a broker or dealer pursuant to Section 15 of the Act, 
and (iii) meet the other qualification requirements for being a Trading 
Permit Holder under the Exchange's bylaws and rules. Each individual 
and organization must be approved to engage in an authorized trading 
function.
    Rule 3.4 imposes additional qualifications on Trading Permit 
Holders that do not maintain an office in the United States responsible 
for preparing and maintaining financial and other reports required to 
be filed with the Commission and the Exchange. Under Rule 3.4, these 
foreign Trading Permit Holders must (i) prepare all such reports, and 
maintain a general ledger chart of account and any description thereof, 
in English and U.S. dollars, (ii) reimburse the Exchange for any 
expense incurred in connection with examination of the Trading Permit 
Holder to the extent that such expenses exceed the cost of examining a 
Trading Permit Holder located within the United States, and (iii) 
ensure the availability of an individual fluent in English 
knowledgeable in securities and financial matters to assist the 
representatives of the Exchange during examinations.\4\
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    \4\ The proposed rule change makes nonsubstantive changes to 
Rule 3.4. It deletes the paragraph letter (a) from the introductory 
paragraph, as there is no paragraph (b). The proposed rule change 
then revises the paragraph markings of subparagraphs (i) through 
(iii) to (a) through (c) to be consistent with the lettering and 
numbering system generally used throughout the Rules.
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    Proposed Rule 3.4A(a) provides that in addition to the 
qualifications set forth in Rules 3.2 through 3.4, a Trading Permit 
Holder applicant:
     Must be domiciled in (with respect to individuals), or 
organized under the laws of (with respect to organizations), a 
jurisdiction expressly approved by the Exchange.\5\ When determining 
whether to approve a jurisdiction, the Exchange will consider whether: 
(i) The applicant will be able to supply the Exchange with such 
information with respect to the applicant's dealings with the Exchange 
as set forth in the Rules,\6\ (ii) the Exchange will be able to examine 
the applicant's books and records to verify the accuracy of any 
information so supplied, (iii) approval of such application will comply 
with all applicable laws, rules and regulations, and (iv) other factors 
that the Exchange reasonably and objectively determines may impact the 
applicant's ability to comply with the Rules and the Act or the 
Exchange's ability to accept Trading Permit Holders from the applicable 
jurisdiction. This approval may be limited to one or more specified 
categories of Trading Permit Holders or Trading Permit Holder 
activities in a jurisdiction or be contingent upon the satisfaction of 
specified conditions by all applicants from a jurisdiction to the 
extent such limits or conditions are necessary to satisfy clauses (i) 
through (iv);
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    \5\ Proposed Rule 3.4A(b) allows the Exchange to determine at 
any time that a Trading Permit Holder can no longer comply with 
proposed Rule 3.4A (for example, if the laws in an applicable 
jurisdiction change). In that event, the Trading Permit Holder will 
have three months following the date of this determination to come 
into compliance with Rule 3.4A. If the Trading Permit Holder does 
not come into compliance during that time period, the Exchange may 
terminate the Trading Permit Holder's status as a Trading Permit 
Holder. This proposed rule change is consistent with Rule 3.5(d), 
which, among other things, permits the Exchange to determine not to 
permit a Trading Permit Holder to continue being a Trading Permit 
Holder if it fails to meet any qualification requirements for being 
a Trading Permit Holder after approval as a Trading Permit Holder.
    \6\ Rule 1.1(c) defines the term ``Rules'' to mean the Rules of 
CBOE.
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     will be subject to the jurisdiction of the federal courts 
of the United States and the courts of the state of Illinois; and
     prior to acting as agent for a customer, must be able to 
provide information regarding the customer and the customer's trading 
activities to the Exchange in response to a regulatory request for 
information pursuant to the Rules. To the extent an individual or 
organization is required by an applicable law, rule or regulation to 
obtain written consent from a customer to permit the provision of this 
information to the Exchange, the applicant must obtain such consent.\7\
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    \7\ The proposed rule change makes a corresponding change to 
Rule 6.20A to provide that Sponsoring Trading Permit Holders must 
ensure that Sponsored Users also satisfy these requirements, as 
Sponsored Users may enter orders, and the Exchange would similarly 
need the same information from Sponsored Users as it would from 
Trading Permit Holders.
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    CBOE intends to initially notify market participants of approved 
jurisdictions by Regulatory Circular (which are publicly available on 
CBOE's Web site). CBOE also intends to have a Web page that lists then-
currently approved jurisdictions. To the extent CBOE no longer intends 
to issue Regulatory Circulars to announce changes to the list of 
approved jurisdictions and only update the Web page, CBOE will issue a 
Regulatory Circular stating that fact.\8\
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    \8\ See Regulatory Circular RG15-014 (question #5 includes a 
current list of approved jurisdictions (British Virgin Islands, 
Cayman Islands, Gibraltar, Ireland, Isle of Jersey, Luxembourg, 
Poland, United Kingdom and United States), subject to approval of 
this proposed rule change).
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    The Exchange believes the proposed Trading Permit Holder 
qualifications in

[[Page 29133]]

proposed Rule 3.4A are reasonable for the following reasons:
     Proposed Rule 3.4A(a)(i) is intended to ensure that the 
Exchange can comply with applicable regulatory requirements in 
jurisdictions in which Trading Permit Holders are located and obtain 
the information necessary to perform its self-regulatory obligations. 
With respect to the factors the Exchange will consider when determining 
whether to approve a jurisdiction, the Exchange needs sufficient 
information to monitor Trading Permit Holders' compliance with the 
Rules and the Act.
    [cir] The Exchange understands that laws in certain jurisdictions 
may limit market participants' ability to share, or a foreign entity's 
ability to access, certain information. In order to perform its self-
regulatory obligations, CBOE needs to ensure it has a complete audit 
trail and sufficient access to information with respect to all Trading 
Permit Holders. Proposed paragraphs (a)(i)(A) and (B) are intended to 
ensure that CBOE will be able to obtain this information regarding a 
Trading Permit Holder to properly conduct its surveillances and other 
regulatory functions.
    [cir] Additionally, the Exchange understands that certain 
jurisdictions require a foreign exchange to receive certain 
authorization to permit direct access (including exchange membership) 
to an exchange. Proposed paragraph (a)(i)(C) is intended to ensure 
CBOE's compliance with all applicable laws, rules and regulations, 
including such restrictions on exchange membership.
    [cir] Legal and regulatory requirements related to the securities 
industry, including exchanges, and international business relationships 
are constantly changing, which changes could impact a Trading Permit 
Holder applicant's ability to comply with the Rules and the Act or the 
Exchange's ability to permit Trading Permit Holders from a particular 
jurisdiction. For example, a country may adopt telecommunication laws 
that restrict market participants from complying with Exchange system 
requirements to establish a connection. A jurisdiction may also impose 
obligations on CBOE as a foreign exchange that may conflict with its 
self-regulatory obligations under the Act or may not have a regulatory 
framework in place that the Exchange believes provides sufficient local 
oversight and protection over market participants. Additionally, the 
Exchange believes it may be reasonable to consider other factors when 
determining whether to approve a jurisdiction, such as if necessary to 
maintain a fair and orderly market or to address other circumstances. 
For example, the U.S. government may restrict U.S. businesses from 
doing business in a jurisdiction, or may not officially recognize the 
government of another jurisdiction. CBOE believes it is reasonable to 
comply with these governmental restrictions and not approve any such 
jurisdiction. Proposed paragraph (a)(i)(D) provides CBOE with the 
flexibility to consider these changes or circumstances when determining 
whether to approve a jurisdiction.
    [cir] The proposed rule change that permits CBOE to limit the 
categories or activities of a Trading Permit Holder from a jurisdiction 
or impose conditions will allow the Exchange to comply with any laws, 
rules or regulations in a jurisdiction that may permit only certain 
activities on the Exchange by market participants in that jurisdiction. 
For example, local laws or regulations may restrict market participants 
from quoting as market-makers or from submitting orders as agent for 
customers. In such a case, this rule change permits the Exchange to 
comply with such laws or regulations while permitting Trading Permit 
Holders from a jurisdiction on a restricted basis.
     Proposed Rule 3.4A(a)(ii) will ensure CBOE can enforce the 
Rules and any agreements it has with Trading Permit Holders in U.S. and 
Illinois courts.
     The Exchange understands that certain jurisdictions have 
privacy laws that restrict broker-dealers from sharing certain 
information regarding their customers. CBOE believes such information 
is necessary to regulate its market. Similar to proposed Rule 
3.4A(a)(i)(A) and (B), proposed Rule 3.4A(a)(iii) is intended to ensure 
CBOE has a complete audit trail and sufficient access to information 
with respect to all Trading Permit Holders and the orders they 
represent on the Exchange (including those from customers) in order to 
properly conduct its surveillances and other regulatory functions.

These requirements will ultimately enhance the Exchange's regulatory 
oversight of its Trading Permit Holders' trading activity.
    The Exchange also believes these additional requirements for all 
Trading Permit Holders are objective and nondiscriminatory. Proposed 
Rule 3.4A(a) sets forth explicit requirements that all Trading Permit 
Holder applicants must satisfy. With respect to approved jurisdictions, 
the Exchange will consider all of the factors included in proposed Rule 
3.4A(a)(i) for all jurisdictions in the same manner. The Exchange's 
consideration of the factors in subparagraph (A) through (C) generally 
will include reviews of the applicable laws, rules and regulations of a 
jurisdiction in consideration to determine whether those factors can be 
satisfied in that jurisdiction. Proposed Rule 3.4A(a)(i)(D) explicitly 
states that the Exchange will determine ``other factors'' objectively, 
and CBOE will consider them in the same manner for all jurisdictions it 
considers. The proposed rule change that indicates the Exchange may 
limit approval to categories of Trading Permit Holders or activities in 
a jurisdiction or impose other conditions specifies that such limits or 
conditions will be imposed on all applicants from the same 
jurisdiction, and the Exchange represents it will determine in the same 
manner for all jurisdictions whether to impose any such limits or 
conditions on Trading Permit Holders from a jurisdiction.\9\
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    \9\ The Exchange notes that this does not prevent the Exchange 
from imposing conditions or restrictions on individual Trading 
Permit Holders pursuant to other Rules. See, e.g., Rules 3.5(c) 
(permits the Exchange to condition a person from becoming a Trading 
Permit Holder on satisfaction of requirements set forth in that 
paragraph); Rule 8.2(b) (permits the Exchange to suspend or 
terminate a Trading Permit Holder's registration as a Market-Maker); 
and Rule 8.90 (permits the Exchange to terminate, place conditions 
upon or otherwise limit a TPH organization's approval to act as 
Designated Primary Market-Maker under certain circumstances).
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    The proposed change to Rule 6.23A provides that persons with 
authorized access to the System (Trading Permit Holders, persons 
associated with Trading Permit Holders and Sponsored Users) \10\ only 
directly access the System from an approved jurisdiction. The Exchange 
has determined that laws, rules and regulations related to exchange 
membership (that may restrict persons or entities domiciled in or 
organized under the laws of, as applicable, a specific jurisdiction 
from, for example, supplying an exchange with certain trading 
information or providing an exchange with access to its books and 
records) apply in the same manner to persons or entities accessing an 
exchange from the applicable jurisdiction.\11\ For example, if an 
office

[[Page 29134]]

of a Trading Permit Holder organization that is organized in the United 
States is located in a foreign jurisdiction, as a Trading Permit Holder 
(organized in an approved jurisdiction) it is authorized to directly 
access the System for trading purposes. However, the laws of that 
jurisdiction may prevent the Exchange from obtaining necessary 
information related to the trading activity on the Exchange originating 
in such office (in accordance with proposed Rule 3.4A(a)). Therefore, 
the Exchange would not permit this direct System access from such 
jurisdiction for the same purposes as it would not approve a Trading 
Permit Holder applicant domiciled in or organized under the laws of 
such jurisdiction. Currently, the Exchange has authority under Rule 
6.23A(e) to prescribe technical specifications regarding the 
establishment of an electronic connection to the System. While the 
proposed rule change is not a technical, system specification, the 
Exchange believes that imposing requirements on the location of the 
connection is similar to a ``specification,'' because this location 
requirement will be part of the same process that otherwise imposes 
these technical specifications with which the Trading Permit Holder 
must comply when establishing a connection with the Exchange.
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    \10\ Rule 6.20A provides that Sponsored Users may be authorized 
to electronically access the System subject to the requirements set 
forth in that Rule. The proposed rule change adds Sponsored Users to 
the list of persons that may have authorized access to the System 
pursuant to Rule 6.23A to be consistent with Rule 6.20A, which were 
inadvertently omitted from that list.
    \11\ The proposed rule change makes a corresponding change to 
Rule 6.20A to provide that Sponsoring Trading Permit Holders must 
ensure that Sponsored Users directly access the System only from an 
approved jurisdiction, as these laws, rules and regulations apply to 
any persons that directly access the Exchange from the applicable 
jurisdiction.
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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.\12\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \13\ 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) \14\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In particular, proposed Rule 3.4A, which imposes additional 
qualifications on Trading Permit Holder applicants, including the 
requirement that the Exchange may determine in which jurisdiction 
Trading Permit Holder applicants may be domiciled in or organized under 
(and the ability of the Exchange to determine that a Trading Permit 
Holder no longer complies with this proposed requirement), is similar 
to Section 6(c)(3)(C) of the Act. That section of the Act allows the 
Exchange to deny persons from becoming associated with Trading Permit 
Holders if they are unable to supply the Exchange with such information 
with respect to its relationship and dealings with such persons or 
entities and unable to permit the Exchange to examine their books and 
records due to the jurisdiction (and any applicable laws, rules and 
regulations of that jurisdiction) in which they are domiciled or under 
the laws of which they are organized. While that Section of the Act 
applies to associated persons and not Trading Permit Holders, the 
Exchange believes it is appropriate to impose those requirements on 
Trading Permit Holders as well to ensure it has access to sufficient 
information to perform its self-regulatory obligations. Additionally, 
the Rules (which have been approved by the Commission and deemed to be 
in accordance with the Act) currently provide that an applicant must 
meet the qualification requirements under the Exchange's Bylaws and 
Rules (including obtaining a Trading Permit) \15\ and deny a person 
from becoming (or condition being) a Trading Permit Holder for such 
other cause as the Exchange reasonably may decide.\16\
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    \15\ See Rules 3.2(a)(iii) and 3.3(a)(iii).
    \16\ See Rule 3.5(c)(iv).
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    The Exchange believes the additional qualifications set forth in 
proposed Rule 3.4A are reasonable and consistent with these current 
rules. Please see the ``Purpose'' section above (beginning on page 29) 
for a discussion regarding the reasonability of these qualifications. 
The Exchange notes that the membership qualifications, and reasons an 
exchange may deny membership to a party, set forth in Section 6(b) and 
(c) of the Act are not meant to be exhaustive, and that it is 
reasonable for an Exchange to have requirements for exchange membership 
beyond those contained in the Act.\17\ The Commission has previously 
approved rules that impose additional membership requirements, 
including additional qualifications for foreign organizations.\18\
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    \17\ See, e.g., Securities Exchange Act Release No. 34-71513 
(February 7, 2014), 79 FR 8771 (February 13, 2014) (SR-CBOE-2013-
100) (order approving proposed rule change to require Trading Permit 
Holders of the CBOE Stock Exchange, LLC (CBSX), a stock trading 
facility of CBOE, to be members of a national securities 
association). In that approval order, the Commission stated that 
``the proposed rule change is consistent with Section 6(b)(2) and 
Section 6(c) of the Act. While Section 6(c) specifies certain bases 
upon which a national securities exchange can deny membership to, 
among other entities, a broker or a dealer, Section 6(c) is not 
intended to provide an exclusive list of reasons a national 
securities exchange can deny membership to a party. National 
securities exchanges may have requirements for exchange membership 
beyond those contained in the Act so long as they are consistent 
with the Act.'' Id. at 8772.
    \18\ See, e.g., Securities Exchange Act Release No. 34-43056 
(July 19, 2000), 65 FR 46524 (July 28, 2000) (SR-CBOE-1999-15) 
(order approving proposed rule change to, among other things, impose 
additional membership qualifications on foreign organizations 
(including that such organizations must be organized under laws of a 
country that satisfies certain criteria set forth by the Exchange in 
the proposed rule)). In that approval order, the Commission stated 
that it ``believes that it is reasonable for the CBOE to clarify 
that, in addition to satisfying the requirements of CBOE Rule 3.4, a 
foreign organization must satisfy the other membership qualification 
requirements under the CBOE's rules and Constitution, as well [as] 
any additional requirements that the CBOE reasonably deems 
appropriate. The Commission believes that these provisions will 
clarify that a foreign organization, like a U.S. applicant for 
membership, must satisfy all of the CBOE's membership qualification 
requirements and provide the CBOE with flexibility to impose 
additional requirements that the CBOE reasonably believes are 
necessary with respect to foreign members.'' Id. at 46534. The 
Exchange notes that SR-CBOE-1999-15 imposed more restrictive 
membership requirements on foreign organizations than the proposed 
rule change in this filing.
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    The proposed changes to Rules 6.20A and 6.23A regarding access are 
similar to current Rule 6.23A(e) (previously approved by the Commission 
as consistent with the Act), which permits the Exchange to impose 
specific requirements related to connectivity to the Exchange. As 
discussed above, while the proposed rule change is not a technical 
specification, the access location requirement is part of the entire 
process a Trading Permit Holder must satisfy in order to establish a 
connection with the Exchange. Additionally, requiring Sponsored Users 
to satisfy the requirements in proposed Rule 3.4A(a) is consistent with 
Rule 6.20A(b)(1)(C), which provides that a Sponsored User will be bound 
by and comply with Exchange Rules as if the Sponsored User were a 
Trading Permit Holder. The proposed rule change makes explicit in the 
Rules that proposed Rule 3.4A(a) is one of those rules to which the 
Sponsored User must agree to be bound. Additionally, the proposed rule 
change to require the Sponsoring Trading

[[Page 29135]]

Permit Holder to ensure the Sponsored Users satisfaction of the 
proposed jurisdiction requirements is consistent with Rule 6.20A, which 
generally makes the Sponsoring Trading Permit Holder responsible for 
the Sponsored User's actions. Rule 6.20A currently sets forth a number 
of requirements with respect to the Sponsoring Trading Permit Holder/
Sponsored User relationship, and this rule filing imposes proposed 
requirements applicable to all Trading Permit Holders on that 
relationship as well.
    This proposed rule change will promote compliance by the Exchange 
with regulatory requirements of governments and regulatory authorities 
outside of the United States related to exchange memberships and 
access, which promotes just and equitable principles of trade and 
fosters cooperation and coordinates with other regulatory authorities. 
The proposed rule change enhances the Exchange's ability to satisfy its 
self-regulatory obligations by ensuring it is able to receive 
sufficient information to conduct its surveillances and investigations, 
which prevents fraudulent and manipulative acts and practices and 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system, which ultimately protects 
investors.
    Additionally, this proposed rule change is not unfairly 
discriminatory, as the proposed additional qualifications and access 
requirements will apply to all Trading Permit Holders and applicants. 
When determining whether to approve a jurisdiction, the Exchange will 
consider the proposed factors in the same manner for each jurisdiction. 
The Exchange believes that individuals or organizations within a 
specific jurisdiction are similarly situated, and thus it may allow 
individuals or organizations from one jurisdiction to become Trading 
Permit Holders but not from another based on the objective criteria set 
forth in the proposed rule. The objective criteria will ensure that the 
Exchange determines approved jurisdictions in a fair, reasonable manner 
that is not unfairly discriminatory. Please see the ``Purpose'' section 
above (beginning on page 32) for additional discussion regarding how 
the proposed qualifications, including factors to be considered when 
the Exchange is determining whether to approve a jurisdiction, will be 
applied in an objective and nondiscriminatory manner.
    The proposed changes to Rule 3.4 are nonsubstantive and merely 
intended to eliminate any potential confusion resulting from the 
mislettering of the paragraphs of that rule.

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

    CBOE 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 
imposes additional Trading Permit Holder qualifications and access 
requirements for CBOE, and thus does not raise any competitive issues. 
The proposed Trading Permit Holder qualifications and access 
requirements apply equally to all Trading Permit Holders and 
individuals and organizations seeking to become Trading Permit Holders. 
As discussed above, the Exchange will consider all factors in an 
objective and nondiscriminatory manner. The proposed rule change is 
intended to promote compliance by the Exchange with regulatory 
requirements of governments and regulatory authorities outside of the 
United States and enhance the Exchange's ability to satisfy its self-
regulatory obligations and regulate its markets.
    The Exchange notes that current Trading Permit Holders are all 
domiciled in or organized under the laws of the United States and 
satisfy these requirements (and thus need to take no additional 
action). Any potential burden that these qualifications and 
requirements may impose on Trading Permit Holders and applicants are 
far outweighed the Exchange's need to receive sufficient information to 
conduct its surveillances and investigations in order to ensure it can 
continue to effectively regulate its markets, which enhanced regulation 
will ultimately benefit all market participants. Please see the 
``Purpose'' and ``Statutory Basis'' sections above (beginning on pages 
29 and 35, respectively) for additional discussion regarding the 
reasonableness and objectivity of the proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2015-012 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-CBOE-2015-012. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make

[[Page 29136]]

available publicly. All submissions should refer to File Number SR-
CBOE-2015-012 and should be submitted on or before June 10, 2015.

    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).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12143 Filed 5-19-15; 8:45 am]
BILLING CODE 8011-01-P