Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Certain Rules Relating To Market-Makers Upon Migration to the Trading System Used by Cboe Affiliated Exchanges, 50545-50558 [2019-20698]
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Federal Register / Vol. 84, No. 186 / Wednesday, September 25, 2019 / Notices
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submission, all subsequent
amendments, all written statements
with respect to the proposed rule
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provisions of 5 U.S.C. 552, will be
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–20694 Filed 9–24–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87024; File No. SR–CBOE–
2019–059]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Certain Rules
Relating To Market-Makers Upon
Migration to the Trading System Used
by Cboe Affiliated Exchanges
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September 19, 2019.
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
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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18:25 Sep 24, 2019
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September 6, 2019, Cboe Exchange, Inc.
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 self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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
and move certain current Rules in
connection with Market-Makers from
the Exchange’s currently effective
Rulebook (‘‘current Rulebook’’) to the
shell structure for the Exchange’s
Rulebook that will become effective
upon the migration of the Exchange’s
trading platform to the same system
used by the Cboe Affiliated Exchanges
(as defined below) (‘‘shell Rulebook’’).
The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/About
CBOE/CBOELegalRegulatory
Home.aspx), 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
In 2016, the Exchange’s parent
company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.)
(‘‘Cboe Global’’), which is also the
parent company of Cboe C2 Exchange,
Inc. (‘‘C2’’), acquired Cboe EDGA
Exchange, Inc. (‘‘EDGA’’), Cboe EDGX
Exchange, Inc. (‘‘EDGX’’ or ‘‘EDGX
Options’’), Cboe BZX Exchange, Inc.
(‘‘BZX’’ or ‘‘BZX Options’’), and Cboe
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Fmt 4703
Sfmt 4703
50545
BYX Exchange, Inc. (‘‘BYX’’ and,
together with Cboe Options, C2, EDGX,
EDGA, and BZX, the ‘‘Cboe Affiliated
Exchanges’’). The Cboe Affiliated
Exchanges are working to align certain
system functionality, retaining only
intended differences between the Cboe
Affiliated Exchanges, in the context of a
technology migration. The Exchange
intends to migrate its trading platform to
the same system used by the Cboe
Affiliated Exchanges, which the
Exchange expects to complete on
October 7, 2019. The Exchange believes
offering similar functionality to the
extent practicable will reduce potential
confusion for market participants.
In connection with this technology
migration, the Exchange has a shell
Rulebook that resides alongside its
current Rulebook, which shell Rulebook
will contain the Rules that will be in
place upon completion of the Cboe
Options technology migration.
The Exchange now proposes to
update and amend its rules under
Chapter 8 (Market-Makers, Trading
Crowds and Modified Trading Systems).
Specifically, the Exchange proposes to
amend its rules regarding Market-Maker
registration, class appointments, and
obligations (applicable to MarketMakers generally and the various
Market-Maker types, i.e. Designated
Primary Market-Makers (‘‘DPMs’’),
Primary Market-Makers (‘‘PMMs’’), and
Lead Market-Makers (‘‘LMMs’’)) to
conform to the corresponding MarketMakers rules of its affiliated options
exchanges, C2, EDGX Options, and BZX
Options (the ‘‘Affiliated Options
Exchanges’’).3 The Exchange proposes
these amendments to reflect the current
Market-Maker functionality and general
rule language of that of the Affiliated
Options Exchanges to the extent
necessary to retain intended differences
unique to Cboe Options market-model,
functionality and/or rule text. In
conforming its Rule to that of is
Affiliated Options Exchanges’ rules, the
Exchange proposes few substantive
changes, which include proposed
changes to the FLEX appointment
process, updates to Market-Maker class
appointments and obligations to such
appointments to apply across Global
Trading Hours (‘‘GTH’’) and Regular
Trading Hours (‘‘RTH’’), updates to the
3 The Exchange notes that the Affiliated Options
Exchanges recently updated and harmonized their
Market-Maker rules. The recent updates to BZX
Option’s Market-Maker rules will be implemented
on or around October 1, 2019, and this filing refers
to these updates. See Securities Exchange Act
Release No. 85845 (May 13, 2019), 84 FR 22541
(May 17, 2019) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Delay
the Operative Date of Rule Change Pursuant to SR–
CboeBZX–2019–025) (SR–CboeBZX–2019–043).
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appointment cost structure,
amendments to certain obligation
provisions, including the bid/ask
requirement, the series excluded from
continuous quoting obligations and
adding a ‘‘good-standing’’ rule, and
updates to some of the rules in
connection with DPMs, including
segregation of accounts for DPM-related
transactions accounts from a firms other
accounts, the DPM net liquidating
requirements, requirement to have two
DPM designees, Exchange review of
DPMs, as well as On-Floor terminations
(which is also in connection with
LMMs) and designations of classes in
connection with DPMs and LMMs.
The Exchange also proposes to make
non-substantive changes to simplify,
clarify, and generally update its MarketMaker rules by consolidating various
provisions and rules (including select
Current rule
Proposed rule
N ......................................
Conforms language to that of the Affiliated Options Exchanges’ rules. Language defining Market-Makers deleted; duplicative of the definition already
in Rule 1.1.
Conforms registration process provisions to that of the Affiliated Options Exchanges’ rules.
Rule 8.2 (Registration of
Market-Makers).
Rule 3.52 (Market-Makers).
Rule 8.13 (Preferred Market-Makers).
Rule 3.56 (PMMs) ...........
Rule 8.15 (Lead MarketMakers).
Rule 3.55 (LMMs) ............
N/A ...................................
N ......................................
Rule 3.54 (DPM Designees).
N/A ...................................
Y: see further discussion
below.
Rule 8.83 (Approval to Act
as DPM).
Rule 3.53 (DPMs) ............
N/A ...................................
N ......................................
Rule 8.88 (Review of
DPM Operations and
Performance).
Rule 8.89 (Transfer of
DPM Appointments).
Rule 3.53 (DPMs) ............
N/A ...................................
N ......................................
Rule 3.53 (DPMs) ............
N/A ...................................
N ......................................
4 The proposed rule change deletes Interpretation
and Policy .01(b) because the Exchange already
moved/consolidated participation entitlements and
rates into shell Rulebook in Rule 5.32. See
Securities Exchange Act Release No. 86374 (July 15,
2019), 84 FR 34963 (July 19, 2019) Notice of Filing
and Immediate Effectiveness of a Proposed Rule
Change Relating to System Connectivity and Order
Entry and Allocation Upon the Migration of the
Exchange’s Trading Platform to the Same System
Used by the Cboe Affiliated Exchanges) (SR–CBOE–
2019–033). The Exchange notes that SR–CBOE–
2019–003 inadvertently failed to remove Rule
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The proposed rule change moves
current Chapter 8 rules related to
registration (including approvals,
eligibility, termination, etc.) and general
Market-Maker functions, from the
current Rulebook to Chapter 3, Section
C (TPH Trading Functions) of the shell
Rulebook as follows:
Description of change
C2 Rule 8.1, EDGX Options Rule 22.2, BZX
Options Rule 22.2.
C2 Rule 8.1, EDGX Options Rule 22.2, BZX
Options Rule 22.2.
N/A ...................................
18:25 Sep 24, 2019
Market-Maker Registration (Proposed
Chapter 3, Section C)
Substantive change
Rule 3.52 (Market-Makers).
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Affiliated Options Exchanges to which
the propose change conforms (if
applicable), whether the proposed
change is substantive or nonsubstantive, and finally, a description of
the proposed rule change. The Exchange
notes that all current provisions
proposed to move to the corresponding
proposed provisions in the shell
Rulebook will also be deleted from the
current rules upon migration.
Corresponding other
Exchange rule
Rule 8.1 (Market-Maker
Defined).
Rule 6.1A (Global Trading
Hours), paragraph
(e)(iii)(A).
Rule 8.81 (DPM Designees).
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rules not covered under current Chapter
8 but pertain to Market-Maker
requirements), simplifying rule language
(e.g. revising run-ons and unnecessary
clauses), updating the rule text to read
in plain English, deleting duplicative
and obsolete rule provisions,
reformatting provision sequencing,
numbering, and lettering, and revising
headings. The Exchange also updates
cross-references to rules not yet in the
shell Rulebook but that will be in the
shell Rulebook and implemented upon
migration. The tables below list each
rule under current Chapter 8, along with
the few additional rules related to
Market-Makers that the Exchange
proposes to consolidate with the
Market-Maker rules, the proposed rule
in the shell Rulebook to which the
current rule will be moved, the
corresponding rule of one or more of the
Y: see further discussion
below..
N ......................................
Moves Rule 8.13(a) and (b), and Interpretation and Policy .01(a) to proposed
rule, deleted Interpretation and Policy .01(b) regarding PMM participation
entitlements,4 and renumbers provisions, changes headings, and updates
cross-references. Removes receipt of PMM order through complex order
book (‘‘COB’’)/or complex order auctions as such complex entitlements are
infrequently allocated, if at all, and, in addition to this, complex orders traded
on the COB or COA will not have PMM allocation in the migrated system.
Moves current Rule 8.15(a) and Interpretation and Policy .01 to proposed rule
and renumbers provisions, changes headings, and updates cross-references. Moves current Rule 6.1A(iii)(A) to proposed rule, which states that
the Exchange may approve one or more market-Makers to act as LMMs in
each class during GTH for one-month terms.
Deletes current 8.1(d) which provides that each DPM must have two designees that are nominees of the DPM, requirement is an unnecessary expense to DPMs. Renumbers provisions and updates cross-references and
updates language to read in plain English.
Modifies the term ‘‘appointment’’ to ‘‘designation’’ to clarify the distinction between a Market-Maker approved to act as a DPM and its appointment to options classes (and updates this term throughout the proposed Market-Maker
rules). Updates the term ‘‘allocation’’ of ‘‘securities’’ to ‘‘appointment’’ of
classes, which is consistent with the terms used throughout Market-Maker
rules (this update is made throughout the proposed Market-Maker rules).
Removes language in connection with the ‘‘Hybrid Trading System’’ and
‘‘Hybrid classes’’ (and makes same update throughout the proposed MarketMaker rules.) 5 Renumbers provisions (including adding Interpretations and
Policies to the rule text) and updates cross-references and updates language to read in plain English.
Renumbers provisions and updates cross-references and headings and updates language to read in plain English.
Moves to proposed rule to consolidate rules regarding Exchange approval,
transfer review, and termination/limitation of status as DPM. Renumbers
provisions and updates cross-references and headings and updates language to read in plain English. Updates certain terms to delineate between
Exchange designation as a DPM and DPM appointment to a class (makes
this change where applicable throughout the rules).
8.13.01(b) when it consolidated into the shell
Rulebook. The filing deleted the following
provisions: Rule 8.13(c) (regarding entitlement rates
for PMMs); Rule 8.15(c)–(d) (regarding participation
entitlements for LMMs); Rule 8.87 (in its entirety,
regarding participation entitlements for DPMs).
5 As noted, on October 7, 2019 the Exchange’s
trading platform will be migrated to the same
system used by the Cboe Affiliated Exchanges. The
Exchange’s trading system will still exist as a
hybrid system but will no longer be referred to as
the ‘‘Hybrid Trading System.’’ Instead, it will be
defined as the ‘‘System,’’ pursuant to Rule 1.1 in the
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Frm 00176
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shell Rulebook, to mean ‘‘the Exchange’s hybrid
trading platform that integrates electronic and open
outcry trading of option contracts on the
Exchange.’’ The Exchange notes that the term
‘‘Hybrid class’’ is no longer relevant because as of
2018, all classes listed for trading on the Exchange
now trade on the same platform (prior to that,
certain classes traded on the Exchange’s Hybrid 3.0
platform, while most classes traded on the
Exchange’s Hybrid platform), making the
distinction obsolete.
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50547
Current rule
Proposed rule
Corresponding other
Exchange rule
Substantive change
Description of change
Rule 8.90 (Termination,
Conditioning, or Limiting
Approval to Act as a
DPM).
Rule 24A.9 (FLEX MarketMaker Appointments
and Obligations).
Rule 3.53 (DPMs) ............
N/A ...................................
N ......................................
Rule 3.57 (FLEX MarketMakers).
N/A ...................................
Y: see below for further
detail.
Moves to proposed rule to consolidate rules regarding Exchange approval,
transfer review, and termination/limitation of status as DPM. Renumbers
provisions and updates cross-references and headings, and updates language to read in plain English.
Moves current Rule 24A.9(a) to proposed rule Changes current ‘‘FLEX Qualified Market-Makers’’ to ‘‘FLEX Market-Makers’’ to harmonize language
under the Market-Maker type rules to the extent possible. Removes current
Rule 24A.9(b) regarding FLEX Appointed Market-Makers because the Exchange currently does not have any FLEX Appointed Market-Makers nor a
participation entitlement established. To the extent the Exchange determines in the future to appoint FLEX Market-Makers as FLEX Appointed
Market-Makers (or similar role) and establish a participation entitlement, the
Exchange will submit a separate rule filing.
The majority of these rules are
virtually identical (other than
renumbering or reorganizing
paragraphs, updating cross-references
and headings, updating language to read
in plain English, and making the types
of non-substantive changes as described
above), and are merely moving from the
current Rulebook to the shell Rulebook.
The Exchange intends to move the
current rules indicated above to
proposed Chapter 3, Section C (TPH
Trading Functions) of the shell
Rulebook in order to consolidate into
one location the rules that provide for
the application, approval, and removal
processes for its various Market-Maker
types. As indicated in the table above,
the proposed change does not
substantively alter the Market-Maker
registration requirement provisions
(current Rule 8.1(b) and Rule 8.2) but
rather proposes to consolidate its
current Market-Maker registration
provisions into proposed Rule 3.52,
which conforms its paragraphs and
language to mirror that of the Affiliated
Options Exchanges’ corresponding rules
(to the extent Affiliated Options
Exchanges’ have corresponding rules).
The Exchange notes that the proposed
Rule 3.52 permits the Exchange to
impose limits to the number of Trading
Permit Holders (‘‘THPs’’) that may
become Market-Makers based on a nonexhaustive list of objective factors,
including system constraints and
capacity restrictions. This is consistent
with the corresponding rules of the
Affiliated Options Exchanges.6
The proposed rule change removes
the requirement that, at a minimum, the
Exchange conduct a review of a DPM’s
operations or performance on an annual
basis. This gives the Exchange more
flexibility regarding when a full review
or evaluation is warranted given the
firm characteristics and infrastructure of
DPM firms do not tend to change and
the Exchange has various surveillances
in place that, if they were to identify a
lapse or failure in a DPM’s compliance
6 See C2 Rule 8.1; EDGX Options Rule 22.2; and
BZX Options Rule 22.2.
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18:25 Sep 24, 2019
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with its obligations, proposed Rule 3.53
allows the Exchange to initiate a review
of a DPM’s operations or performance at
any time, as it currently may.
Proposed Rules 3.53 and 3.55 amend
language under current Rule 8.83(g) and
8.15.01(c), respectively, which provide
that a class in which an Off-Floor DPM
and/or Off-Floor LMM has been
appointed, the Exchange in its
discretion may also appoint an OnFloor LMM, and, if the Exchange in its
discretion determines to reallocate a
class in which an Off-Floor DPM and/
or Off-Floor LMM has been appointed,
the On-Floor LMM appointment will
automatically terminate. The proposed
rules update these rules to remove
automatic termination and allow for the
Exchange to terminate the On-Floor
LMM appointment in its discretion
because the performance of an Off-Floor
DPM and/or Off-Floor LMM is not
connected or indicative of the
performance of an On-Floor LMM that
may be high performing, therefore,
automatic termination would be
unnecessary and disruptive to the OnFloor LMM’s appointment and
obligations.
The proposed rule change updates the
FLEX Market-Maker approval and
appointment process under proposed
Rule 3.57(b). The proposed change
removes the language in current Rule
24A.9(a) that provides for Exchange
designation of two or more FLEX
Market-Makers to each FLEX Index
Option of a given class, and two or more
FLEX Market-Makers to each FLEX
Equity Option of a given class. The
proposed change removes these
provisions, as they are no longer
necessary in the enhancement and
maintenance of the Exchange’s MarketMaker program or for FLEX classes.
Instead, proposed Rule3.57(c) updates
the language of current Rule 24A.9(a) in
connection with FLEX appointments
and Non-FLEX appointments. The
current rule conditions a FLEX MarketMaker’s appointment in a FLEX Index
Option class or a FLEX Equity Option
class on maintaining an appointment in
one or more Non-FLEX Index Option
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classes or one or more Non-FLEX Equity
Option classes, as applicable. Such NonFLEX Option class appointment(s) need
not be in a class(es) that has the same
underlying index or security as the
appointed FLEX Option. The proposed
change updates the appointment
process so that a Market-Maker
approved for FLEX market-making will
automatically receive an appointment in
the same FLEX options class(es) as its
Non-FLEX class appointments selected
in relation to its general Market-Making
responsibilities pursuant to proposed
Rule 5.50. The proposed rule does not
alter the obligations of a FLEX MarketMaker, as they will continue to be
required to maintain an appointment in
a Non-FLEX class. The proposed rule
change simplifies the FLEX
appointment process, but will continue
to provide that each FLEX class will
have appointed Market-Makers to
provide liquidity in that class, in
addition to all other market participants.
The proposed rule change deletes
current Rule 8.83(b) which provides that
each DPM shall have at least two DPM
Designees who are nominees of the
DPM. The Exchange has determined
that for a DPM to maintain Trading
Permits for two nominees is an
unnecessary expense to a member
organization designated to act as a DPM.
Current Rule 3.8 requires that each
member organization have at least one
nominee (which, upon migration, will
be referred to as a ‘‘Responsible Person’’
for TPH organizations that hold
electronic Trading Permits).7 The
Exchange implemented Rule 8.83(b) in
1999 in order to ensure that a DPM is
responsible for ensuring there is always
a nominee available, if, for example, a
nominee were to depart from the
7 The Exchange will implement a rule change to
current Rule 3.8 in anticipation of migration that
will require a designation of a nominee only for
floor-based Trading Permits. TPH organizations that
hold electronic permits will be required to
designate a ‘‘Responsible Person’’, who must be
affiliated with the TPH. The Exchange notes that it
updates this reference where applicable in the
proposed rules herein this filing.
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organization.8 The Exchange notes the
infrequency in which a DPM
necessitated or could not provide for a
‘‘back-up’’ DPM over the last two
decades and, therefore, that the benefit
or protection potentially provided by
this rule is far outweighed by the
expense a DPM must incur to maintain
two nominees. A DPM, like all member
organizations, will continue to be
Current rule
Proposed rule
Rule 8.3 (Appointment of MarketMakers).
Rule 6.1A (Global
Trading Hours),
paragraph (e) (Appointments).
Rule 8.7 (Obligations
of Market-Makers).
Rule 8.7 (Obligations
of Market-Makers).
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Rule 1.1 (definition of
‘‘continuous
quoting obligations’’).
Rule 6.1A (Global
Trading Hours),
paragraph (e)(iv).
N/A ...........................
Market-Maker Appointments and
Obligations (Proposed Chapter 5,
Section D)
Market-Maker appointments to classes
and Market-Maker obligations from the
current Rulebook to Chapter 5, Section
D (Market-Maker Appointments and
Obligations) of the shell Rulebook as
follows:
The proposed rule change also moves
current Chapter 8 rules related to
Corresponding other exchange rule
Substantive change
Description of change
Rule 5.50 (MarketMaker Appointments).
C2 Rule 8.2, EDGX Options Rule 22.3,
BZX Options Rule 22.3.
Y: see below for further detail.
Conforms to the Affiliated Options Exchanges’ corresponding rules regarding appointments to the extent necessary to adhere to existing Exchange rule text,
maintain provisions specific to Cboe Options, and to account for details/descriptions included in the Exchange’s Rules but not in the applicable Affiliated
Options Exchanges’ rules. Incorporates GTH appointment costs. Removes
provisions in connection with Trading Permits as they relate to appointment
costs, which is consistent with the fee schedule and Exchange functionality to
be implemented upon migration. Deletes obsolete provisions and language regarding Exchange-appointed classes as the Exchange does not currently appoint and Market-Makers already choose appointments. Removes current language that refers to the creation of Virtual Trading Crowds (‘‘VTCs’’) The Exchange previously maintained two different assignment types for appointment
costs, VTC and Physical Trading Crowd (‘‘PTC’’) 9 and PTC appointments
have long been eliminated, therefore, there is no longer a need to discern
VTC appointments; all appointments assign appointment costs in the same
manner. Deletes language that allows the Exchange to group classes and
make appointments to those groupings because the Exchange does not invoke these provisions and Market-Makers already select their own appointments. Deletes redundant language and provisions proposed or currently elsewhere in the rules, updates cross-references, paragraph numbering, headings,
and language to read in plain English.
Rule 5.51 (MarketMaker Obligations).
C2 Rule 8.5, EDGX Options Rule 22.5,
BZX Options Rule 22.5.
N .............................
Rule 5.52 (MarketMaker Quotes).
C2 Rule 8.6, EDGX Options Rule 22.6,
BZX Options Rule 22.6.
Y: see below for further details.
Moves current Rule 8.7(a) and (b) and Interpretation and Policy .09 to proposed
rule and conforms to the Affiliated Options Exchanges’ rules to the extent necessary to adhere to existing Exchange rule text, maintain provisions specific to
Cboe Options rules, and to account for details/descriptions included in the Exchange’s Rules but not in the applicable rules of the Affiliated Options Exchanges. Removes provisions redundant of and/or already encompassed by a
Market-Maker’s obligation to engage in dealing to maintain fair and orderly
markets. Proposed Rule 5.51(e), which provides that if the Exchange finds any
substantial or continued failure by a Market-Maker to engage in a course of
dealings, the Market-Maker will be subject to disciplinary action or suspension
or revocation of its registration or its appointment(s), is based on and consistent with the Affiliated Exchanges’ rules, as well as the Exchange’s current
authority to take disciplinary action for Market-Maker failure to meet its MarketMaker obligations (e.g. continuous quoting requirements).
Moves current Rule 8.7(c) and (d), as well as Interpretations and Policies .03,
.05, .06, .09, .10, and .11 to proposed rule. Conforms proposed quoting obligation provisions to Affiliated Options Exchanges’ quoting obligation rules (including for GTH) to the extent necessary to adhere to existing Exchange rule
text, maintains provisions specific to the Exchange and to account for details/
descriptions included in the Exchange’s Rules but not in the applicable Affiliated Options Exchanges’ rules. Moves the definition of ‘‘continuous quoting
obligations’’ from current Rule 1.1 for consistency and consolidation; this includes the current two-sided quote requirement language which is incorporated into proposed Rule 5.52(c). Deletes Rule 6.1A(e)(iv), as this was related separate trading session appointments and Hybrid classes, neither will
be applicable upon migration. Proposed rule does not substantively alter current obligations but rather removes redundancies and makes the quoting obligation rules easier to follow by consolidating current provisions and streamlining language (which includes removing the lengthy and potentially confusing
examples under current 8.7(d)(iii); the Exchange instead currently disseminates notices with such examples, explanations, answers to FAQ, and Exchange contact information). Deletes obsolete and redundant language/provisions, updates cross-references, paragraph lettering, headings, and language
to read in plain English.
Rule 5.53 (GoodStanding for Market-Makers).
C2 Rule 8.4, EDGX Options Rule 22.4,
BZX Options Rule 22.4.
Y: see below for further details.
8 See Securities and Exchange Act No. 41325
(April 22, 1999), 64 FR 23691 (May 3, 1999) (Notice
of Filing of Proposed Rule Change by the Chicago
Board Options Exchange, Inc. To Update and
Reorganize Its Rules Relating to Designated Primary
Market-Makers) (SR–CBOE–98–54).
9 See Securities Exchange Act Release No. 51371
(March 15, 2005), 70 FR 13557 (March 21, 2005)
VerDate Sep<11>2014
required to maintain at least one
nominee (or Responsible Person) and
may choose to maintain multiple
nominees (or Responsible Persons).
18:25 Sep 24, 2019
Jkt 247001
Proposed rule conforms to Market-Maker good standing rules of the Affiliated
Options Exchanges.
(Notice of Filing of Proposed Rule Change by the
Chicago Board Options Exchange, Incorporated To
Amend CBOE Rule 8.4 To Remove the Physical
Trading Crowd Appointment Alternative for
Remote Market-Makers and To Create an ‘‘A+’’ Tier
Consisting of the Two Most Actively-Traded
Products on the Exchange) (SR–CBOE–2005–23).
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10 The Exchange intends to move Interpretation
and Policy .01 and .01(c) to proposed Rule 4.14 of
the shell Rulebook at a later date in anticipation of
migration.
11 The Exchange intends to move Interpretation
and Policy .01 and .01(c) to proposed Rule 4.14 of
the shell Rulebook at a later date in anticipation of
migration.
E:\FR\FM\25SEN1.SGM
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Federal Register / Vol. 84, No. 186 / Wednesday, September 25, 2019 / Notices
Current rule
Proposed rule
Corresponding other exchange rule
Substantive change
Description of change
Rule 8.13 (Preferred
Market-Makers).
Rule 5.56 (PMMs) ..
C2 Rule 8.6, EDGX Options 22.6, BZX
Options 22.6.
Y: update of the
time-to-expiration
language for certain series excluded is the only
substantive
change made; described below.
Rule 8.14 (Hybrid
Trading System
Platforms & Market-Maker Participants).
Rule 8.15 (Lead Market-Makers).
Rule 5.50 (MarketMaker Appointments) paragraph
(l).
Consistent with EDGX Options Rule
22.2(c) *.
Y: see below for further details.
Rule 5.55 (LMMs) ..
N/A ..........................................................
N .............................
Moves current 8.13(b)–(d) and Interpretations and Policies .01(a) through .04 to
proposed rule. Codifies that PMM obligations are applicable only during Regular Trading Hours, which is currently the manner in which they apply. Updates the language in current Rule 8.13 to clarify that receipt of PMM orders is
the point in time when a PMM receives an entitlement (i.e. after being preferred on an order), this is currently that manner in which receipt functions.
Conforms time-to-expiration-language for series excluded to the Affiliated Options time-to-expiration (i.e. from 9 months to 270 days). Renumbers provisions, changes headings, and updates cross-references and language to read
in plain English.
Moves current Rule 8.14 to proposed paragraph (l).10 Removes current Rule
8.14(a) as it is no longer necessary because all classes now trade on the System (Hybrid Trading System). Removes conditions in current paragraph (b) for
Exchange designation of classes without a DPM/LMM and updates rule language to reflect this change.
Moves current 8.15(b)–(d) and Interpretations and Policies .02—.04 to proposed
rule, deletes certain provisions redundant of Market-Maker obligations under
proposed Rule 5.52 (current Rule 8.7, to which a LMM must already comply).
Codifies that LMM obligations are applicable only during Regular Trading
Hours, which is the current manner in which LMM obligations already apply.
Renumbers provisions and updates cross-references and headings, and language to read in plain English. Moves current Rule 6.1A(iii)(B) to Rule 6.1A to
proposed 5.55(b).
Rule 5.50 (MarketMaker Appointments).
N/A ..........................................................
N .............................
Rule 8.85 DPM Obligations.
Rule 5.54 (DPMs) ..
N/A ..........................................................
Y: see below for further details.
Rule 8.95 (Allocation
of Securities and
Location of Trading
Crowds and
DPMs).
Rule 21.19 (Obligations of MarketMakers (Treasury
Bonds and Notes)).
Rule 5.50 (MarketMaker Appointments).
N/A ..........................................................
N .............................
N/A .........................
C2 Rule 8.6, EDGX Options Rule 22.6,
BZX Options Rule 22.6.
N .............................
Rule 22.14 (Maximum Bid-Ask Differentials; MarketMaker Appointments & Obligations).
29.17 (Market-Maker
Appointments &
Obligations).
N/A .........................
N/A ..........................................................
N .............................
N/A .........................
N/A ..........................................................
N .............................
Rule 24A.9 (FLEX
Market-Maker Appointments and
Obligations).
Rule 5.57 (FLEX
Market-Makers).
N/A ..........................................................
N .............................
Rule 8.7 (Obligations
of Market-Makers).
Rule 5.51 (MarketMaker Obligations).
C2 Rule 8.5, EDGX Options Rule 22.5,
BZX Options Rule 22.5.
N .............................
Rule 6.1A (Global
Trading Hours),
paragraph (iii)(B).
Rule 8.84 (Conditions
on the Allocations
of Securities to
DPMs).
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50549
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Moves current rule to proposed 5.50(k), Interpretation and Policy .02 to
5.50(i)(5), and deletes current Interpretation and Policy .01(b) because it is redundant of an existing provision in current Rule 8.95 with which current Rule
8.84 is being consolidated with in proposed Rule 5.50. Renumbers provisions
and updates cross-references and headings, and language to read in plain
English.
Moves current rule, including Interpretations and Policies, to proposed rule. Codifies that DPM obligations are applicable only during Regular Trading Hours,
which is the current manner in which DPM obligations already apply. Removes
segregation of account requirements for DPM-related transactions. Deletes
current 8.85(a)(ii) which states obligations redundant of those in 8.85(a)(i). Deletes Rule 8.85(a)(iii) which is redundant of Market-Maker obligations under
proposed rule 5.52 (current Rule 8.7, to which a DPM must already comply).
Changes ‘‘Exchange committee to ‘‘Exchange’’ as the Exchange, rather than a
specific committee, requires DPM Designees. Renumbers provisions and updates cross-references and headings and language to read in plain English
Deletes Interpretation and Policy .04 which would be redundant of Rule 8.84,
also being consolidated into proposed Rule 5.50. Deletes current 8.95(j) and
Interpretation and Policy .03, which is obsolete as it refers to classes open for
trading prior to 1987. Renumbers provisions and updates headings and crossreferences and language to read in plain English.
Deletes current rule (which covers bid/ask requirements for government securities) to align with proposed no bid/ask requirement, which is consistent with
the Affiliated Options Exchanges. In addition, the Exchange delisted government securities in 2011, therefore, Market-Maker obligations in such classes
are no longer relevant.
Deletes current rule (which covers bid/ask requirements for binary options) to
align with proposed no bid/ask requirement, which is consistent with the Affiliated Options Exchanges. In addition, the Exchange delisted binary options in
2015, therefore, Market-Maker obligations in such classes are no longer relevant.
Deletes current rule, which provides for certain Market-Making obligations in relation to Credit Option classes as the Exchange delisted Credit Options in
2014, therefore, this provision is no longer relevant to the current or proposed
Market-Maker program.
Moves current Rule 21A.9(d) and (e) to proposed rule. Removes current Rule
21A.9(c) regarding FLEX Appointed Market-Maker obligations because the Exchange currently does not have any FLEX Appointed Market-Makers. To the
extent the Exchange determines in the future to have FLEX Appointed MarketMakers in place, the Exchange will submit a separate rule filing. Updates
cross-references, heading, and language to read in plain English.
Moves current Rule 8.7(a) and (b) and Interpretation and Policy .09 to proposed
rule and conforms to the Affiliated Options Exchanges’ rules to the extent necessary to adhere to existing Exchange rule text, maintain provisions specific to
Cboe Options rules, and to account for details/descriptions included in the Exchange’s Rules but not in the applicable rules of the Affiliated Options Exchanges. Removes provisions redundant of and/or already encompassed by a
Market-Maker’s obligation to engage in dealing to maintain fair and orderly
markets. Proposed Rule 5.51(e), which provides that if the Exchange finds any
substantial or continued failure by a Market-Maker to engage in a course of
dealings, the Market-Maker will be subject to disciplinary action or suspension
or revocation of its registration or its appointment(s), is based on and consistent with the Affiliated Exchanges’ rules, as well as the Exchange’s current
authority to take disciplinary action for Market-Maker failure to meet its MarketMaker obligations (e.g. continuous quoting requirements).
E:\FR\FM\25SEN1.SGM
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50550
Federal Register / Vol. 84, No. 186 / Wednesday, September 25, 2019 / Notices
Current rule
Corresponding other exchange rule
Substantive change
Description of change
Rule 5.52 (MarketMaker Quotes).
Proposed rule
C2 Rule 8.6, EDGX Options Rule 22.6,
BZX Options Rule 22.6.
Y: see below for further details.
Moves current Rule 8.7(c) and (d), as well as Interpretations and Policies .03,
.05, .06, .09, .10, and .11 to proposed rule. Conforms proposed quoting obligation provisions to Affiliated Options Exchanges’ quoting obligation rules (including for GTH) to the extent necessary to adhere to existing Exchange rule
text, maintains provisions specific to the Exchange and to account for details/
descriptions included in the Exchange’s Rules but not in the applicable the Affiliated Options Exchanges’ rules. Moves the definition of ‘‘continuous quoting
obligations’’ from current Rule 1.1 for consistency and consolidation; this includes the current two-sided quote requirement language which is incorporated into proposed Rule 5.52(c). Deletes Rule 6.1A(e)(iv), as this was related separate trading session appointments and Hybrid classes, neither will
be applicable upon migration. Proposed rule does not substantively alter current obligations but rather removes redundancies and makes the quoting obligation rules easier to follow by consolidating current provisions and streamlining language (which includes removing the lengthy and potentially confusing
examples under current 8.7(d)(iii); the Exchange instead currently disseminates notices with such examples, explanations, answers to FAQ, and Exchange contact information). Deletes obsolete and redundant language/provisions, updates cross-references, paragraph lettering, headings, and language
to read in plain English.
Rule 5.53 (GoodStanding for Market-Makers).
Rule 5.56 (PMMs) ..
C2 Rule 8.4, EDGX Options Rule 22.4,
BZX Options Rule 22.4.
Y: see below for further details.
Proposed rule conforms to Market-Maker good standing rules of the Affiliated
Options Exchanges.
C2 Rule 8.6, EDGX Options 22.6, BZX
Options 22.6.
Y: update of the
time-to-expiration
language for certain series excluded is the only
substantive
change made; described below..
Rule 5.50 (MarketMaker Appointments) paragraph
(l).
Consistent with EDGX Options Rule
22.2(c) *.
Y: see below for further details.
Rule 5.55 (LMMs) ..
N/A ..........................................................
N .............................
Moves current 8.13(b)–(d) and Interpretations and Policies .01(a) through .04 to
proposed rule. Codifies that PMM obligations are applicable only during Regular Trading Hours, which is currently the manner in which they apply. Updates the language in current Rule 8.13 to clarify that receipt of PMM orders is
the point in time when a PMM receives an entitlement (i.e. after being preferred on an order), this is currently that manner in which receipt functions.
Conforms time-to-expiration-language for series excluded to the Affiliated Options time-to-expiration (i.e. from 9 months to 270 days). Renumbers provisions, changes headings, and updates cross-references and language to read
in plain English.
Moves current Rule 8.14 to proposed paragraph (l).11 Removes current Rule
8.14(a) as it is no longer necessary because all classes now trade on the System (Hybrid Trading System). Removes conditions in current paragraph (b) for
Exchange designation of classes without a DPM/LMM and updates rule language to reflect this change.
Moves current 8.15(b)–(d) and Interpretations and Policies .02—.04 to proposed
rule, deletes certain provisions redundant of Market-Maker obligations under
proposed Rule 5.52 (current Rule 8.7, to which a LMM must already comply).Codifies that LMM obligations are applicable only during Regular Trading
Hours, which is the current manner in which LMM obligations already apply.
Renumbers provisions and updates cross-references and headings, and language to read in plain English. Moves current Rule 6.1A(iii)(B) to Rule 6.1A to
proposed 5.55(b).
Rule 5.50 (MarketMaker Appointments).
N/A ..........................................................
N .............................
Rule 8.85 DPM Obligations.
Rule 5.54 (DPMs) ..
N/A ..........................................................
Y: see below for further details.
Rule 8.95 (Allocation
of Securities and
Location of Trading
Crowds and
DPMs).
Rule 21.19 (Obligations of MarketMakers (Treasury
Bonds and Notes)).
Rule 5.50 (MarketMaker Appointments).
N/A ..........................................................
N .............................
N/A .........................
C2 Rule 8.6, EDGX Options Rule 22.6,
BZX Options Rule 22.6.
N .............................
Rule 22.14 (Maximum Bid-Ask Differentials; MarketMaker Appointments & Obligations).
29.17 (Market-Maker
Appointments &
Obligations).
N/A .........................
N/A ..........................................................
N .............................
N/A .........................
N/A ..........................................................
N .............................
Rule 8.7 (Obligations
of Market-Makers).
Rule 1.1 (definition of
‘‘continuous
quoting obligations’’).
Rule 6.1A (Global
Trading Hours),
paragraph (e)(iv).
N/A ...........................
Rule 8.13 (Preferred
Market-Makers).
Rule 8.14 (Hybrid
Trading System
Platforms & Market-Maker Participants).
Rule 8.15 (Lead Market-Makers).
jbell on DSK3GLQ082PROD with NOTICES
Rule 6.1A (Global
Trading Hours),
paragraph (iii)(B).
Rule 8.84 (Conditions
on the Allocations
of Securities to
DPMs).
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Moves current rule to proposed 5.50(k), Interpretation and Policy .02 to
5.50(i)(5), and deletes current Interpretation and Policy .01(b) because it is redundant of an existing provision in current Rule 8.95 with which current Rule
8.84 is being consolidated with in proposed Rule 5.50. Renumbers provisions
and updates cross-references and headings, and language to read in plain
English.
Moves current rule, including Interpretations and Policies, to proposed rule. Codifies that DPM obligations are applicable only during Regular Trading Hours,
which is the current manner in which DPM obligations already apply. Removes
segregation of account requirements for DPM-related transactions. Deletes
current 8.85(a)(ii) which states obligations redundant of those in 8.85(a)(i). Deletes Rule 8.85(a)(iii) which is redundant of Market-Maker obligations under
proposed rule 5.52 (current Rule 8.7, to which a DPM must already comply).
Changes ‘‘Exchange committee to ‘‘Exchange’’ as the Exchange, rather than a
specific committee, requires DPM Designees. Renumbers provisions and updates cross-references and headings and language to read in plain English
Deletes Interpretation and Policy .04 which would be redundant of Rule 8.84,
also being consolidated into proposed Rule 5.50. Deletes current 8.95(j) and
Interpretation and Policy .03, which is obsolete as it refers to classes open for
trading prior to 1987. Renumbers provisions and updates headings and crossreferences and language to read in plain English.
Deletes current rule (which covers bid/ask requirements for government securities) to align with proposed no bid/ask requirement, which is consistent with
the Affiliated Options Exchanges. In addition, the Exchange delisted government securities in 2011, therefore, Market-Maker obligations in such classes
are no longer relevant.
Deletes current rule (which covers bid/ask requirements for binary options) to
align with proposed no bid/ask requirement, which is consistent with the Affiliated Options Exchanges. In addition, the Exchange delisted binary options in
2015, therefore, Market-Maker obligations in such classes are no longer relevant.
Deletes current rule, which provides for certain Market-Making obligations in relation to Credit Option classes as the Exchange delisted Credit Options in
2014, therefore, this provision is no longer relevant to the current or proposed
Market-Maker program.
E:\FR\FM\25SEN1.SGM
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Federal Register / Vol. 84, No. 186 / Wednesday, September 25, 2019 / Notices
Current rule
Rule 24A.9 (FLEX
Market-Maker Appointments and
Obligations).
Proposed rule
Rule 5.57 (FLEX
Market-Makers).
Corresponding other exchange rule
Substantive change
Description of change
N/A ..........................................................
N .............................
Moves current Rule 21A.9(d) and (e) to proposed rule. Removes current Rule
21A.9(c) regarding FLEX Appointed Market-Maker obligations because the Exchange currently does not have any FLEX Appointed Market-Makers. To the
extent the Exchange determines in the future to have FLEX Appointed MarketMakers in place, the Exchange will submit a separate rule filing. Updates
cross-references, heading, and language to read in plain English.
As indicated above, many of the
proposed rules are virtually identical
(other than updating the rule text to
plain English, updating cross-references,
revising headings renumbering
provisions, and, where applicable,
deleting duplicative provisions as a
result of consolidation, and making
other types of non-substantive changes
described above) and are merely moving
from the current Rulebook to the shell
Rulebook.
jbell on DSK3GLQ082PROD with NOTICES
Proposed Rule 5.50 (Market-Maker
Appointments)
Proposed Rule 5.50 consolidates rules
under current Chapter 8 in connection
with class appointments, which
includes appointment costs and class
appointments to DPMs and Trading
Crowds. Below describes in more detail
the substantive changes proposed:
Proposed Rule 5.50(a) provides that a
registered Market-Maker may select
class appointments to make markets in
those classes during all trading sessions,
i.e. Regular Trading Hours (‘‘RTH’’) 12
and Global Trading Hours (‘‘GTH’’) 13.
Particularly, this proposed change
removes current language, which
provides that a Market-Maker may select
class appointments in one or more
trading sessions in order to harmonize
its rules and processes with the Affiliate
Options Exchanges, which allow for a
Market-Maker selected class
appointment that apply to classes
during all trading sessions.14 In other
words, if a Market-Maker selects an
appointment in Cboe Volatility Index
(‘‘VIX’’) options, which series are open
for trading during GTH and RTH, that
appointment would apply during both
trading sessions (and thus, the MarketMaker would have an appointment to
make markets in VIX during both GTH
and RTH). As a result, a Market-Maker
continuous quoting obligations set forth
in proposed Rule 5.52(d) (current Rule
8.7(d)) would apply to the class for an
entire trading day. A Market-Maker with
appointments in either GTH or RTH is
required to provide continuous quotes
in at least 60% of the series 15 for 90%
12 From
8.30 a.m. CT to 3:15 p.m. CT.
2:00 a.m. CT to 8:15 a.m. CT.
14 See C2 Rule 8.2; EDGX Options Rule 22.3; and
BZX Options Rule 22.3. The Exchange notes that
GTH session on the Affiliated Options Exchanges
occurs from 7:30 a.m. CT to 8:15 a.m. CT.
15 Proposed Rule 5.52(d) (current Rule 8.7(d).
13 From
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18:25 Sep 24, 2019
50551
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of the time it is quoting in those
classes.16 The Exchange notes that a
Market-Maker’s continuous obligations
will continue to function in this
manner, therefore, the extension of
obligations to appointed classes to
trading sessions will have a de minimis,
if any, impact on a Market-Maker’s
continuous quoting obligations, as they
may continue to choose when to
actively quote and have their obligations
to their appointed classes apply.
Proposed 5.50(b) states that a MarketMaker may enter an appointment
request via an Exchange-approved
electronic interface with the Exchange’s
systems by 2:30 a.m.17 for ‘‘All
Sessions’’ 18 classes, that is an option
class the Exchange lists for trading
during both GTH and RTH., which
appointment becomes effective on the
open of the Global Trading session, or
by 9:00 a.m. for classes traded during
Regular Trading Hours, which
appointment becomes effective on the
open of the Regular Trading session.
Market-Makers already request
appointments via an Exchangeapproved electronic interface, therefore
this proposed rule merely codifies the
existing request process.19 This is
consistent with the corresponding rules
of the Affiliated Options Exchanges,20
but is amended to provide MarketMakers with flexibility regarding
appointments between its two trading
sessions, which are different in scope
than those of the Affiliate Options
Exchanges.
The proposed rule change (proposed
Rule 5.50(g)(1)) also deletes language in
current Rule 8.3(c)(iv) that allows for
only 1.0 appointment cost and one tier
appointment per Trading Permit, as well
as rule language relevant to this
limitation. In anticipation of migration,
the Exchange intends to update and
simplify its fee schedule, and a MarketMaker firm will need only one MarketMaking Trading Permit, regardless of
16 Proposed
Rule 5.52(d) (current Rule 1.1).
times are Eastern Time pursuant to Rule 1.6
in shell Rulebook.
18 See Rule 1.1 in the shell Rulebook.
19 See Cboe Release No. C2019071600 (2019),
available at https://cdn.cboe.com/resources/release_
notes/2019/Quarterly-Rebalance-of-Option-ClassTiers-and-Online-Appointment-System-Q2–
2019.pdf
20 See C2 Rule 8.2; EDGX Options Rule 22.3; and
BZX Options Rule 22.3.
17 All
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Frm 00181
Fmt 4703
Sfmt 4703
the number of classes in which it
chooses to have appointments.21 Upon
migration, a Market-Maker firm will
only be required to have one permit and
will be charged for one or more
‘‘Appointment Units’’ (which will scale
from 1 ‘‘unit’’ to more than 5 ‘‘units’’),
depending on which classes they elect
appointments. Appointment Units will
replace the standard 1.0 appointment
cost, but function in the same manner.
Appointment weights (which, in the
proposed rule, replaces the term
‘‘appointment costs’’, but these terms
are equivalent) for each appointed class
will be summed for each Market-Maker
in order to determine the total
appointment units, to which fees will be
assessed. This is the current manner in
which the tier costs per class
appointment are summed to meet the
1.0 appointment cost, the only
difference will be that if a Market-Maker
exceeds this ‘‘unit’’ then their fees will
be assessed under the ‘‘unit’’ that
corresponds to the total of their
appointment weights, as opposed to
holding another Trading Permit because
it exceeded the 1.0 ‘‘unit’’. The
proposed rule also updates some of the
appointment costs (and updates this
term to reflect ‘‘appointment weights’’
in line with the fees schedule for
migration) in order to align with the
rebalanced Appointment Units upon
migration. The proposed change is
intended to provide for a more
straightforward and efficient
administration of the appointment unit
process as it will remove the more
burdensome process in obtaining
Trading Permits and replace it with a
simple, scaled appointment unit regime
(which is reflective of the same scaled
regimes Market-Makers are accustomed
to within the Exchange’s fees schedule).
The Exchange believes that by making
the appointment unit process less
burdensome for Market-Makers, the
proposed rule may potentially
incentivize more market-making across
classes.
The proposed rule change removes
the condition in current Rule 8.14(b)
that the Exchange may only designate
classes to not have a DPM or LMM if
21 See Exchange Notice C2019081900 (August 19,
2019). Also, the Exchange intends to propose this
change to the Fees Schedule in a separate rule
filing.
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jbell on DSK3GLQ082PROD with NOTICES
there are at least four Market-Makers
quoting in the class that are subject to
the continuous quoting obligations.
When the Exchange implemented this
condition, there were a limited number
of classes trading on the Hybrid System
and this condition was designed, at that
time, to enhance the Exchange’s MarketMaking program in the select classes
trading on Hybrid, which was relatively
new to the Exchange. As discussed
above, all classes now trade on the
System (i.e. Hybrid), and Market-Makers
select their own appointments which
adequately cover all classes of options
necessitating market-making liquidity.
In addition to this, proposed Rule
5.52(g) (current Rule 8.7(d)(iv)) allows
for the Exchange to call on a MarketMaker to submit a single quote or
maintain continuous quotes in one or
more series of a Market-Maker’s
appointed class whenever, in the
judgment of the Exchange, it is
necessary to do so in the interest of
maintaining a fair and orderly market.
The Exchange believes these rules
provide for sufficient liquidity in classes
trading on the Exchange. Also, the
proposed change is consistent with the
rules of EDGX Options, which currently
has a DPM program and lists many of
the same classes. Pursuant to EDGX
Options rules, it may choose to appoint
one DPM per class, yet its rules do not
obligate it to do so, nor do they require
for a requisite number of Market-Makers
when EDGX does not choose to appoint
a DPM to a class.22
Proposed Rules Regarding MarketMaker Obligations
The Exchange notes that the proposed
rules in connection with Market-Marker
obligations (presented in the table
above) largely make non-substantive
changes to update and simplify the rules
by reorganizing and consolidating
provisions, simplifying language,
updating language to plain English and
removing redundancies. For example,
and as indicated in the table above,
proposed Rule 5.51 only makes nonsubstantive changes to the rule
governing a Market-Maker’s general
obligations (current Rule 8.7, in part),
most of which remove redundant
provisions that are already covered
under the umbrella of a Market-Maker’s
obligation to engage in dealing to
maintain fair and orderly markets. The
proposed rules make only a few
substantive changes to Market-Maker’s
obligations. The following provides an
overview of the proposed substantive
changes being made to the obligations
for Market-Maker and Market-Maker
22 See
EDGX Options Rule 22.2(c).
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18:25 Sep 24, 2019
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types (which are described in further
detail in the sections below):
• Adds exceptions under proposed
Rule 5.52(a) to the current requirement
(under current Rule 8.51) 23 that a
Market-Maker’s quotes must be firm.
These are consistent with the exceptions
to the firm quote requirement for
Market-Makers on the Affiliated Options
Exchanges.
• Amends language throughout
proposed Rule 5.52 to reflect that a
Market-Maker’s current continuous
quoting requirements (i.e., 90% of the
time a Market-Maker is quoting in its
appointed classes) in 60% of the series
of the Market-Maker’s appointed classes
will now apply to all trading sessions
(GTH and RTH). As indicated in the
table above, the 90% continuous
quoting requirement in 60% of
appointed classes is currently the
quoting requirement for Market-Makers.
The proposed rule change does not alter
this continuous electronic quoting
obligation but merely incorporates the
definition of continuous electronic
quotes into this proposed rule, as
opposed to having this term defined
elsewhere in the Rules, as it is currently.
The Exchange notes that DPMs, PMMs,
and LMMs will also continue to have
the same electronic quoting
requirements which will continue to
apply only during RTH, as they
currently do.
• Updates the series excluded from a
Market-Maker’s continuous quoting
obligations under proposed 5.52(d)(2),
including: Amending the exclusion of
‘‘9-month’’ series to ‘‘270-day series’’
(and makes this proposed change where
applicable throughout the rules); and
adding that any intra-day add-on series
on the day during which such series are
added for trading and any Quarterly
Options series are excluded from the
continuous quoting obligation. The
Exchange notes that it does not propose
to add these series to be excluded from
PMM, DPM, and LMM obligations.
• Removes the quote width
requirements (current Rule 8.7(d)(i)(A)
and (ii)(A), Rule 21.19, and Rule 22.14).
This is consistent with the MarketMaker quoting requirements on the
Affiliated Options Exchanges.
• Adds proposed Rule 5.53 which
governs good standing for MarketMakers and is consistent with rules of
the Affiliated Options Exchanges.
• Removes the requirement under
proposed Rule 5.54 that DPMs must
segregate in a manner prescribed by the
23 The Exchange notes that current Rule 8.51,
which governs Firm Disseminated Market Quotes
will be maintained as is, and continue to apply to
Market-Makers, but will be moved to the shell
Rulebook at a later date.
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Exchange (i.e. segregated accounts)
transaction made in a DPM capacity
from other transactions/activity.
Proposed Rule 5.52 (Market-Maker
Quotes)
Proposed Rule 5.52 consolidates
overall the Market-Maker quoting
obligations and amends obligations to 1)
include quoting obligations under the
Affiliated Options Exchanges’ rules, and
2) update current quoting obligations to
be consistent, the extent possible to
maintain Exchange specific
requirements, with the quoting
obligations of the Affiliated Options
Exchanges. The Exchange notes that, as
proposed, a Market-Maker’s obligations
will be substantially similar to its
current obligations.
Proposed Rule 5.52(a) provides for the
firm quote obligation for Market-Makers
pursuant to Rule 602 of Regulation
NMS, to which Market-Makers must
already comply pursuant to current Rule
8.51 (Firm Disseminated Market
Quotes).24 Proposed Rule 5.52(a)
mirrors the firm quoting provision for
Market-Makers under the rules of the
Affiliated Options Exchanges, and adds
exceptions to firm quotes that are the
same as the exceptions under
corresponding rules of the Affiliated
Options Exchanges.25 These proposed
exceptions to a Market Maker’s firm
quote include system malfunction,
unusual market conditions, and quotes
during the pre-open.
Proposed Rule 5.52(d)(2), regarding
continuous electronic quoting
requirements incorporates obligations to
appointed classes to the entire trading
day (i.e., GTH and RTH, which is
described in detail above) by removing
or updating language that refers to
‘‘Regular Trading Hours’’ and ‘‘per
trading session’’ and its amends its list
of series of excluded from a MarketMaker’s continuous quoting obligation
to incorporates the exclusion of any
intra-day add-on series on the day
during which such series are added for
trading and any Quarterly Options
series. This exclusion is consistent with
corresponding rules of the Affiliated
Options Exchanges.26 As stated above,
24 See
supra note 25.
C2 Rule 8.6; EDGX Options Rule 22.6; BZX
Options Rule 22.6.
26 Id; see also Securities Exchange Act Release
No. 71129 (December 18, 2013), 78 FR 77736
(December 18, 2013) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Modify BATS Options Market Maker
Continuous Quoting Obligation Rules) (SR–BATS–
2013–062), which adopted exclusions, including
Quarterly Options series, to Market Maker’s quoting
obligations and noted that such exclusions were
‘‘consistent with the rules of several other options
exchanges’’ and ‘‘did not diminish the quoting
25 See
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proposed Rule 5.52(d)(2) also amends
the current quoting exclusion of any
series with an expiration of nine months
or greater to an expiration of greater
than 270 days, which is consistent with
the time-to-expiration language for the
same exclusion under the Affiliated
Options Exchanges’ rules. The Exchange
notes that Market Makers generally
already monitor expirations by a
defined count of 270 days, as opposed
to a nine month count in which the
number of days continuously varies.
Therefore, this proposed change aligns
the Exchange’s rules with current
industry practice already in place on the
Affiliated Options Exchanges. The
Exchange also applied this change in
the PMM obligation rule (the only other
location in the Market-Maker rules
which refers to 9-month series),
proposed Rule 5.56.
The proposed rule change also
removes the quote width requirements
under current Rule 8.7(d)(i)(A) and
(d)(ii)(A)), as well as reference to such
determined quote widths throughout the
proposed rules, including those for SPX,
Interpretation and Policy .08 regarding
bid/ask determinations for indexes, and
current Rule 24A.9(e). This is consistent
with the corresponding rules of the
Affiliated Options Exchanges 27 and the
manner in which Market-Makers on
those exchanges are required to quote
many of the same classes as MarketMakers on the Exchange. The Exchange
notes that currently the quote width
requirement for generally all classes is
$10, however, Market-Makers
consistently maintain two-sided quotes
that are much tighter than the required
width. Indeed, even if markets are
experiencing period of stress or
volatility, pursuant to proposed Rule
5.51 (current Rule 8.7), Market-Makers
remain obligated to maintain two sided
markets and engage in a course of
dealings that must be reasonable
calculated to contribute to the
maintenance of a fair and orderly
market, which includes refraining from
making bids or offers that are
inconsistent with such course of
dealings and updating quotations in
response to changed market conditions.
The Exchange may take disciplinary
action against any substantial or
continued failure of these obligations.
Therefore, the Exchange does not
believe that the continuing to provide
for a quote width requirement is
necessary nor will it impact the
maintenance of fair and orderly markets
obligation’’. The Exchange also notes that these
exclusions were adopted on EDGX Options when
that exchange was established.
27 See supra note 27.
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because Market-Makers already quote at
a bid/ask spread much narrower than
the requirements and are required to
continuously fulfill their obligations to
engage in a course of dealings
reasonably calculated to contribute to
the maintenance of a fair and orderly
market. The Exchange also notes that
under proposed Rule 5.51 (current Rule
8.7), in connection with a MarketMaker’s obligations to maintain fair and
orderly markets, it may not make bids
or offers inconsistent with this
requirement, and, if the Exchange finds
any substantial or continued failure by
a Market-Maker regarding this
requirement, the Market-Maker will be
subject to disciplinary action or
suspension or revocation of its
registration or appointment(s). As such,
Market-Makers must continue to submit
quotes in accordance with this standard.
The Exchange also notes a proposed
non-substantive change (not presented
in the table above) to delete the
language under current 8.7(d) which
provides that Market-Makers remain
subject to all obligations imposed by
current Rule 8.7, and, to the extent
another obligation contained elsewhere
in current Rule 8.7 is inconsistent with
an obligation contained in current
paragraph (d) of Rule 8.7 (i.e.,
continuous quoting obligations) with
respect to a class, current paragraph (d)
shall govern. The Affiliated Options
Exchanges’ corresponding rules do not
provide for the same, as a Market-Maker
is expected to uphold all obligations
under the rules and in no circumstance
circumvent its other, equally important
obligations (e.g., constituting a course of
dealings reasonably calculated to
contribute to the maintenance of a fair
and orderly market) in order to
continuously quote. Therefore, this
proposed change will not impact a
Market-Maker’s obligations under any of
the rules, but instead is designed to
ensure that a Market-Maker upholds
each of its obligations. The proposed
change conforms the Exchange’s rules to
the Affiliated Options Exchanges’ rules.
Similarly, the proposed rule change
removes Interpretation and Policy .02,
which states that the obligations of a
Market-Maker with respect to those
classes of option contracts to which the
Market-Maker holds an Appointment
shall take precedence over his other
Market-Maker obligations. The
Exchange notes that a Market-Maker’s
obligations only pertain to its appointed
classes, which renders this provision
unnecessary. This is also consistent
with the quoting obligation provisions
of the Affiliated Options Exchanges.
PO 00000
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50553
Proposed Rule 5.53 (Good Standing for
Market-Makers)
Proposed Rule 5.53, which covers
good standing for Market-Makers, is
identical to the corresponding rules of
the Affiliated Options Exchange.28 The
Exchange currently does not have a
similar, consolidated rule that covers
good standing for Market-Makers. This
change is designed to harmonize
Market-Maker requirements across the
Exchange and the Affiliated Options
Exchanges which provide clear
requirements for Market-Makers to
maintain good standing as a MarketMaker. The proposed rule states that for
a Market-Maker to remain in good
standing, a Market-Maker must: (1)
Continue to meet the requirements
established in Exchange Act Rule 15c3–
1(a)(6)(i), the general requirements for
Trading Permit Holders set forth in
Chapter 3 of the Rules (as proposed),
and the Market-Maker requirements set
forth in Chapter 5 of the Rules (as
proposed); (2) comply with the Rules as
well as the Rules of the Clearing
Corporation and the Federal Reserve
Board; and (3) pay on a timely basis
such participation, transaction, and
other fees as the Exchange prescribes.
The rule also provides that the
Exchange may suspend or terminate a
Trading Permit Holder’s registration as
a Market-Maker or a Market-Maker’s
appointment to a class, or otherwise
withdraw the good standing of a MarketMaker as provided in the Rules, if the
Market-Maker ceases to maintain any of
these conditions for approval or violates
any of its agreements with the Exchange
or any of the provisions of the Rules.
The proposed rule does not impose any
new obligations or requirements for
Market-Makers but are merely provides
for the standards, currently in place
under other rules or regulations, for
which the Exchange may measure a
Market-Maker’s good standing.
Proposed Rule 5.54 (DPMs)
The proposed rule deletes current
Rule 8.85(a)(vi), which states that a
DPM must segregate in a manner
prescribed by the Exchange all
transactions consummated by the DPM
in securities allocated to the DPM and
any other transactions consummated by
or on behalf of the DPM that are related
to the DPM’s DPM business, and current
Rule 8.85(c)(v), which states the DPM
shall segregate in a manner prescribed
by the Exchange the DPM’s business
and activities as a DPM from the DPM’s
other businesses and activities (i.e.
segregated accounts for DPM-related
28 See C2 Rule 8.4; EDGX Options Rule 22.4; and
BZX Options Rule 22.4.
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transactions from the firm’s general
Market-Maker accounts or accounts in
relation to other trading activities or
capacities). This is consistent with
EDGX Options Rules (which, of the
Affiliated Options Exchanges, also has
DPMs), which do not require DPMs to
maintain segregated accounts for that of
their general Market Maker or other
trading activities. These provisions were
implemented in the past to ensure the
financial stability of, then, newly
the DPM in connection with its other
businesses and activities.29 Finally, the
proposed rule change removes current
paragraph (e) regarding Trading Permits
per appointment costs, in line with the
changes made to the overall MarketMaker appointment costs and
assignments under proposed Rule 5.50
(described in detail above).
Miscellaneous Market-Maker Rules
Current rule
Proposed rule
Corresponding other
exchange rule
Substantive change
Rule 8.8 (Restriction on
Acting as Market-Maker
and Floor Broker).
Rule 8.9 (Securities Accounts and Orders of
Market-Makers).
Rule 8.25 (Restriction on
Acting as Market-Maker
and Floor Broker).
Rule 7.6 (Securities Accounts and Orders of
Market-Makers).
N/A ...................................
N ......................................
None (aside from updating cross-references).
C2 Rule 8.7, EDGX Options Rule 22.7, BZX
Options Rule 22.7.
N ......................................
Rule 8.10 (Financial Arrangements of MarketMakers).
Rule 8.17 (Stopping of
Option Order).
Rule 11.6(b) (MarketMaker Financial Requirements).
Rule 5.58 (Stopping of
Option Orders) of Section D (Market-Maker
Appointments and Obligations).
N/A ...................................
N/A ...................................
N ......................................
Conforms to corresponding rules of the Affiliated Options Exchanges (including Interpretation and Policy .01 to BZX/EDGX Rule 22.7). Maintains provisions specific to Cboe Options rules. Deletes redundancies, including those
provisions already covered under other Rules (e.g. Rule 6.55.03), updates
language to read in plain English
None.
N/A ...................................
N ......................................
None.
N/A ...................................
N: however, see below for
further details.
Removes current rule which is no longer in practice by the Exchange and unnecessary given the authority of the Exchange to evaluate and determine
satisfactory Market-Maker performance and fulfillment of obligations, as well
as authority to take disciplinary action for failure to satisfy Market-Maker requirements through various other Exchange rules.
Replaces reference to Rule 8.1 in current Rule 1.1 with current Rule 8.1 language which defines a DPM.
Moves to proposed Rule 11.6(a) and removes the $100,000 net liquidating equity requirement as it is no longer applicable to the current DPM and marketplace structures. Conforms Rule 11.6(a) to corresponding C2 rule. The
Market-Maker language covers all Maker-Maker types, thus DPMs.
Rule 8.60 (Evaluation of
Trading Crowd Performance).
Description of change
Rule 8.80 (DPM Defined)
Rule 1.1 ...........................
N/A ...................................
N ......................................
Rule 8.86 (DPM Financial
Requirements).
Rule 11.6 (Financial Arrangements of MarketMakers).
C2 Rule 8.8 .....................
Y: see below for further
details.
Proposed Deletion of Current Rule 8.60
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formed small DPM firms. Today, DPMs
now need larger financial infrastructure
to trade as a DPM and the Exchange
determines if firms are appropriately
situated act as a DPM pursuant to
proposed Rule 3.53 (current Rule 8.83)
by considering, among other things, the
firms’ adequacy of capital and
operational capacity. This reduces the
risk that a DPM’s financial integrity
would be adversely impacted by
financial losses that may be incurred by
The proposed rule change deletes
current Rule 8.60 which provides for the
Exchange evaluation of trading crowd
performance. The current rule provides
that the Exchange periodically evaluate
the performance of DPMs, MarketMakers, and other Trading Permit
Holders both individually and
collectively as trading crowds in order
to determine whether they are
satisfactorily meeting their market
responsibilities. The Exchange may do
so by means of a survey, and, if the
Exchange finds that such participant has
failed to satisfy its Market-Making
requirements then the Exchange may,
among other things, suspend, terminate
or restrict registration or appointment to
a class or classes, reallocate (i.e.
reappoint, as proposed) class(es) or
restrict allocation of classes, and so on,
and give notice and an opportunity for
a market participant to have a formal
hearing or informal hearing, depending
on the action under consideration. The
proposed rule change deletes current
Rule 8.60 as it is no longer implemented
by the Exchange. The Exchange does not
take such surveys or make
determinations pursuant to Rule 8.60
because the Exchange exercises its
authority under other rules to ensure
that Market-Makers (and Market-Maker
types) fulfil their Market-Making
requirements, and to take appropriate
disciplinary actions for a participant’s
failure to do so. The Exchange may
make the same determinations and take
action against a participant for failing to
meet their respective Market-Maker
obligations under the current rules
(moved to proposed Rules 3.53, 5.50,
5.51, 5.52, 5.53, 5.54, 5.55, and 5.56).
Moreover, the Exchange must follow the
notice provision to terminate or
condition a participant’s approval to act
as a DPM under proposed Rule 3.53, as
well as the notice and proceeding
requirements for disciplinary actions
under Chapter 17. Because the Exchange
does not take surveys or make
determinations under Rule 8.60, and
instead, currently ensures that
participants fulfill their respective
Market-Making requirements pursuant
to multiple other rules, the proposed
rule change does not alter the manner in
which the Exchange determines
whether Market-Making requirements
are met nor the actions and procedures
necessary to discipline a participant for
failure of such obligations. The
proposed rule change merely removes a
rule that is not essential to the function
and continuity of the Exchange and its
Market-Maker program.
Proposed Rule 11.6
The proposed rule change moves
current Rule 8.86 to proposed Rule
11.6(a) and removes the $100,000 net
liquidating equity requirement as it is
no longer applicable to current DPM
structures. This is consistent with
corresponding C2 Rule 8.8. Current Rule
8.86 was enacted (almost 20 years ago)
to ensure the financial stability of newly
formed, small DPM firms who were not
previously net capital computing firms,
as a number of small firms were not net
capital computing based on an
exemption (i.e., the ‘‘(b)(1) exemption’’)
in Exchange Act Rule 15c3–1. However,
due to changes in the market and, as
stated above, the large infrastructure
29 The Exchange also already surveils for a firm’s
DPM requirements by DPM-specific acronyms and
firm IDs.
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now needed to trade as a DPM, in which
the Exchange determines if
appropriately situated to act as a DPM
pursuant to proposed Rule 3.53 (current
Rule 8.83), the number of firms who can
be a DPM has decreased significantly
and the size of DPM firms, including
their adequacy of capital and
operational capacity, has increased
significantly. As a result, current DPMs
have capital well beyond the $100,000
net liquidating requirement, which
eliminates the need for the Exchange to
surveil for compliance with this
requirement and will enable the
Exchange to better allocate its
surveillance resources, focusing on
enhanced surveillance in connection
with Exchange rules permitting,
requiring, or prohibiting liquidation and
rules requiring liquidation in a
reasonable and orderly fashion.
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.30 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 31 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) 32 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
changes are generally intended to add or
align certain system functionality
currently offered by the Exchange and
the Cboe Affiliated Exchanges
(specifically, the Affiliated Options
Exchanges) in order to provide a
consistent technology offering for the
Cboe Affiliated Exchanges. A consistent
technology offering, in turn, will
simplify the technology
implementation, changes and
30 15
31 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
33 Proposed Rules 3.52, 5.50, 5.51, 5.52, 5.53,
5.56, 7.6, and 11.6.
32 Id.
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18:25 Sep 24, 2019
maintenance by Exchange participants
that are also participants on the
Affiliated Options Exchanges. The
proposed rule change does not propose
to implement new or unique
functionality that has not been
previously filed with the Commission or
is not available on the Affiliated
Options Exchanges. The Exchange notes
that many of the proposed changes are
generally based on rules of the Affiliated
Options Exchanges and differ only to
the extent necessary to conform to the
Exchange’s current rules, retain
intended differences unique to Cboe
Options market-model, functionality
and/or rule text and not applicable to
the Affiliated Options Exchanges.
Where applicable,33 the Exchange has
substantively mirrored the Affiliated
Options Exchange rules or certain
Market-Maker requirement language
within the Affiliated Options Exchange
rules, because consistent rules will
simplify the regulatory requirements
and increase the understanding of the
Exchange’s operations for TPHs that are
also participants on the Cboe Affiliated
Options Exchanges. The Exchange notes
that the proposed changes to make its
rules consistent with the Affiliated
Options Exchange’s rule do not impose
new or novel obligations for MarketMakers or does not differ from the
Exchange’s current authority over
Market-Makers; the proposed rules
based on the Affiliated Options
Exchanges’ rules are substantially
similar to the current rules. The
proposed rule change would provide
greater harmonization between the rules
of the Cboe Affiliated Exchanges,
resulting in greater uniformity, bolstered
collective understanding of the
Exchange’s rules and the Affiliated
Options Exchanges for participants, and
less burdensome and more efficient
regulatory compliance. 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.
The proposed change to harmonize
the Exchange’s rules and processes with
the Affiliate Options Exchanges by
allowing a Market-Maker to select class
appointments that apply to classes
during all trading sessions, thus
applying Market-Maker obligations
across all trading sessions, will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system by
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harmonizing the application of
appointments with that of the Affiliated
Options Exchange rules. The
application class appointments to all
trading sessions will not have an impact
of the protection of investors or cause
any additional burden to MarketMaker’s because a Market-Maker’s
continuous obligations will continue to
apply only when quoting in their
appointed classes, therefore, the
proposed change will have negligible, if
any, impact on a Market-Maker’s
continuous quoting obligations as they
may continue to choose when to
actively quote and have their obligations
to their appointed classes apply.
The proposed changes to the
appointment cost provisions (both in
connection with Market-Makers,
generally, and DPMs) will remove
impediments to and perfect the
mechanism of a free and open market
and national market system because it
will provide rules for investor that
accurately reflect the structure of the
Exchange’s fees schedule upon
migration.34 Furthermore, the Exchange
believes that the proposed change will
serve to incentivize more marketmaking across classes as Market-Makers
will no longer be limited to a 1.0
appointment cost or having to acquire
additional Trading Permits to select
appointments in more classes, thereby
benefitting all market participants.
The proposed change to remove the
condition that a requisite number of
Market-Makers where the Exchange
determines to designate a class without
a DPM or LMM removes impediments to
and perfects the mechanism of a free
and open market and national market
system and, in general, protects
investors, because it is consistent with
the rules of EDGX Options (previously
filed with the Commission) which also
has a DPM program and lists many of
the same classes. The Exchange believes
that the current condition to this
determination is no longer necessary
given that all classes now trade on the
System (i.e. Hybrid) and its MarketMaker program has grown to adequately
cover the classes that necessitate
market-maker liquidity. In addition to
this, the rules allow for the Exchange to
appropriately address the case where
further market-making in a class might
be needed. Therefore, the Exchange
believes that the proposed change will
not have any significant impact on the
trading of classes and functions of the
Exchange.
The Exchange also believes that by
making Market-Maker obligations
consistent, to the extent possible while
34 See
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maintaining Exchange specific rule text
and obligations, with those of the
Affiliated Options Exchanges the
proposed rule change fosters
cooperation and coordination with
persons engaged in facilitating
transactions in securities, as well as
removes impediments to and perfects
the mechanism of a free and open
market and national market system. The
Exchange notes that the proposed
changes to the Market-Maker obligation
provisions are substantially similar to
the current obligations, therefore will
have de minimus impact on market
participants. The proposed changes do
not alter the authority and/or discretion
of the Exchange in connection with
Market-Makers, significantly alter the
obligations of Market-Makers, nor
impose any significant additional
burden. Instead, the Exchange believes
the changes will result in greater
uniformity for Market-Maker obligations
across the Exchange and its affiliates,
thereby bolstering participants’
collective understanding of MarketMaker obligations across the affiliated
exchanges and resulting in less
burdensome regulatory compliance.
In particular, the Exchange believes
the proposed rule change to amend
certain provisions in connection with a
Market Makers’ quoting obligations will
remove impediments to and perfect the
mechanism of a free and open market
and a national market system. By
conforming the quoting obligations, to
the extent possible to maintain
differences unique to the Exchange, to
that of the Affiliated Options Exchange
rules, the proposed change will remove
impediments to and perfect the
mechanism of a free and open market
and national market system. As stated,
the proposed rules in connection with
Market-Marker obligations largely make
non-substantive changes to update and
simplify the rules by reorganizing and
consolidating provisions, simplifying
language, updating language to plain
English and removing redundancies. For
example, proposed Rule 5.51 makes
only non-substantive changes to the rule
governing a Market-Maker’s general
obligations, most of which remove
redundant provisions that are already
covered under the umbrella of a MarketMaker’s obligation to engage in dealing
to maintain fair and orderly markets.
The proposed substantive changes that
harmonize Market-Maker obligations
with those of the Affiliated Options
Exchange include adding exclusions to
a Market-Maker’s the firm quote
requirement, removing the quote width
requirement, adding certain series
excluded from continuous quoting
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18:25 Sep 24, 2019
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obligations, conforming the series
expiration of 9 months to the 270-day
period, adding provision governing
good standing for Market-Makers, and
removing the requirement that DPMs
maintain segregated accounts for DPMrelated transactions (addressed in the
paragraph below). These proposed
changes are reasonable and do not affect
investor protection because the
proposed changes do not present any
novel or unique issues, as they have
been previously filed with the
Commission. Market-Makers continue to
comply with the firm quote requirement
under current Rule 8.51 and Rule 602 of
Regulation NMS and the proposed
exceptions to a Market-Maker’s firm
quote are consistent with the rules of
the Affiliated Options Exchanges and
remove impediments to and perfect the
mechanism of a free and open market
and national market system by
providing exceptions to firm quotes
with malfunctions and unusual market
conditions arise. The proposed change
from the 9 month expiration time to the
270 expiration time is an industry
practice currently in place, as MarketMakers generally already monitor
expirations by a defined count of 270
days, as opposed to a nine month count
in which the number of days
continuously varies. In addition,
Market-Makers on the Affiliated Options
Exchanges quote in many of the same
classes available on the Exchange but do
not have a bid/ask requirement when
quoting on those exchanges. The
Exchange notes that removing this
requirement will not impact market
participants because Market-Maker’s
already submit two-sided quotes
consistently at a much tighter spread
than the Exchange-determined quote
widths and Market-Makers are obliged
to continue to engage in dealings that
maintain a fair and orderly market. The
proposed rule providing for good
standing requirements for MarketMakers will serve to protect investors
because it provides under a single rule
the requirements, which are already in
place pursuant to the rules and
regulations, that the Exchange will refer
to in order to determine if a MarketMaker is fit to continue making markets
on the Exchange. This rule mirrors that
of the Affiliated Options Exchanges’
corresponding rules.
The Exchange believes that the
proposed updates to certain provisions
of the DPM requirements, overall, serve
to remove impediments to and perfect
the mechanism of a free and open
national market system. The proposed
change to remove the requirement that
each DPM has at least two Designees
PO 00000
Frm 00186
Fmt 4703
Sfmt 4703
who are nominees of the DPM removes
an unnecessary compliance burden for
DPMs for which the cost of maintaining
two designees far outweighs the benefit,
if any, of the rule. Further, like all
member organizations a DPM will
continue to be required to maintain at
least one nominee and may choose to
maintain multiple nominees. The
proposed removal of the net DPM
liquidation requirement and the
requirement that a firm segregate
accounts between DPM-related
transactions and that of its general
Market-Maker account or accounts
related to other trading activities or
capacities requirement will also lift a
compliance burden for DPMs as these
provisions are no longer necessary to
ensure financial integrity or to mitigate
losses given the current financial status
and infrastructure of DPMs. As stated,
the Exchange determines if a DPM has
the adequacy of capital and operational
capacity necessary to perform and take
on the potential risks as a DPM.
The Exchange believes that removing
the designation of two Market-Makers in
FLEX classes and instead automatically
appointing FLEX class appointments
when a Market-Maker (approved for
FLEX) selects an appointment in the
same Non-FLEX class will not alter the
obligations of a FLEX Market-Maker, as
they will continue to be required to
maintain an appointment in a NonFLEX class, which will then
automatically appoint them the FLEX
class. The proposed rule change
removes impediments to and perfects
the mechanism of a free and open
market and national market system by
simplifying the FLEX appointment
process through the automatic FLEX
class appointments in connection with
a Market-Maker’s selection of class
appointments for its general MarketMaking requirements, and continuing to
ensure that each FLEX class will have
appointed Market-Makers to provide
liquidity in that class, in addition to all
other market participants.
The proposed change to allow the
Exchange the discretion to terminate an
On-Floor LMM (as opposed to automatic
termination) when it decides to
terminate the Off-Floor DPM and/or OffFloor LMM in that class will serve to
remove impediments to and perfect the
mechanism of a free and open market
and national market system by allowing
an On-Floor LMM that may be high
performing to continue its appointment
in that class instead of disrupting the
On-Floor LMM’s appointment and
obligations by automatic termination.
The proposed removal of the rule
relating to the Exchange’s evaluation of
a trading crowd performance removes a
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Federal Register / Vol. 84, No. 186 / Wednesday, September 25, 2019 / Notices
jbell on DSK3GLQ082PROD with NOTICES
rule that is no longer in practice by the
Exchange as the Exchange’s evaluation,
determinations, and ability to sanction
Market-Makers and Market-Maker types
are currently implemented under
various other Market-Maker related
rules.
The Exchange believes the proposed
reorganization of Rules to move all
Rules that relate to Market-Makers and
Market-Maker types, including: (1)
Related to registration (as well as
approvals, eligibility, termination, etc.)
and general Market-Maker functions; (2)
Market-Maker appointments; (3) MarketMaker obligations and entitlements; and
4) other rules in connection with
Market-Makers under the same chapters,
will also benefit investors and remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. The
majority of the changes in the proposed
rule change move rules from the current
Rulebook to the shell Rulebook with no
substantive changes. Indeed, many of
the proposed non-substantive changes
removes impediments to and perfects
the mechanism of a free and open
market and national market system by
providing up-to-date rules that
accurately reflect the manner in which
the Exchange, its Market-Maker
program, and its market participants
currently function by removing
provisions that are not invoked by the
Exchange or currently in practice by its
participants and are not necessary to,
nor impact, the Exchange’s MarketMaker program, which protects
investors by providing accurate and upto-date rules. The proposed nonsubstantive changes to the Rules also
provide additional detail in the rule
regarding current functionality, make
the Rules more plain English, update
cross-references and paragraph lettering
and numbering, delete duplicative or
unnecessary language and language that
is no longer applicable to the current
functions of the Exchange, simplify and
streamline rule language, and update
terms to provide consistency throughout
the proposed Market-Maker rules, all of
which benefits investors. The Exchange
believes these changes and transparency
the proposed changes provide will
protect investors, as they provide more
clarity and reduce complexity within
the Rules, making the rule easier to
understand and comply with.
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
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18:25 Sep 24, 2019
Jkt 247001
Exchange does not believe the proposed
rule change will impose any burden on
intramarket competition, as they will
apply to all potential Market-Makers
and Market-Maker types (i.e.
applicants), and all Market-Makers and
Market-Maker types in the same
manner. The Exchange reiterates that a
majority of the proposed rule change is
intended to harmonize the Exchange
rules with that of the Affiliated Options
Exchanges’ rules. Thus, the Exchange
believes this proposed rule change will
reduce the burden on Exchange
participants by providing consistent
rules among the affiliated exchanges
upon migration. Such proposed rule
changes in this filing conform to the
approved rules of the Affiliated Options
Exchanges, which have already been
filed with the Commission. In addition
to this, the Exchange does not believes
that the other proposed changes will
impose any burden on intramarket
competition because such changes serve
to update and remove provisions or
requirements that are no longer
necessary in the function and
maintenance of the Exchange and its
Market-Maker program, or are already
ensured and/or implemented via other
rules of the Exchange. As such, these
proposed changes will not impose any
burden on intramarket competition, but
rather, will serve to relieve certain
compliance burdens for Market-Makers
or surveillance burdens for the
Exchange, which will make available
more market-making resources to
allocate toward classes that may need
and consume more liquidity, or more
enhanced surveillance resources to
monitor for Market-Maker compliance,
including general obligations, quoting
obligations, and account maintenance.
The Exchange does not believe the
proposed rule change will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act,
because majority of the proposed change
to the Market-Maker rules (i.e.,
registration, appointments, good
standing, general obligations, and
quoting obligations) is based on the
rules of the Affiliated Options
Exchange, previously filed with the
Commission. The Exchange also notes
that to the degree that other exchanges
have varying obligations for MarketMakers, market participants on other
exchanges are welcome to become
Market-Makers on the Exchange if they
determine that this proposed rule
change has made market making on
Cboe Options more attractive or
favorable. The proposed changes to the
rules that reflect functionality that will
PO 00000
Frm 00187
Fmt 4703
Sfmt 4703
50557
be in place come October 7, 2019, will
not impose any burden on intermarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act but rather provide
clear, accurate rules for market
participants surrounding the completion
of migration.
The proposed non-substantive
changes are not intended to have any
impact on competition, as they do not
impact trading on Cboe Options.
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 rule 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 if consistent
with the protection of investors and the
public interest, provided that the selfregulatory organization has given the
Commission written notice of its intent
to file 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,35 the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 36 and
Rule 19b–4(f)(6) thereunder.37
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. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
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.
35 The
Exchange has fulfilled this requirement.
U.S.C. 78s(b)(3)(A).
37 17 CFR 240.19b–4(f)(6).
36 15
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50558
Federal Register / Vol. 84, No. 186 / Wednesday, September 25, 2019 / Notices
Comments may be submitted by any of
the following methods:
SMALL BUSINESS ADMINISTRATION
Electronic Comments
Privacy Act of 1974; System of
Records
• 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–2019–059 on the subject line.
Paper Comments
jbell on DSK3GLQ082PROD with NOTICES
• 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–2019–059. 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
10:00 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–CBOE–2019–059 and
should be submitted on or before
October 16, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–20698 Filed 9–24–19; 8:45 am]
BILLING CODE 8011–01–P
38 17
CFR 200.30–3(a)(12).
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18:25 Sep 24, 2019
Jkt 247001
U.S. Small Business
Administration.
ACTION: Notice of a Modified System of
Records.
AGENCY:
The U.S. Small Business
Administration (SBA) proposes to
update a system of records titled,
Veteran Programs Training and
Counseling Records (SBA 39), to its
inventory of records systems subject to
the Privacy Act of 1974 (5 U.S.C. 552a),
as amended. Publication of this notice
complies with the Privacy Act and the
Office of Management and Budget
(OMB) Circular A–130 requirement for
agencies to publish a notice in the
Federal Register whenever the agency
establishes a new system of records. The
SBA’s Office of Veterans Business
Development (OVBD) manages grant
programs related to the counseling and
training services for veterans. The
OVBD maintains a System of Records
including include registration forms,
participant/client surveys, interviews,
resource partner surveys, which
includes personal information such as
name, gender, race, ethnicity, service,
and pay grade, which are used to
analyze the population of veterans who
are seeking training.
DATES: Submit comments on or before
October 25, 2019. This revised system
will be effective upon publication.
FOR FURTHER INFORMATION CONTACT:
Martin Williams, Veterans Affairs
Specialist, 409 3rd Street SW, Suite
5700 Washington, DC 20416.
ADDRESSES: Submit written comments
to Martin Williams, Veterans Affairs
Specialist, 409 3rd Street SW, Suite
5700 Washington, DC 20416.
SUPPLEMENTARY INFORMATION: A system
of records is a group of any records
under the control of a Federal agency
from which information is retrieved by
the name of an individual or by a
number, symbol or other identifier
assigned to the individual. The Privacy
Act, 5 U.S.C. 552a, requires each
Federal agency to publish in the Federal
Register a system of records notice
(SORN) identifying and describing each
system of records the agency maintains,
the purposes for which the agency uses
the personally identifiable information
(PII) in the system, the routine uses for
which the agency discloses such
information outside the agency, and
how individuals can exercise their
rights related to their PII information.
The SBA’s Office of Veterans Business
SUMMARY:
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Fmt 4703
Sfmt 4703
Development (OVBD) manages grant
programs related to the counseling and
training services for veterans, National
Guard & Reserve members, transitioning
service members, military spouses and
their dependents. These services
include the Boots to Business & Boots to
Business Reboot Programs, Veterans
Business Outreach Center Program,
Women Veteran Entrepreneurship
Program, Service-Disabled Veteran
Entrepreneurship Training Program and
the Veteran Federal Procurement
Entrepreneurship Training Program.
VBOCs, and other OVBD grantees,
implement SBA’s Veterans programs
and initiatives as authorized by section
32 of the Small Business Act (15 U.S.C.
657b). In order to measure program
performance, implement standardized
outreach efforts and register participants
for training/counseling, information is
collected through various methods.
These methods include registration
forms, participant/client surveys,
interviews, resource partner surveys,
and data obtained through data sharing
agreements with other Federal agencies.
Collected information is used to analyze
the population of veterans who are
seeking entrepreneurial training,
identify trends among participants,
facilitate communication between the
Office of Veterans Business
Development and training/counseling
participants, and to evaluate the
performance of the OVBD programs.
SYSTEM NAME AND NUMBER:
Veteran Programs Training and
Counseling Records (SBA 39).
SECURITY CLASSIFICATION:
Unclassified.
SYSTEM LOCATION:
SBA Headquarters, 409 3rd Street SW,
Washington, DC 20416.
SYSTEM MANAGER(S):
Martin Williams, Veterans Affairs
Specialist, 409 3rd Street SW, Suite
5700, Washington, DC 20416, 202–205–
6157.
. . .
CATEGORIES OF RECORDS IN THE SYSTEM:
The records in this system include:
1. Course data.
2. Personal Data (Last Name, First
Name, Middle Name, Date of Birth,
Post-separation email, Post-separation
phone number).
3. Military Service data (DoD ID
Number, Grade, Service, Component,
Guard/Reserve Status, Military
Installation, Anticipated Separation
Date).
4. Demographics (Gender, Race,
Ethnicity).
E:\FR\FM\25SEN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 186 (Wednesday, September 25, 2019)]
[Notices]
[Pages 50545-50558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20698]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87024; File No. SR-CBOE-2019-059]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Certain Rules Relating To Market-Makers Upon Migration to the Trading
System Used by Cboe Affiliated Exchanges
September 19, 2019.
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 September 6, 2019, Cboe Exchange, Inc. 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 self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 and move certain current Rules in connection with Market-
Makers from the Exchange's currently effective Rulebook (``current
Rulebook'') to the shell structure for the Exchange's Rulebook that
will become effective upon the migration of the Exchange's trading
platform to the same system used by the Cboe Affiliated Exchanges (as
defined below) (``shell Rulebook''). The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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
In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated
Exchanges''). The Cboe Affiliated Exchanges are working to align
certain system functionality, retaining only intended differences
between the Cboe Affiliated Exchanges, in the context of a technology
migration. The Exchange intends to migrate its trading platform to the
same system used by the Cboe Affiliated Exchanges, which the Exchange
expects to complete on October 7, 2019. The Exchange believes offering
similar functionality to the extent practicable will reduce potential
confusion for market participants.
In connection with this technology migration, the Exchange has a
shell Rulebook that resides alongside its current Rulebook, which shell
Rulebook will contain the Rules that will be in place upon completion
of the Cboe Options technology migration.
The Exchange now proposes to update and amend its rules under
Chapter 8 (Market-Makers, Trading Crowds and Modified Trading Systems).
Specifically, the Exchange proposes to amend its rules regarding
Market-Maker registration, class appointments, and obligations
(applicable to Market-Makers generally and the various Market-Maker
types, i.e. Designated Primary Market-Makers (``DPMs''), Primary
Market-Makers (``PMMs''), and Lead Market-Makers (``LMMs'')) to conform
to the corresponding Market-Makers rules of its affiliated options
exchanges, C2, EDGX Options, and BZX Options (the ``Affiliated Options
Exchanges'').\3\ The Exchange proposes these amendments to reflect the
current Market-Maker functionality and general rule language of that of
the Affiliated Options Exchanges to the extent necessary to retain
intended differences unique to Cboe Options market-model, functionality
and/or rule text. In conforming its Rule to that of is Affiliated
Options Exchanges' rules, the Exchange proposes few substantive
changes, which include proposed changes to the FLEX appointment
process, updates to Market-Maker class appointments and obligations to
such appointments to apply across Global Trading Hours (``GTH'') and
Regular Trading Hours (``RTH''), updates to the
[[Page 50546]]
appointment cost structure, amendments to certain obligation
provisions, including the bid/ask requirement, the series excluded from
continuous quoting obligations and adding a ``good-standing'' rule, and
updates to some of the rules in connection with DPMs, including
segregation of accounts for DPM-related transactions accounts from a
firms other accounts, the DPM net liquidating requirements, requirement
to have two DPM designees, Exchange review of DPMs, as well as On-Floor
terminations (which is also in connection with LMMs) and designations
of classes in connection with DPMs and LMMs.
---------------------------------------------------------------------------
\3\ The Exchange notes that the Affiliated Options Exchanges
recently updated and harmonized their Market-Maker rules. The recent
updates to BZX Option's Market-Maker rules will be implemented on or
around October 1, 2019, and this filing refers to these updates. See
Securities Exchange Act Release No. 85845 (May 13, 2019), 84 FR
22541 (May 17, 2019) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change To Delay the Operative Date of Rule Change
Pursuant to SR-CboeBZX-2019-025) (SR-CboeBZX-2019-043).
---------------------------------------------------------------------------
The Exchange also proposes to make non-substantive changes to
simplify, clarify, and generally update its Market-Maker rules by
consolidating various provisions and rules (including select rules not
covered under current Chapter 8 but pertain to Market-Maker
requirements), simplifying rule language (e.g. revising run-ons and
unnecessary clauses), updating the rule text to read in plain English,
deleting duplicative and obsolete rule provisions, reformatting
provision sequencing, numbering, and lettering, and revising headings.
The Exchange also updates cross-references to rules not yet in the
shell Rulebook but that will be in the shell Rulebook and implemented
upon migration. The tables below list each rule under current Chapter
8, along with the few additional rules related to Market-Makers that
the Exchange proposes to consolidate with the Market-Maker rules, the
proposed rule in the shell Rulebook to which the current rule will be
moved, the corresponding rule of one or more of the Affiliated Options
Exchanges to which the propose change conforms (if applicable), whether
the proposed change is substantive or non-substantive, and finally, a
description of the proposed rule change. The Exchange notes that all
current provisions proposed to move to the corresponding proposed
provisions in the shell Rulebook will also be deleted from the current
rules upon migration.
Market-Maker Registration (Proposed Chapter 3, Section C)
The proposed rule change moves current Chapter 8 rules related to
registration (including approvals, eligibility, termination, etc.) and
general Market-Maker functions, from the current Rulebook to Chapter 3,
Section C (TPH Trading Functions) of the shell Rulebook as follows:
---------------------------------------------------------------------------
\4\ The proposed rule change deletes Interpretation and Policy
.01(b) because the Exchange already moved/consolidated participation
entitlements and rates into shell Rulebook in Rule 5.32. See
Securities Exchange Act Release No. 86374 (July 15, 2019), 84 FR
34963 (July 19, 2019) Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to System Connectivity and Order
Entry and Allocation Upon the Migration of the Exchange's Trading
Platform to the Same System Used by the Cboe Affiliated Exchanges)
(SR-CBOE-2019-033). The Exchange notes that SR-CBOE-2019-003
inadvertently failed to remove Rule 8.13.01(b) when it consolidated
into the shell Rulebook. The filing deleted the following
provisions: Rule 8.13(c) (regarding entitlement rates for PMMs);
Rule 8.15(c)-(d) (regarding participation entitlements for LMMs);
Rule 8.87 (in its entirety, regarding participation entitlements for
DPMs).
\5\ As noted, on October 7, 2019 the Exchange's trading platform
will be migrated to the same system used by the Cboe Affiliated
Exchanges. The Exchange's trading system will still exist as a
hybrid system but will no longer be referred to as the ``Hybrid
Trading System.'' Instead, it will be defined as the ``System,''
pursuant to Rule 1.1 in the shell Rulebook, to mean ``the Exchange's
hybrid trading platform that integrates electronic and open outcry
trading of option contracts on the Exchange.'' The Exchange notes
that the term ``Hybrid class'' is no longer relevant because as of
2018, all classes listed for trading on the Exchange now trade on
the same platform (prior to that, certain classes traded on the
Exchange's Hybrid 3.0 platform, while most classes traded on the
Exchange's Hybrid platform), making the distinction obsolete.
----------------------------------------------------------------------------------------------------------------
Corresponding
Current rule Proposed rule other Exchange Substantive change Description of
rule change
----------------------------------------------------------------------------------------------------------------
Rule 8.1 (Market-Maker Defined). Rule 3.52 (Market- C2 Rule 8.1, EDGX N................. Conforms language
Makers). Options Rule to that of the
22.2, BZX Options Affiliated
Rule 22.2. Options
Exchanges' rules.
Language defining
Market-Makers
deleted;
duplicative of
the definition
already in Rule
1.1.
Rule 8.2 (Registration of Market- Rule 3.52 (Market- C2 Rule 8.1, EDGX Y: see further Conforms
Makers). Makers). Options Rule discussion below.. registration
22.2, BZX Options process
Rule 22.2. provisions to
that of the
Affiliated
Options
Exchanges' rules.
Rule 8.13 (Preferred Market- Rule 3.56 (PMMs).. N/A............... N................. Moves Rule 8.13(a)
Makers). and (b), and
Interpretation
and Policy .01(a)
to proposed rule,
deleted
Interpretation
and Policy .01(b)
regarding PMM
participation
entitlements,\4\
and renumbers
provisions,
changes headings,
and updates cross-
references.
Removes receipt
of PMM order
through complex
order book
(``COB'')/or
complex order
auctions as such
complex
entitlements are
infrequently
allocated, if at
all, and, in
addition to this,
complex orders
traded on the COB
or COA will not
have PMM
allocation in the
migrated system.
Rule 8.15 (Lead Market-Makers).. Rule 3.55 (LMMs).. N/A............... N................. Moves current Rule
8.15(a) and
Interpretation
and Policy .01 to
proposed rule and
renumbers
provisions,
changes headings,
and updates cross-
references. Moves
current Rule
6.1A(iii)(A) to
proposed rule,
which states that
the Exchange may
approve one or
more market-
Makers to act as
LMMs in each
class during GTH
for one-month
terms.
Rule 6.1A (Global Trading
Hours), paragraph (e)(iii)(A).
Rule 8.81 (DPM Designees)....... Rule 3.54 (DPM N/A............... Y: see further Deletes current
Designees). discussion below. 8.1(d) which
provides that
each DPM must
have two
designees that
are nominees of
the DPM,
requirement is an
unnecessary
expense to DPMs.
Renumbers
provisions and
updates cross-
references and
updates language
to read in plain
English.
Rule 8.83 (Approval to Act as Rule 3.53 (DPMs).. N/A............... N................. Modifies the term
DPM). ``appointment''
to
``designation''
to clarify the
distinction
between a Market-
Maker approved to
act as a DPM and
its appointment
to options
classes (and
updates this term
throughout the
proposed Market-
Maker rules).
Updates the term
``allocation'' of
``securities'' to
``appointment''
of classes, which
is consistent
with the terms
used throughout
Market-Maker
rules (this
update is made
throughout the
proposed Market-
Maker rules).
Removes language
in connection
with the ``Hybrid
Trading System''
and ``Hybrid
classes'' (and
makes same update
throughout the
proposed Market-
Maker rules.) \5\
Renumbers
provisions
(including adding
Interpretations
and Policies to
the rule text)
and updates cross-
references and
updates language
to read in plain
English.
Rule 8.88 (Review of DPM Rule 3.53 (DPMs).. N/A............... N................. Renumbers
Operations and Performance). provisions and
updates cross-
references and
headings and
updates language
to read in plain
English.
Rule 8.89 (Transfer of DPM Rule 3.53 (DPMs).. N/A............... N................. Moves to proposed
Appointments). rule to
consolidate rules
regarding
Exchange
approval,
transfer review,
and termination/
limitation of
status as DPM.
Renumbers
provisions and
updates cross-
references and
headings and
updates language
to read in plain
English. Updates
certain terms to
delineate between
Exchange
designation as a
DPM and DPM
appointment to a
class (makes this
change where
applicable
throughout the
rules).
[[Page 50547]]
Rule 8.90 (Termination, Rule 3.53 (DPMs).. N/A............... N................. Moves to proposed
Conditioning, or Limiting rule to
Approval to Act as a DPM). consolidate rules
regarding
Exchange
approval,
transfer review,
and termination/
limitation of
status as DPM.
Renumbers
provisions and
updates cross-
references and
headings, and
updates language
to read in plain
English.
Rule 24A.9 (FLEX Market-Maker Rule 3.57 (FLEX N/A............... Y: see below for Moves current Rule
Appointments and Obligations). Market-Makers). further detail. 24A.9(a) to
proposed rule
Changes current
``FLEX Qualified
Market-Makers''
to ``FLEX Market-
Makers'' to
harmonize
language under
the Market-Maker
type rules to the
extent possible.
Removes current
Rule 24A.9(b)
regarding FLEX
Appointed Market-
Makers because
the Exchange
currently does
not have any FLEX
Appointed Market-
Makers nor a
participation
entitlement
established. To
the extent the
Exchange
determines in the
future to appoint
FLEX Market-
Makers as FLEX
Appointed Market-
Makers (or
similar role) and
establish a
participation
entitlement, the
Exchange will
submit a separate
rule filing.
----------------------------------------------------------------------------------------------------------------
The majority of these rules are virtually identical (other than
renumbering or reorganizing paragraphs, updating cross-references and
headings, updating language to read in plain English, and making the
types of non-substantive changes as described above), and are merely
moving from the current Rulebook to the shell Rulebook. The Exchange
intends to move the current rules indicated above to proposed Chapter
3, Section C (TPH Trading Functions) of the shell Rulebook in order to
consolidate into one location the rules that provide for the
application, approval, and removal processes for its various Market-
Maker types. As indicated in the table above, the proposed change does
not substantively alter the Market-Maker registration requirement
provisions (current Rule 8.1(b) and Rule 8.2) but rather proposes to
consolidate its current Market-Maker registration provisions into
proposed Rule 3.52, which conforms its paragraphs and language to
mirror that of the Affiliated Options Exchanges' corresponding rules
(to the extent Affiliated Options Exchanges' have corresponding rules).
The Exchange notes that the proposed Rule 3.52 permits the Exchange
to impose limits to the number of Trading Permit Holders (``THPs'')
that may become Market-Makers based on a non-exhaustive list of
objective factors, including system constraints and capacity
restrictions. This is consistent with the corresponding rules of the
Affiliated Options Exchanges.\6\
---------------------------------------------------------------------------
\6\ See C2 Rule 8.1; EDGX Options Rule 22.2; and BZX Options
Rule 22.2.
---------------------------------------------------------------------------
The proposed rule change removes the requirement that, at a
minimum, the Exchange conduct a review of a DPM's operations or
performance on an annual basis. This gives the Exchange more
flexibility regarding when a full review or evaluation is warranted
given the firm characteristics and infrastructure of DPM firms do not
tend to change and the Exchange has various surveillances in place
that, if they were to identify a lapse or failure in a DPM's compliance
with its obligations, proposed Rule 3.53 allows the Exchange to
initiate a review of a DPM's operations or performance at any time, as
it currently may.
Proposed Rules 3.53 and 3.55 amend language under current Rule
8.83(g) and 8.15.01(c), respectively, which provide that a class in
which an Off-Floor DPM and/or Off-Floor LMM has been appointed, the
Exchange in its discretion may also appoint an On- Floor LMM, and, if
the Exchange in its discretion determines to reallocate a class in
which an Off-Floor DPM and/or Off-Floor LMM has been appointed, the On-
Floor LMM appointment will automatically terminate. The proposed rules
update these rules to remove automatic termination and allow for the
Exchange to terminate the On-Floor LMM appointment in its discretion
because the performance of an Off-Floor DPM and/or Off-Floor LMM is not
connected or indicative of the performance of an On-Floor LMM that may
be high performing, therefore, automatic termination would be
unnecessary and disruptive to the On-Floor LMM's appointment and
obligations.
The proposed rule change updates the FLEX Market-Maker approval and
appointment process under proposed Rule 3.57(b). The proposed change
removes the language in current Rule 24A.9(a) that provides for
Exchange designation of two or more FLEX Market-Makers to each FLEX
Index Option of a given class, and two or more FLEX Market-Makers to
each FLEX Equity Option of a given class. The proposed change removes
these provisions, as they are no longer necessary in the enhancement
and maintenance of the Exchange's Market-Maker program or for FLEX
classes. Instead, proposed Rule3.57(c) updates the language of current
Rule 24A.9(a) in connection with FLEX appointments and Non-FLEX
appointments. The current rule conditions a FLEX Market-Maker's
appointment in a FLEX Index Option class or a FLEX Equity Option class
on maintaining an appointment in one or more Non-FLEX Index Option
classes or one or more Non-FLEX Equity Option classes, as applicable.
Such Non-FLEX Option class appointment(s) need not be in a class(es)
that has the same underlying index or security as the appointed FLEX
Option. The proposed change updates the appointment process so that a
Market-Maker approved for FLEX market-making will automatically receive
an appointment in the same FLEX options class(es) as its Non-FLEX class
appointments selected in relation to its general Market-Making
responsibilities pursuant to proposed Rule 5.50. The proposed rule does
not alter the obligations of a FLEX Market-Maker, as they will continue
to be required to maintain an appointment in a Non-FLEX class. The
proposed rule change simplifies the FLEX appointment process, but will
continue to provide that each FLEX class will have appointed Market-
Makers to provide liquidity in that class, in addition to all other
market participants.
The proposed rule change deletes current Rule 8.83(b) which
provides that each DPM shall have at least two DPM Designees who are
nominees of the DPM. The Exchange has determined that for a DPM to
maintain Trading Permits for two nominees is an unnecessary expense to
a member organization designated to act as a DPM. Current Rule 3.8
requires that each member organization have at least one nominee
(which, upon migration, will be referred to as a ``Responsible Person''
for TPH organizations that hold electronic Trading Permits).\7\ The
Exchange implemented Rule 8.83(b) in 1999 in order to ensure that a DPM
is responsible for ensuring there is always a nominee available, if,
for example, a nominee were to depart from the
[[Page 50548]]
organization.\8\ The Exchange notes the infrequency in which a DPM
necessitated or could not provide for a ``back-up'' DPM over the last
two decades and, therefore, that the benefit or protection potentially
provided by this rule is far outweighed by the expense a DPM must incur
to maintain two nominees. A DPM, like all member organizations, will
continue to be required to maintain at least one nominee (or
Responsible Person) and may choose to maintain multiple nominees (or
Responsible Persons).
---------------------------------------------------------------------------
\7\ The Exchange will implement a rule change to current Rule
3.8 in anticipation of migration that will require a designation of
a nominee only for floor-based Trading Permits. TPH organizations
that hold electronic permits will be required to designate a
``Responsible Person'', who must be affiliated with the TPH. The
Exchange notes that it updates this reference where applicable in
the proposed rules herein this filing.
\8\ See Securities and Exchange Act No. 41325 (April 22, 1999),
64 FR 23691 (May 3, 1999) (Notice of Filing of Proposed Rule Change
by the Chicago Board Options Exchange, Inc. To Update and Reorganize
Its Rules Relating to Designated Primary Market-Makers) (SR-CBOE-98-
54).
---------------------------------------------------------------------------
Market-Maker Appointments and Obligations (Proposed Chapter 5, Section
D)
The proposed rule change also moves current Chapter 8 rules related
to Market-Maker appointments to classes and Market-Maker obligations
from the current Rulebook to Chapter 5, Section D (Market-Maker
Appointments and Obligations) of the shell Rulebook as follows:
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 51371 (March 15,
2005), 70 FR 13557 (March 21, 2005) (Notice of Filing of Proposed
Rule Change by the Chicago Board Options Exchange, Incorporated To
Amend CBOE Rule 8.4 To Remove the Physical Trading Crowd Appointment
Alternative for Remote Market-Makers and To Create an ``A+'' Tier
Consisting of the Two Most Actively-Traded Products on the Exchange)
(SR-CBOE-2005-23).
\10\ The Exchange intends to move Interpretation and Policy .01
and .01(c) to proposed Rule 4.14 of the shell Rulebook at a later
date in anticipation of migration.
\11\ The Exchange intends to move Interpretation and Policy .01
and .01(c) to proposed Rule 4.14 of the shell Rulebook at a later
date in anticipation of migration.
----------------------------------------------------------------------------------------------------------------
Corresponding
Current rule Proposed rule other exchange Substantive Description of change
rule change
----------------------------------------------------------------------------------------------------------------
Rule 8.3 (Appointment of Market- Rule 5.50 (Market- C2 Rule 8.2, EDGX Y: see below for Conforms to the
Makers). Maker Options Rule further detail. Affiliated Options
Appointments). 22.3, BZX Exchanges'
Options Rule corresponding rules
22.3. regarding
appointments to the
extent necessary to
adhere to existing
Exchange rule text,
maintain provisions
specific to Cboe
Options, and to
account for details/
descriptions included
in the Exchange's
Rules but not in the
applicable Affiliated
Options Exchanges'
rules. Incorporates
GTH appointment
costs. Removes
provisions in
connection with
Trading Permits as
they relate to
appointment costs,
which is consistent
with the fee schedule
and Exchange
functionality to be
implemented upon
migration. Deletes
obsolete provisions
and language
regarding Exchange-
appointed classes as
the Exchange does not
currently appoint and
Market-Makers already
choose appointments.
Removes current
language that refers
to the creation of
Virtual Trading
Crowds (``VTCs'') The
Exchange previously
maintained two
different assignment
types for appointment
costs, VTC and
Physical Trading
Crowd (``PTC'') \9\
and PTC appointments
have long been
eliminated,
therefore, there is
no longer a need to
discern VTC
appointments; all
appointments assign
appointment costs in
the same manner.
Deletes language that
allows the Exchange
to group classes and
make appointments to
those groupings
because the Exchange
does not invoke these
provisions and Market-
Makers already select
their own
appointments. Deletes
redundant language
and provisions
proposed or currently
elsewhere in the
rules, updates cross-
references, paragraph
numbering, headings,
and language to read
in plain English.
Rule 6.1A (Global Trading
Hours), paragraph (e)
(Appointments).
Rule 8.7 (Obligations of Market- Rule 5.51 (Market- C2 Rule 8.5, EDGX N................ Moves current Rule
Makers). Maker Options Rule 8.7(a) and (b) and
Obligations). 22.5, BZX Interpretation and
Options Rule Policy .09 to
22.5. proposed rule and
conforms to the
Affiliated Options
Exchanges' rules to
the extent necessary
to adhere to existing
Exchange rule text,
maintain provisions
specific to Cboe
Options rules, and to
account for details/
descriptions included
in the Exchange's
Rules but not in the
applicable rules of
the Affiliated
Options Exchanges.
Removes provisions
redundant of and/or
already encompassed
by a Market-Maker's
obligation to engage
in dealing to
maintain fair and
orderly markets.
Proposed Rule
5.51(e), which
provides that if the
Exchange finds any
substantial or
continued failure by
a Market-Maker to
engage in a course of
dealings, the Market-
Maker will be subject
to disciplinary
action or suspension
or revocation of its
registration or its
appointment(s), is
based on and
consistent with the
Affiliated Exchanges'
rules, as well as the
Exchange's current
authority to take
disciplinary action
for Market-Maker
failure to meet its
Market-Maker
obligations (e.g.
continuous quoting
requirements).
Rule 8.7 (Obligations of Market- Rule 5.52 (Market- C2 Rule 8.6, EDGX Y: see below for Moves current Rule
Makers). Maker Quotes). Options Rule further details. 8.7(c) and (d), as
22.6, BZX well as
Options Rule Interpretations and
22.6. Policies .03, .05,
.06, .09, .10, and
.11 to proposed rule.
Conforms proposed
quoting obligation
provisions to
Affiliated Options
Exchanges' quoting
obligation rules
(including for GTH)
to the extent
necessary to adhere
to existing Exchange
rule text, maintains
provisions specific
to the Exchange and
to account for
details/descriptions
included in the
Exchange's Rules but
not in the applicable
Affiliated Options
Exchanges' rules.
Moves the definition
of ``continuous
quoting obligations''
from current Rule 1.1
for consistency and
consolidation; this
includes the current
two-sided quote
requirement language
which is incorporated
into proposed Rule
5.52(c). Deletes Rule
6.1A(e)(iv), as this
was related separate
trading session
appointments and
Hybrid classes,
neither will be
applicable upon
migration. Proposed
rule does not
substantively alter
current obligations
but rather removes
redundancies and
makes the quoting
obligation rules
easier to follow by
consolidating current
provisions and
streamlining language
(which includes
removing the lengthy
and potentially
confusing examples
under current
8.7(d)(iii); the
Exchange instead
currently
disseminates notices
with such examples,
explanations, answers
to FAQ, and Exchange
contact information).
Deletes obsolete and
redundant language/
provisions, updates
cross-references,
paragraph lettering,
headings, and
language to read in
plain English.
Rule 1.1 (definition of
``continuous quoting
obligations'').
Rule 6.1A (Global Trading
Hours), paragraph (e)(iv).
N/A............................ Rule 5.53 (Good- C2 Rule 8.4, EDGX Y: see below for Proposed rule conforms
Standing for Options Rule further details. to Market-Maker good
Market-Makers). 22.4, BZX standing rules of the
Options Rule Affiliated Options
22.4. Exchanges.
[[Page 50549]]
Rule 8.13 (Preferred Market- Rule 5.56 (PMMs). C2 Rule 8.6, EDGX Y: update of the Moves current 8.13(b)-
Makers). Options 22.6, time-to- (d) and
BZX Options 22.6. expiration Interpretations and
language for Policies .01(a)
certain series through .04 to
excluded is the proposed rule.
only substantive Codifies that PMM
change made; obligations are
described below. applicable only
during Regular
Trading Hours, which
is currently the
manner in which they
apply. Updates the
language in current
Rule 8.13 to clarify
that receipt of PMM
orders is the point
in time when a PMM
receives an
entitlement (i.e.
after being preferred
on an order), this is
currently that manner
in which receipt
functions. Conforms
time-to-expiration-
language for series
excluded to the
Affiliated Options
time-to-expiration
(i.e. from 9 months
to 270 days).
Renumbers provisions,
changes headings, and
updates cross-
references and
language to read in
plain English.
Rule 8.14 (Hybrid Trading Rule 5.50 (Market- Consistent with Y: see below for Moves current Rule
System Platforms & Market- Maker EDGX Options further details. 8.14 to proposed
Maker Participants). Appointments) Rule 22.2(c) *. paragraph (l).\10\
paragraph (l). Removes current Rule
8.14(a) as it is no
longer necessary
because all classes
now trade on the
System (Hybrid
Trading System).
Removes conditions in
current paragraph (b)
for Exchange
designation of
classes without a DPM/
LMM and updates rule
language to reflect
this change.
Rule 8.15 (Lead Market-Makers). Rule 5.55 (LMMs). N/A.............. N................ Moves current 8.15(b)-
(d) and
Interpretations and
Policies .02--.04 to
proposed rule,
deletes certain
provisions redundant
of Market-Maker
obligations under
proposed Rule 5.52
(current Rule 8.7, to
which a LMM must
already comply).
Codifies that LMM
obligations are
applicable only
during Regular
Trading Hours, which
is the current manner
in which LMM
obligations already
apply. Renumbers
provisions and
updates cross-
references and
headings, and
language to read in
plain English. Moves
current Rule
6.1A(iii)(B) to Rule
6.1A to proposed
5.55(b).
Rule 6.1A (Global Trading
Hours), paragraph (iii)(B).
Rule 8.84 (Conditions on the Rule 5.50 (Market- N/A.............. N................ Moves current rule to
Allocations of Securities to Maker proposed 5.50(k),
DPMs). Appointments). Interpretation and
Policy .02 to
5.50(i)(5), and
deletes current
Interpretation and
Policy .01(b) because
it is redundant of an
existing provision in
current Rule 8.95
with which current
Rule 8.84 is being
consolidated with in
proposed Rule 5.50.
Renumbers provisions
and updates cross-
references and
headings, and
language to read in
plain English.
Rule 8.85 DPM Obligations...... Rule 5.54 (DPMs). N/A.............. Y: see below for Moves current rule,
further details. including
Interpretations and
Policies, to proposed
rule. Codifies that
DPM obligations are
applicable only
during Regular
Trading Hours, which
is the current manner
in which DPM
obligations already
apply. Removes
segregation of
account requirements
for DPM-related
transactions. Deletes
current 8.85(a)(ii)
which states
obligations redundant
of those in
8.85(a)(i). Deletes
Rule 8.85(a)(iii)
which is redundant of
Market-Maker
obligations under
proposed rule 5.52
(current Rule 8.7, to
which a DPM must
already comply).
Changes ``Exchange
committee to
``Exchange'' as the
Exchange, rather than
a specific committee,
requires DPM
Designees. Renumbers
provisions and
updates cross-
references and
headings and language
to read in plain
English
Rule 8.95 (Allocation of Rule 5.50 (Market- N/A.............. N................ Deletes Interpretation
Securities and Location of Maker and Policy .04 which
Trading Crowds and DPMs). Appointments). would be redundant of
Rule 8.84, also being
consolidated into
proposed Rule 5.50.
Deletes current
8.95(j) and
Interpretation and
Policy .03, which is
obsolete as it refers
to classes open for
trading prior to
1987. Renumbers
provisions and
updates headings and
cross-references and
language to read in
plain English.
Rule 21.19 (Obligations of N/A.............. C2 Rule 8.6, EDGX N................ Deletes current rule
Market-Makers (Treasury Bonds Options Rule (which covers bid/ask
and Notes)). 22.6, BZX requirements for
Options Rule government
22.6. securities) to align
with proposed no bid/
ask requirement,
which is consistent
with the Affiliated
Options Exchanges. In
addition, the
Exchange delisted
government securities
in 2011, therefore,
Market-Maker
obligations in such
classes are no longer
relevant.
Rule 22.14 (Maximum Bid-Ask N/A.............. N/A.............. N................ Deletes current rule
Differentials; Market-Maker (which covers bid/ask
Appointments & Obligations). requirements for
binary options) to
align with proposed
no bid/ask
requirement, which is
consistent with the
Affiliated Options
Exchanges. In
addition, the
Exchange delisted
binary options in
2015, therefore,
Market-Maker
obligations in such
classes are no longer
relevant.
29.17 (Market-Maker N/A.............. N/A.............. N................ Deletes current rule,
Appointments & Obligations). which provides for
certain Market-Making
obligations in
relation to Credit
Option classes as the
Exchange delisted
Credit Options in
2014, therefore, this
provision is no
longer relevant to
the current or
proposed Market-Maker
program.
Rule 24A.9 (FLEX Market-Maker Rule 5.57 (FLEX N/A.............. N................ Moves current Rule
Appointments and Obligations). Market-Makers). 21A.9(d) and (e) to
proposed rule.
Removes current Rule
21A.9(c) regarding
FLEX Appointed Market-
Maker obligations
because the Exchange
currently does not
have any FLEX
Appointed Market-
Makers. To the extent
the Exchange
determines in the
future to have FLEX
Appointed Market-
Makers in place, the
Exchange will submit
a separate rule
filing. Updates cross-
references, heading,
and language to read
in plain English.
Rule 8.7 (Obligations of Market- Rule 5.51 (Market- C2 Rule 8.5, EDGX N................ Moves current Rule
Makers). Maker Options Rule 8.7(a) and (b) and
Obligations). 22.5, BZX Interpretation and
Options Rule Policy .09 to
22.5. proposed rule and
conforms to the
Affiliated Options
Exchanges' rules to
the extent necessary
to adhere to existing
Exchange rule text,
maintain provisions
specific to Cboe
Options rules, and to
account for details/
descriptions included
in the Exchange's
Rules but not in the
applicable rules of
the Affiliated
Options Exchanges.
Removes provisions
redundant of and/or
already encompassed
by a Market-Maker's
obligation to engage
in dealing to
maintain fair and
orderly markets.
Proposed Rule
5.51(e), which
provides that if the
Exchange finds any
substantial or
continued failure by
a Market-Maker to
engage in a course of
dealings, the Market-
Maker will be subject
to disciplinary
action or suspension
or revocation of its
registration or its
appointment(s), is
based on and
consistent with the
Affiliated Exchanges'
rules, as well as the
Exchange's current
authority to take
disciplinary action
for Market-Maker
failure to meet its
Market-Maker
obligations (e.g.
continuous quoting
requirements).
[[Page 50550]]
Rule 8.7 (Obligations of Market- Rule 5.52 (Market- C2 Rule 8.6, EDGX Y: see below for Moves current Rule
Makers). Maker Quotes). Options Rule further details. 8.7(c) and (d), as
22.6, BZX well as
Options Rule Interpretations and
22.6. Policies .03, .05,
.06, .09, .10, and
.11 to proposed rule.
Conforms proposed
quoting obligation
provisions to
Affiliated Options
Exchanges' quoting
obligation rules
(including for GTH)
to the extent
necessary to adhere
to existing Exchange
rule text, maintains
provisions specific
to the Exchange and
to account for
details/descriptions
included in the
Exchange's Rules but
not in the applicable
the Affiliated
Options Exchanges'
rules. Moves the
definition of
``continuous quoting
obligations'' from
current Rule 1.1 for
consistency and
consolidation; this
includes the current
two-sided quote
requirement language
which is incorporated
into proposed Rule
5.52(c). Deletes Rule
6.1A(e)(iv), as this
was related separate
trading session
appointments and
Hybrid classes,
neither will be
applicable upon
migration. Proposed
rule does not
substantively alter
current obligations
but rather removes
redundancies and
makes the quoting
obligation rules
easier to follow by
consolidating current
provisions and
streamlining language
(which includes
removing the lengthy
and potentially
confusing examples
under current
8.7(d)(iii); the
Exchange instead
currently
disseminates notices
with such examples,
explanations, answers
to FAQ, and Exchange
contact information).
Deletes obsolete and
redundant language/
provisions, updates
cross-references,
paragraph lettering,
headings, and
language to read in
plain English.
Rule 1.1 (definition of
``continuous quoting
obligations'').
Rule 6.1A (Global Trading
Hours), paragraph (e)(iv).
N/A............................ Rule 5.53 (Good- C2 Rule 8.4, EDGX Y: see below for Proposed rule conforms
Standing for Options Rule further details. to Market-Maker good
Market-Makers). 22.4, BZX standing rules of the
Options Rule Affiliated Options
22.4. Exchanges.
Rule 8.13 (Preferred Market- Rule 5.56 (PMMs). C2 Rule 8.6, EDGX Y: update of the Moves current 8.13(b)-
Makers). Options 22.6, time-to- (d) and
BZX Options 22.6. expiration Interpretations and
language for Policies .01(a)
certain series through .04 to
excluded is the proposed rule.
only substantive Codifies that PMM
change made; obligations are
described below.. applicable only
during Regular
Trading Hours, which
is currently the
manner in which they
apply. Updates the
language in current
Rule 8.13 to clarify
that receipt of PMM
orders is the point
in time when a PMM
receives an
entitlement (i.e.
after being preferred
on an order), this is
currently that manner
in which receipt
functions. Conforms
time-to-expiration-
language for series
excluded to the
Affiliated Options
time-to-expiration
(i.e. from 9 months
to 270 days).
Renumbers provisions,
changes headings, and
updates cross-
references and
language to read in
plain English.
Rule 8.14 (Hybrid Trading Rule 5.50 (Market- Consistent with Y: see below for Moves current Rule
System Platforms & Market- Maker EDGX Options further details. 8.14 to proposed
Maker Participants). Appointments) Rule 22.2(c) *. paragraph (l).\11\
paragraph (l). Removes current Rule
8.14(a) as it is no
longer necessary
because all classes
now trade on the
System (Hybrid
Trading System).
Removes conditions in
current paragraph (b)
for Exchange
designation of
classes without a DPM/
LMM and updates rule
language to reflect
this change.
Rule 8.15 (Lead Market-Makers). Rule 5.55 (LMMs). N/A.............. N................ Moves current 8.15(b)-
(d) and
Interpretations and
Policies .02--.04 to
proposed rule,
deletes certain
provisions redundant
of Market-Maker
obligations under
proposed Rule 5.52
(current Rule 8.7, to
which a LMM must
already
comply).Codifies that
LMM obligations are
applicable only
during Regular
Trading Hours, which
is the current manner
in which LMM
obligations already
apply. Renumbers
provisions and
updates cross-
references and
headings, and
language to read in
plain English. Moves
current Rule
6.1A(iii)(B) to Rule
6.1A to proposed
5.55(b).
Rule 6.1A (Global Trading
Hours), paragraph (iii)(B).
Rule 8.84 (Conditions on the Rule 5.50 (Market- N/A.............. N................ Moves current rule to
Allocations of Securities to Maker proposed 5.50(k),
DPMs). Appointments). Interpretation and
Policy .02 to
5.50(i)(5), and
deletes current
Interpretation and
Policy .01(b) because
it is redundant of an
existing provision in
current Rule 8.95
with which current
Rule 8.84 is being
consolidated with in
proposed Rule 5.50.
Renumbers provisions
and updates cross-
references and
headings, and
language to read in
plain English.
Rule 8.85 DPM Obligations...... Rule 5.54 (DPMs). N/A.............. Y: see below for Moves current rule,
further details. including
Interpretations and
Policies, to proposed
rule. Codifies that
DPM obligations are
applicable only
during Regular
Trading Hours, which
is the current manner
in which DPM
obligations already
apply. Removes
segregation of
account requirements
for DPM-related
transactions. Deletes
current 8.85(a)(ii)
which states
obligations redundant
of those in
8.85(a)(i). Deletes
Rule 8.85(a)(iii)
which is redundant of
Market-Maker
obligations under
proposed rule 5.52
(current Rule 8.7, to
which a DPM must
already comply).
Changes ``Exchange
committee to
``Exchange'' as the
Exchange, rather than
a specific committee,
requires DPM
Designees. Renumbers
provisions and
updates cross-
references and
headings and language
to read in plain
English
Rule 8.95 (Allocation of Rule 5.50 (Market- N/A.............. N................ Deletes Interpretation
Securities and Location of Maker and Policy .04 which
Trading Crowds and DPMs). Appointments). would be redundant of
Rule 8.84, also being
consolidated into
proposed Rule 5.50.
Deletes current
8.95(j) and
Interpretation and
Policy .03, which is
obsolete as it refers
to classes open for
trading prior to
1987. Renumbers
provisions and
updates headings and
cross-references and
language to read in
plain English.
Rule 21.19 (Obligations of N/A.............. C2 Rule 8.6, EDGX N................ Deletes current rule
Market-Makers (Treasury Bonds Options Rule (which covers bid/ask
and Notes)). 22.6, BZX requirements for
Options Rule government
22.6. securities) to align
with proposed no bid/
ask requirement,
which is consistent
with the Affiliated
Options Exchanges. In
addition, the
Exchange delisted
government securities
in 2011, therefore,
Market-Maker
obligations in such
classes are no longer
relevant.
Rule 22.14 (Maximum Bid-Ask N/A.............. N/A.............. N................ Deletes current rule
Differentials; Market-Maker (which covers bid/ask
Appointments & Obligations). requirements for
binary options) to
align with proposed
no bid/ask
requirement, which is
consistent with the
Affiliated Options
Exchanges. In
addition, the
Exchange delisted
binary options in
2015, therefore,
Market-Maker
obligations in such
classes are no longer
relevant.
29.17 (Market-Maker N/A.............. N/A.............. N................ Deletes current rule,
Appointments & Obligations). which provides for
certain Market-Making
obligations in
relation to Credit
Option classes as the
Exchange delisted
Credit Options in
2014, therefore, this
provision is no
longer relevant to
the current or
proposed Market-Maker
program.
[[Page 50551]]
Rule 24A.9 (FLEX Market-Maker Rule 5.57 (FLEX N/A.............. N................ Moves current Rule
Appointments and Obligations). Market-Makers). 21A.9(d) and (e) to
proposed rule.
Removes current Rule
21A.9(c) regarding
FLEX Appointed Market-
Maker obligations
because the Exchange
currently does not
have any FLEX
Appointed Market-
Makers. To the extent
the Exchange
determines in the
future to have FLEX
Appointed Market-
Makers in place, the
Exchange will submit
a separate rule
filing. Updates cross-
references, heading,
and language to read
in plain English.
----------------------------------------------------------------------------------------------------------------
As indicated above, many of the proposed rules are virtually
identical (other than updating the rule text to plain English, updating
cross-references, revising headings renumbering provisions, and, where
applicable, deleting duplicative provisions as a result of
consolidation, and making other types of non-substantive changes
described above) and are merely moving from the current Rulebook to the
shell Rulebook.
Proposed Rule 5.50 (Market-Maker Appointments)
Proposed Rule 5.50 consolidates rules under current Chapter 8 in
connection with class appointments, which includes appointment costs
and class appointments to DPMs and Trading Crowds. Below describes in
more detail the substantive changes proposed:
Proposed Rule 5.50(a) provides that a registered Market-Maker may
select class appointments to make markets in those classes during all
trading sessions, i.e. Regular Trading Hours (``RTH'') \12\ and Global
Trading Hours (``GTH'') \13\. Particularly, this proposed change
removes current language, which provides that a Market-Maker may select
class appointments in one or more trading sessions in order to
harmonize its rules and processes with the Affiliate Options Exchanges,
which allow for a Market-Maker selected class appointment that apply to
classes during all trading sessions.\14\ In other words, if a Market-
Maker selects an appointment in Cboe Volatility Index (``VIX'')
options, which series are open for trading during GTH and RTH, that
appointment would apply during both trading sessions (and thus, the
Market-Maker would have an appointment to make markets in VIX during
both GTH and RTH). As a result, a Market-Maker continuous quoting
obligations set forth in proposed Rule 5.52(d) (current Rule 8.7(d))
would apply to the class for an entire trading day. A Market-Maker with
appointments in either GTH or RTH is required to provide continuous
quotes in at least 60% of the series \15\ for 90% of the time it is
quoting in those classes.\16\ The Exchange notes that a Market-Maker's
continuous obligations will continue to function in this manner,
therefore, the extension of obligations to appointed classes to trading
sessions will have a de minimis, if any, impact on a Market-Maker's
continuous quoting obligations, as they may continue to choose when to
actively quote and have their obligations to their appointed classes
apply.
---------------------------------------------------------------------------
\12\ From 8.30 a.m. CT to 3:15 p.m. CT.
\13\ From 2:00 a.m. CT to 8:15 a.m. CT.
\14\ See C2 Rule 8.2; EDGX Options Rule 22.3; and BZX Options
Rule 22.3. The Exchange notes that GTH session on the Affiliated
Options Exchanges occurs from 7:30 a.m. CT to 8:15 a.m. CT.
\15\ Proposed Rule 5.52(d) (current Rule 8.7(d).
\16\ Proposed Rule 5.52(d) (current Rule 1.1).
---------------------------------------------------------------------------
Proposed 5.50(b) states that a Market-Maker may enter an
appointment request via an Exchange-approved electronic interface with
the Exchange's systems by 2:30 a.m.\17\ for ``All Sessions'' \18\
classes, that is an option class the Exchange lists for trading during
both GTH and RTH., which appointment becomes effective on the open of
the Global Trading session, or by 9:00 a.m. for classes traded during
Regular Trading Hours, which appointment becomes effective on the open
of the Regular Trading session. Market-Makers already request
appointments via an Exchange-approved electronic interface, therefore
this proposed rule merely codifies the existing request process.\19\
This is consistent with the corresponding rules of the Affiliated
Options Exchanges,\20\ but is amended to provide Market-Makers with
flexibility regarding appointments between its two trading sessions,
which are different in scope than those of the Affiliate Options
Exchanges.
---------------------------------------------------------------------------
\17\ All times are Eastern Time pursuant to Rule 1.6 in shell
Rulebook.
\18\ See Rule 1.1 in the shell Rulebook.
\19\ See Cboe Release No. C2019071600 (2019), available at
https://cdn.cboe.com/resources/release_notes/2019/Quarterly-Rebalance-of-Option-Class-Tiers-and-Online-Appointment-System-Q2-2019.pdf
\20\ See C2 Rule 8.2; EDGX Options Rule 22.3; and BZX Options
Rule 22.3.
---------------------------------------------------------------------------
The proposed rule change (proposed Rule 5.50(g)(1)) also deletes
language in current Rule 8.3(c)(iv) that allows for only 1.0
appointment cost and one tier appointment per Trading Permit, as well
as rule language relevant to this limitation. In anticipation of
migration, the Exchange intends to update and simplify its fee
schedule, and a Market-Maker firm will need only one Market-Making
Trading Permit, regardless of the number of classes in which it chooses
to have appointments.\21\ Upon migration, a Market-Maker firm will only
be required to have one permit and will be charged for one or more
``Appointment Units'' (which will scale from 1 ``unit'' to more than 5
``units''), depending on which classes they elect appointments.
Appointment Units will replace the standard 1.0 appointment cost, but
function in the same manner. Appointment weights (which, in the
proposed rule, replaces the term ``appointment costs'', but these terms
are equivalent) for each appointed class will be summed for each
Market-Maker in order to determine the total appointment units, to
which fees will be assessed. This is the current manner in which the
tier costs per class appointment are summed to meet the 1.0 appointment
cost, the only difference will be that if a Market-Maker exceeds this
``unit'' then their fees will be assessed under the ``unit'' that
corresponds to the total of their appointment weights, as opposed to
holding another Trading Permit because it exceeded the 1.0 ``unit''.
The proposed rule also updates some of the appointment costs (and
updates this term to reflect ``appointment weights'' in line with the
fees schedule for migration) in order to align with the rebalanced
Appointment Units upon migration. The proposed change is intended to
provide for a more straightforward and efficient administration of the
appointment unit process as it will remove the more burdensome process
in obtaining Trading Permits and replace it with a simple, scaled
appointment unit regime (which is reflective of the same scaled regimes
Market-Makers are accustomed to within the Exchange's fees schedule).
The Exchange believes that by making the appointment unit process less
burdensome for Market-Makers, the proposed rule may potentially
incentivize more market-making across classes.
---------------------------------------------------------------------------
\21\ See Exchange Notice C2019081900 (August 19, 2019). Also,
the Exchange intends to propose this change to the Fees Schedule in
a separate rule filing.
---------------------------------------------------------------------------
The proposed rule change removes the condition in current Rule
8.14(b) that the Exchange may only designate classes to not have a DPM
or LMM if
[[Page 50552]]
there are at least four Market-Makers quoting in the class that are
subject to the continuous quoting obligations. When the Exchange
implemented this condition, there were a limited number of classes
trading on the Hybrid System and this condition was designed, at that
time, to enhance the Exchange's Market-Making program in the select
classes trading on Hybrid, which was relatively new to the Exchange. As
discussed above, all classes now trade on the System (i.e. Hybrid), and
Market-Makers select their own appointments which adequately cover all
classes of options necessitating market-making liquidity. In addition
to this, proposed Rule 5.52(g) (current Rule 8.7(d)(iv)) allows for the
Exchange to call on a Market-Maker to submit a single quote or maintain
continuous quotes in one or more series of a Market-Maker's appointed
class whenever, in the judgment of the Exchange, it is necessary to do
so in the interest of maintaining a fair and orderly market. The
Exchange believes these rules provide for sufficient liquidity in
classes trading on the Exchange. Also, the proposed change is
consistent with the rules of EDGX Options, which currently has a DPM
program and lists many of the same classes. Pursuant to EDGX Options
rules, it may choose to appoint one DPM per class, yet its rules do not
obligate it to do so, nor do they require for a requisite number of
Market-Makers when EDGX does not choose to appoint a DPM to a
class.\22\
---------------------------------------------------------------------------
\22\ See EDGX Options Rule 22.2(c).
---------------------------------------------------------------------------
Proposed Rules Regarding Market-Maker Obligations
The Exchange notes that the proposed rules in connection with
Market-Marker obligations (presented in the table above) largely make
non-substantive changes to update and simplify the rules by
reorganizing and consolidating provisions, simplifying language,
updating language to plain English and removing redundancies. For
example, and as indicated in the table above, proposed Rule 5.51 only
makes non-substantive changes to the rule governing a Market-Maker's
general obligations (current Rule 8.7, in part), most of which remove
redundant provisions that are already covered under the umbrella of a
Market-Maker's obligation to engage in dealing to maintain fair and
orderly markets. The proposed rules make only a few substantive changes
to Market-Maker's obligations. The following provides an overview of
the proposed substantive changes being made to the obligations for
Market-Maker and Market-Maker types (which are described in further
detail in the sections below):
Adds exceptions under proposed Rule 5.52(a) to the current
requirement (under current Rule 8.51) \23\ that a Market-Maker's quotes
must be firm. These are consistent with the exceptions to the firm
quote requirement for Market-Makers on the Affiliated Options
Exchanges.
---------------------------------------------------------------------------
\23\ The Exchange notes that current Rule 8.51, which governs
Firm Disseminated Market Quotes will be maintained as is, and
continue to apply to Market-Makers, but will be moved to the shell
Rulebook at a later date.
---------------------------------------------------------------------------
Amends language throughout proposed Rule 5.52 to reflect
that a Market-Maker's current continuous quoting requirements (i.e.,
90% of the time a Market-Maker is quoting in its appointed classes) in
60% of the series of the Market-Maker's appointed classes will now
apply to all trading sessions (GTH and RTH). As indicated in the table
above, the 90% continuous quoting requirement in 60% of appointed
classes is currently the quoting requirement for Market-Makers. The
proposed rule change does not alter this continuous electronic quoting
obligation but merely incorporates the definition of continuous
electronic quotes into this proposed rule, as opposed to having this
term defined elsewhere in the Rules, as it is currently. The Exchange
notes that DPMs, PMMs, and LMMs will also continue to have the same
electronic quoting requirements which will continue to apply only
during RTH, as they currently do.
Updates the series excluded from a Market-Maker's
continuous quoting obligations under proposed 5.52(d)(2), including:
Amending the exclusion of ``9-month'' series to ``270-day series'' (and
makes this proposed change where applicable throughout the rules); and
adding that any intra-day add-on series on the day during which such
series are added for trading and any Quarterly Options series are
excluded from the continuous quoting obligation. The Exchange notes
that it does not propose to add these series to be excluded from PMM,
DPM, and LMM obligations.
Removes the quote width requirements (current Rule
8.7(d)(i)(A) and (ii)(A), Rule 21.19, and Rule 22.14). This is
consistent with the Market-Maker quoting requirements on the Affiliated
Options Exchanges.
Adds proposed Rule 5.53 which governs good standing for
Market-Makers and is consistent with rules of the Affiliated Options
Exchanges.
Removes the requirement under proposed Rule 5.54 that DPMs
must segregate in a manner prescribed by the Exchange (i.e. segregated
accounts) transaction made in a DPM capacity from other transactions/
activity.
Proposed Rule 5.52 (Market-Maker Quotes)
Proposed Rule 5.52 consolidates overall the Market-Maker quoting
obligations and amends obligations to 1) include quoting obligations
under the Affiliated Options Exchanges' rules, and 2) update current
quoting obligations to be consistent, the extent possible to maintain
Exchange specific requirements, with the quoting obligations of the
Affiliated Options Exchanges. The Exchange notes that, as proposed, a
Market-Maker's obligations will be substantially similar to its current
obligations.
Proposed Rule 5.52(a) provides for the firm quote obligation for
Market-Makers pursuant to Rule 602 of Regulation NMS, to which Market-
Makers must already comply pursuant to current Rule 8.51 (Firm
Disseminated Market Quotes).\24\ Proposed Rule 5.52(a) mirrors the firm
quoting provision for Market-Makers under the rules of the Affiliated
Options Exchanges, and adds exceptions to firm quotes that are the same
as the exceptions under corresponding rules of the Affiliated Options
Exchanges.\25\ These proposed exceptions to a Market Maker's firm quote
include system malfunction, unusual market conditions, and quotes
during the pre-open.
---------------------------------------------------------------------------
\24\ See supra note 25.
\25\ See C2 Rule 8.6; EDGX Options Rule 22.6; BZX Options Rule
22.6.
---------------------------------------------------------------------------
Proposed Rule 5.52(d)(2), regarding continuous electronic quoting
requirements incorporates obligations to appointed classes to the
entire trading day (i.e., GTH and RTH, which is described in detail
above) by removing or updating language that refers to ``Regular
Trading Hours'' and ``per trading session'' and its amends its list of
series of excluded from a Market-Maker's continuous quoting obligation
to incorporates the exclusion of any intra-day add-on series on the day
during which such series are added for trading and any Quarterly
Options series. This exclusion is consistent with corresponding rules
of the Affiliated Options Exchanges.\26\ As stated above,
[[Page 50553]]
proposed Rule 5.52(d)(2) also amends the current quoting exclusion of
any series with an expiration of nine months or greater to an
expiration of greater than 270 days, which is consistent with the time-
to-expiration language for the same exclusion under the Affiliated
Options Exchanges' rules. The Exchange notes that Market Makers
generally already monitor expirations by a defined count of 270 days,
as opposed to a nine month count in which the number of days
continuously varies. Therefore, this proposed change aligns the
Exchange's rules with current industry practice already in place on the
Affiliated Options Exchanges. The Exchange also applied this change in
the PMM obligation rule (the only other location in the Market-Maker
rules which refers to 9-month series), proposed Rule 5.56.
---------------------------------------------------------------------------
\26\ Id; see also Securities Exchange Act Release No. 71129
(December 18, 2013), 78 FR 77736 (December 18, 2013) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Modify BATS Options Market Maker Continuous Quoting Obligation
Rules) (SR-BATS-2013-062), which adopted exclusions, including
Quarterly Options series, to Market Maker's quoting obligations and
noted that such exclusions were ``consistent with the rules of
several other options exchanges'' and ``did not diminish the quoting
obligation''. The Exchange also notes that these exclusions were
adopted on EDGX Options when that exchange was established.
---------------------------------------------------------------------------
The proposed rule change also removes the quote width requirements
under current Rule 8.7(d)(i)(A) and (d)(ii)(A)), as well as reference
to such determined quote widths throughout the proposed rules,
including those for SPX, Interpretation and Policy .08 regarding bid/
ask determinations for indexes, and current Rule 24A.9(e). This is
consistent with the corresponding rules of the Affiliated Options
Exchanges \27\ and the manner in which Market-Makers on those exchanges
are required to quote many of the same classes as Market-Makers on the
Exchange. The Exchange notes that currently the quote width requirement
for generally all classes is $10, however, Market-Makers consistently
maintain two-sided quotes that are much tighter than the required
width. Indeed, even if markets are experiencing period of stress or
volatility, pursuant to proposed Rule 5.51 (current Rule 8.7), Market-
Makers remain obligated to maintain two sided markets and engage in a
course of dealings that must be reasonable calculated to contribute to
the maintenance of a fair and orderly market, which includes refraining
from making bids or offers that are inconsistent with such course of
dealings and updating quotations in response to changed market
conditions. The Exchange may take disciplinary action against any
substantial or continued failure of these obligations. Therefore, the
Exchange does not believe that the continuing to provide for a quote
width requirement is necessary nor will it impact the maintenance of
fair and orderly markets because Market-Makers already quote at a bid/
ask spread much narrower than the requirements and are required to
continuously fulfill their obligations to engage in a course of
dealings reasonably calculated to contribute to the maintenance of a
fair and orderly market. The Exchange also notes that under proposed
Rule 5.51 (current Rule 8.7), in connection with a Market-Maker's
obligations to maintain fair and orderly markets, it may not make bids
or offers inconsistent with this requirement, and, if the Exchange
finds any substantial or continued failure by a Market-Maker regarding
this requirement, the Market-Maker will be subject to disciplinary
action or suspension or revocation of its registration or
appointment(s). As such, Market-Makers must continue to submit quotes
in accordance with this standard.
---------------------------------------------------------------------------
\27\ See supra note 27.
---------------------------------------------------------------------------
The Exchange also notes a proposed non-substantive change (not
presented in the table above) to delete the language under current
8.7(d) which provides that Market-Makers remain subject to all
obligations imposed by current Rule 8.7, and, to the extent another
obligation contained elsewhere in current Rule 8.7 is inconsistent with
an obligation contained in current paragraph (d) of Rule 8.7 (i.e.,
continuous quoting obligations) with respect to a class, current
paragraph (d) shall govern. The Affiliated Options Exchanges'
corresponding rules do not provide for the same, as a Market-Maker is
expected to uphold all obligations under the rules and in no
circumstance circumvent its other, equally important obligations (e.g.,
constituting a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market) in order to
continuously quote. Therefore, this proposed change will not impact a
Market-Maker's obligations under any of the rules, but instead is
designed to ensure that a Market-Maker upholds each of its obligations.
The proposed change conforms the Exchange's rules to the Affiliated
Options Exchanges' rules. Similarly, the proposed rule change removes
Interpretation and Policy .02, which states that the obligations of a
Market-Maker with respect to those classes of option contracts to which
the Market-Maker holds an Appointment shall take precedence over his
other Market-Maker obligations. The Exchange notes that a Market-
Maker's obligations only pertain to its appointed classes, which
renders this provision unnecessary. This is also consistent with the
quoting obligation provisions of the Affiliated Options Exchanges.
Proposed Rule 5.53 (Good Standing for Market-Makers)
Proposed Rule 5.53, which covers good standing for Market-Makers,
is identical to the corresponding rules of the Affiliated Options
Exchange.\28\ The Exchange currently does not have a similar,
consolidated rule that covers good standing for Market-Makers. This
change is designed to harmonize Market-Maker requirements across the
Exchange and the Affiliated Options Exchanges which provide clear
requirements for Market-Makers to maintain good standing as a Market-
Maker. The proposed rule states that for a Market-Maker to remain in
good standing, a Market-Maker must: (1) Continue to meet the
requirements established in Exchange Act Rule 15c3-1(a)(6)(i), the
general requirements for Trading Permit Holders set forth in Chapter 3
of the Rules (as proposed), and the Market-Maker requirements set forth
in Chapter 5 of the Rules (as proposed); (2) comply with the Rules as
well as the Rules of the Clearing Corporation and the Federal Reserve
Board; and (3) pay on a timely basis such participation, transaction,
and other fees as the Exchange prescribes. The rule also provides that
the Exchange may suspend or terminate a Trading Permit Holder's
registration as a Market-Maker or a Market-Maker's appointment to a
class, or otherwise withdraw the good standing of a Market-Maker as
provided in the Rules, if the Market-Maker ceases to maintain any of
these conditions for approval or violates any of its agreements with
the Exchange or any of the provisions of the Rules. The proposed rule
does not impose any new obligations or requirements for Market-Makers
but are merely provides for the standards, currently in place under
other rules or regulations, for which the Exchange may measure a
Market-Maker's good standing.
---------------------------------------------------------------------------
\28\ See C2 Rule 8.4; EDGX Options Rule 22.4; and BZX Options
Rule 22.4.
---------------------------------------------------------------------------
Proposed Rule 5.54 (DPMs)
The proposed rule deletes current Rule 8.85(a)(vi), which states
that a DPM must segregate in a manner prescribed by the Exchange all
transactions consummated by the DPM in securities allocated to the DPM
and any other transactions consummated by or on behalf of the DPM that
are related to the DPM's DPM business, and current Rule 8.85(c)(v),
which states the DPM shall segregate in a manner prescribed by the
Exchange the DPM's business and activities as a DPM from the DPM's
other businesses and activities (i.e. segregated accounts for DPM-
related
[[Page 50554]]
transactions from the firm's general Market-Maker accounts or accounts
in relation to other trading activities or capacities). This is
consistent with EDGX Options Rules (which, of the Affiliated Options
Exchanges, also has DPMs), which do not require DPMs to maintain
segregated accounts for that of their general Market Maker or other
trading activities. These provisions were implemented in the past to
ensure the financial stability of, then, newly formed small DPM firms.
Today, DPMs now need larger financial infrastructure to trade as a DPM
and the Exchange determines if firms are appropriately situated act as
a DPM pursuant to proposed Rule 3.53 (current Rule 8.83) by
considering, among other things, the firms' adequacy of capital and
operational capacity. This reduces the risk that a DPM's financial
integrity would be adversely impacted by financial losses that may be
incurred by the DPM in connection with its other businesses and
activities.\29\ Finally, the proposed rule change removes current
paragraph (e) regarding Trading Permits per appointment costs, in line
with the changes made to the overall Market-Maker appointment costs and
assignments under proposed Rule 5.50 (described in detail above).
---------------------------------------------------------------------------
\29\ The Exchange also already surveils for a firm's DPM
requirements by DPM-specific acronyms and firm IDs.
---------------------------------------------------------------------------
Miscellaneous Market-Maker Rules
----------------------------------------------------------------------------------------------------------------
Corresponding
Current rule Proposed rule other exchange Substantive change Description of
rule change
----------------------------------------------------------------------------------------------------------------
Rule 8.8 (Restriction on Acting Rule 8.25 N/A............... N................. None (aside from
as Market-Maker and Floor (Restriction on updating cross-
Broker). Acting as Market- references).
Maker and Floor
Broker).
Rule 8.9 (Securities Accounts Rule 7.6 C2 Rule 8.7, EDGX N................. Conforms to
and Orders of Market-Makers). (Securities Options Rule corresponding
Accounts and 22.7, BZX Options rules of the
Orders of Market- Rule 22.7. Affiliated
Makers). Options Exchanges
(including
Interpretation
and Policy .01 to
BZX/EDGX Rule
22.7). Maintains
provisions
specific to Cboe
Options rules.
Deletes
redundancies,
including those
provisions
already covered
under other Rules
(e.g. Rule
6.55.03), updates
language to read
in plain English
Rule 8.10 (Financial Rule 11.6(b) N/A............... N................. None.
Arrangements of Market-Makers). (Market-Maker
Financial
Requirements).
Rule 8.17 (Stopping of Option Rule 5.58 N/A............... N................. None.
Order). (Stopping of
Option Orders) of
Section D (Market-
Maker
Appointments and
Obligations).
Rule 8.60 (Evaluation of Trading N/A............... N/A............... N: however, see Removes current
Crowd Performance). below for further rule which is no
details. longer in
practice by the
Exchange and
unnecessary given
the authority of
the Exchange to
evaluate and
determine
satisfactory
Market-Maker
performance and
fulfillment of
obligations, as
well as authority
to take
disciplinary
action for
failure to
satisfy Market-
Maker
requirements
through various
other Exchange
rules.
Rule 8.80 (DPM Defined)......... Rule 1.1.......... N/A............... N................. Replaces reference
to Rule 8.1 in
current Rule 1.1
with current Rule
8.1 language
which defines a
DPM.
Rule 8.86 (DPM Financial Rule 11.6 C2 Rule 8.8....... Y: see below for Moves to proposed
Requirements). (Financial further details. Rule 11.6(a) and
Arrangements of removes the
Market-Makers). $100,000 net
liquidating
equity
requirement as it
is no longer
applicable to the
current DPM and
marketplace
structures.
Conforms Rule
11.6(a) to
corresponding C2
rule. The Market-
Maker language
covers all Maker-
Maker types, thus
DPMs.
----------------------------------------------------------------------------------------------------------------
Proposed Deletion of Current Rule 8.60
The proposed rule change deletes current Rule 8.60 which provides
for the Exchange evaluation of trading crowd performance. The current
rule provides that the Exchange periodically evaluate the performance
of DPMs, Market-Makers, and other Trading Permit Holders both
individually and collectively as trading crowds in order to determine
whether they are satisfactorily meeting their market responsibilities.
The Exchange may do so by means of a survey, and, if the Exchange finds
that such participant has failed to satisfy its Market-Making
requirements then the Exchange may, among other things, suspend,
terminate or restrict registration or appointment to a class or
classes, reallocate (i.e. reappoint, as proposed) class(es) or restrict
allocation of classes, and so on, and give notice and an opportunity
for a market participant to have a formal hearing or informal hearing,
depending on the action under consideration. The proposed rule change
deletes current Rule 8.60 as it is no longer implemented by the
Exchange. The Exchange does not take such surveys or make
determinations pursuant to Rule 8.60 because the Exchange exercises its
authority under other rules to ensure that Market-Makers (and Market-
Maker types) fulfil their Market-Making requirements, and to take
appropriate disciplinary actions for a participant's failure to do so.
The Exchange may make the same determinations and take action against a
participant for failing to meet their respective Market-Maker
obligations under the current rules (moved to proposed Rules 3.53,
5.50, 5.51, 5.52, 5.53, 5.54, 5.55, and 5.56). Moreover, the Exchange
must follow the notice provision to terminate or condition a
participant's approval to act as a DPM under proposed Rule 3.53, as
well as the notice and proceeding requirements for disciplinary actions
under Chapter 17. Because the Exchange does not take surveys or make
determinations under Rule 8.60, and instead, currently ensures that
participants fulfill their respective Market-Making requirements
pursuant to multiple other rules, the proposed rule change does not
alter the manner in which the Exchange determines whether Market-Making
requirements are met nor the actions and procedures necessary to
discipline a participant for failure of such obligations. The proposed
rule change merely removes a rule that is not essential to the function
and continuity of the Exchange and its Market-Maker program.
Proposed Rule 11.6
The proposed rule change moves current Rule 8.86 to proposed Rule
11.6(a) and removes the $100,000 net liquidating equity requirement as
it is no longer applicable to current DPM structures. This is
consistent with corresponding C2 Rule 8.8. Current Rule 8.86 was
enacted (almost 20 years ago) to ensure the financial stability of
newly formed, small DPM firms who were not previously net capital
computing firms, as a number of small firms were not net capital
computing based on an exemption (i.e., the ``(b)(1) exemption'') in
Exchange Act Rule 15c3-1. However, due to changes in the market and, as
stated above, the large infrastructure
[[Page 50555]]
now needed to trade as a DPM, in which the Exchange determines if
appropriately situated to act as a DPM pursuant to proposed Rule 3.53
(current Rule 8.83), the number of firms who can be a DPM has decreased
significantly and the size of DPM firms, including their adequacy of
capital and operational capacity, has increased significantly. As a
result, current DPMs have capital well beyond the $100,000 net
liquidating requirement, which eliminates the need for the Exchange to
surveil for compliance with this requirement and will enable the
Exchange to better allocate its surveillance resources, focusing on
enhanced surveillance in connection with Exchange rules permitting,
requiring, or prohibiting liquidation and rules requiring liquidation
in a reasonable and orderly fashion.
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.\30\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \31\ 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) \32\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
\32\ Id.
---------------------------------------------------------------------------
In particular, the proposed rule changes are generally intended to
add or align certain system functionality currently offered by the
Exchange and the Cboe Affiliated Exchanges (specifically, the
Affiliated Options Exchanges) in order to provide a consistent
technology offering for the Cboe Affiliated Exchanges. A consistent
technology offering, in turn, will simplify the technology
implementation, changes and maintenance by Exchange participants that
are also participants on the Affiliated Options Exchanges. The proposed
rule change does not propose to implement new or unique functionality
that has not been previously filed with the Commission or is not
available on the Affiliated Options Exchanges. The Exchange notes that
many of the proposed changes are generally based on rules of the
Affiliated Options Exchanges and differ only to the extent necessary to
conform to the Exchange's current rules, retain intended differences
unique to Cboe Options market-model, functionality and/or rule text and
not applicable to the Affiliated Options Exchanges. Where
applicable,\33\ the Exchange has substantively mirrored the Affiliated
Options Exchange rules or certain Market-Maker requirement language
within the Affiliated Options Exchange rules, because consistent rules
will simplify the regulatory requirements and increase the
understanding of the Exchange's operations for TPHs that are also
participants on the Cboe Affiliated Options Exchanges. The Exchange
notes that the proposed changes to make its rules consistent with the
Affiliated Options Exchange's rule do not impose new or novel
obligations for Market-Makers or does not differ from the Exchange's
current authority over Market-Makers; the proposed rules based on the
Affiliated Options Exchanges' rules are substantially similar to the
current rules. The proposed rule change would provide greater
harmonization between the rules of the Cboe Affiliated Exchanges,
resulting in greater uniformity, bolstered collective understanding of
the Exchange's rules and the Affiliated Options Exchanges for
participants, and less burdensome and more efficient regulatory
compliance. 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.
---------------------------------------------------------------------------
\33\ Proposed Rules 3.52, 5.50, 5.51, 5.52, 5.53, 5.56, 7.6, and
11.6.
---------------------------------------------------------------------------
The proposed change to harmonize the Exchange's rules and processes
with the Affiliate Options Exchanges by allowing a Market-Maker to
select class appointments that apply to classes during all trading
sessions, thus applying Market-Maker obligations across all trading
sessions, will remove impediments to and perfect the mechanism of a
free and open market and a national market system by harmonizing the
application of appointments with that of the Affiliated Options
Exchange rules. The application class appointments to all trading
sessions will not have an impact of the protection of investors or
cause any additional burden to Market-Maker's because a Market-Maker's
continuous obligations will continue to apply only when quoting in
their appointed classes, therefore, the proposed change will have
negligible, if any, impact on a Market-Maker's continuous quoting
obligations as they may continue to choose when to actively quote and
have their obligations to their appointed classes apply.
The proposed changes to the appointment cost provisions (both in
connection with Market-Makers, generally, and DPMs) will remove
impediments to and perfect the mechanism of a free and open market and
national market system because it will provide rules for investor that
accurately reflect the structure of the Exchange's fees schedule upon
migration.\34\ Furthermore, the Exchange believes that the proposed
change will serve to incentivize more market-making across classes as
Market-Makers will no longer be limited to a 1.0 appointment cost or
having to acquire additional Trading Permits to select appointments in
more classes, thereby benefitting all market participants.
---------------------------------------------------------------------------
\34\ See supra note 23.
---------------------------------------------------------------------------
The proposed change to remove the condition that a requisite number
of Market-Makers where the Exchange determines to designate a class
without a DPM or LMM removes impediments to and perfects the mechanism
of a free and open market and national market system and, in general,
protects investors, because it is consistent with the rules of EDGX
Options (previously filed with the Commission) which also has a DPM
program and lists many of the same classes. The Exchange believes that
the current condition to this determination is no longer necessary
given that all classes now trade on the System (i.e. Hybrid) and its
Market-Maker program has grown to adequately cover the classes that
necessitate market-maker liquidity. In addition to this, the rules
allow for the Exchange to appropriately address the case where further
market-making in a class might be needed. Therefore, the Exchange
believes that the proposed change will not have any significant impact
on the trading of classes and functions of the Exchange.
The Exchange also believes that by making Market-Maker obligations
consistent, to the extent possible while
[[Page 50556]]
maintaining Exchange specific rule text and obligations, with those of
the Affiliated Options Exchanges the proposed rule change fosters
cooperation and coordination with persons engaged in facilitating
transactions in securities, as well as removes impediments to and
perfects the mechanism of a free and open market and national market
system. The Exchange notes that the proposed changes to the Market-
Maker obligation provisions are substantially similar to the current
obligations, therefore will have de minimus impact on market
participants. The proposed changes do not alter the authority and/or
discretion of the Exchange in connection with Market-Makers,
significantly alter the obligations of Market-Makers, nor impose any
significant additional burden. Instead, the Exchange believes the
changes will result in greater uniformity for Market-Maker obligations
across the Exchange and its affiliates, thereby bolstering
participants' collective understanding of Market-Maker obligations
across the affiliated exchanges and resulting in less burdensome
regulatory compliance.
In particular, the Exchange believes the proposed rule change to
amend certain provisions in connection with a Market Makers' quoting
obligations will remove impediments to and perfect the mechanism of a
free and open market and a national market system. By conforming the
quoting obligations, to the extent possible to maintain differences
unique to the Exchange, to that of the Affiliated Options Exchange
rules, the proposed change will remove impediments to and perfect the
mechanism of a free and open market and national market system. As
stated, the proposed rules in connection with Market-Marker obligations
largely make non-substantive changes to update and simplify the rules
by reorganizing and consolidating provisions, simplifying language,
updating language to plain English and removing redundancies. For
example, proposed Rule 5.51 makes only non-substantive changes to the
rule governing a Market-Maker's general obligations, most of which
remove redundant provisions that are already covered under the umbrella
of a Market-Maker's obligation to engage in dealing to maintain fair
and orderly markets. The proposed substantive changes that harmonize
Market-Maker obligations with those of the Affiliated Options Exchange
include adding exclusions to a Market-Maker's the firm quote
requirement, removing the quote width requirement, adding certain
series excluded from continuous quoting obligations, conforming the
series expiration of 9 months to the 270-day period, adding provision
governing good standing for Market-Makers, and removing the requirement
that DPMs maintain segregated accounts for DPM-related transactions
(addressed in the paragraph below). These proposed changes are
reasonable and do not affect investor protection because the proposed
changes do not present any novel or unique issues, as they have been
previously filed with the Commission. Market-Makers continue to comply
with the firm quote requirement under current Rule 8.51 and Rule 602 of
Regulation NMS and the proposed exceptions to a Market-Maker's firm
quote are consistent with the rules of the Affiliated Options Exchanges
and remove impediments to and perfect the mechanism of a free and open
market and national market system by providing exceptions to firm
quotes with malfunctions and unusual market conditions arise. The
proposed change from the 9 month expiration time to the 270 expiration
time is an industry practice currently in place, as Market-Makers
generally already monitor expirations by a defined count of 270 days,
as opposed to a nine month count in which the number of days
continuously varies. In addition, Market-Makers on the Affiliated
Options Exchanges quote in many of the same classes available on the
Exchange but do not have a bid/ask requirement when quoting on those
exchanges. The Exchange notes that removing this requirement will not
impact market participants because Market-Maker's already submit two-
sided quotes consistently at a much tighter spread than the Exchange-
determined quote widths and Market-Makers are obliged to continue to
engage in dealings that maintain a fair and orderly market. The
proposed rule providing for good standing requirements for Market-
Makers will serve to protect investors because it provides under a
single rule the requirements, which are already in place pursuant to
the rules and regulations, that the Exchange will refer to in order to
determine if a Market-Maker is fit to continue making markets on the
Exchange. This rule mirrors that of the Affiliated Options Exchanges'
corresponding rules.
The Exchange believes that the proposed updates to certain
provisions of the DPM requirements, overall, serve to remove
impediments to and perfect the mechanism of a free and open national
market system. The proposed change to remove the requirement that each
DPM has at least two Designees who are nominees of the DPM removes an
unnecessary compliance burden for DPMs for which the cost of
maintaining two designees far outweighs the benefit, if any, of the
rule. Further, like all member organizations a DPM will continue to be
required to maintain at least one nominee and may choose to maintain
multiple nominees. The proposed removal of the net DPM liquidation
requirement and the requirement that a firm segregate accounts between
DPM-related transactions and that of its general Market-Maker account
or accounts related to other trading activities or capacities
requirement will also lift a compliance burden for DPMs as these
provisions are no longer necessary to ensure financial integrity or to
mitigate losses given the current financial status and infrastructure
of DPMs. As stated, the Exchange determines if a DPM has the adequacy
of capital and operational capacity necessary to perform and take on
the potential risks as a DPM.
The Exchange believes that removing the designation of two Market-
Makers in FLEX classes and instead automatically appointing FLEX class
appointments when a Market-Maker (approved for FLEX) selects an
appointment in the same Non-FLEX class will not alter the obligations
of a FLEX Market-Maker, as they will continue to be required to
maintain an appointment in a Non-FLEX class, which will then
automatically appoint them the FLEX class. The proposed rule change
removes impediments to and perfects the mechanism of a free and open
market and national market system by simplifying the FLEX appointment
process through the automatic FLEX class appointments in connection
with a Market-Maker's selection of class appointments for its general
Market-Making requirements, and continuing to ensure that each FLEX
class will have appointed Market-Makers to provide liquidity in that
class, in addition to all other market participants.
The proposed change to allow the Exchange the discretion to
terminate an On-Floor LMM (as opposed to automatic termination) when it
decides to terminate the Off-Floor DPM and/or Off-Floor LMM in that
class will serve to remove impediments to and perfect the mechanism of
a free and open market and national market system by allowing an On-
Floor LMM that may be high performing to continue its appointment in
that class instead of disrupting the On-Floor LMM's appointment and
obligations by automatic termination.
The proposed removal of the rule relating to the Exchange's
evaluation of a trading crowd performance removes a
[[Page 50557]]
rule that is no longer in practice by the Exchange as the Exchange's
evaluation, determinations, and ability to sanction Market-Makers and
Market-Maker types are currently implemented under various other
Market-Maker related rules.
The Exchange believes the proposed reorganization of Rules to move
all Rules that relate to Market-Makers and Market-Maker types,
including: (1) Related to registration (as well as approvals,
eligibility, termination, etc.) and general Market-Maker functions; (2)
Market-Maker appointments; (3) Market-Maker obligations and
entitlements; and 4) other rules in connection with Market-Makers under
the same chapters, will also benefit investors and remove impediments
to and perfect the mechanism of a free and open market and a national
market system. The majority of the changes in the proposed rule change
move rules from the current Rulebook to the shell Rulebook with no
substantive changes. Indeed, many of the proposed non-substantive
changes removes impediments to and perfects the mechanism of a free and
open market and national market system by providing up-to-date rules
that accurately reflect the manner in which the Exchange, its Market-
Maker program, and its market participants currently function by
removing provisions that are not invoked by the Exchange or currently
in practice by its participants and are not necessary to, nor impact,
the Exchange's Market-Maker program, which protects investors by
providing accurate and up-to-date rules. The proposed non-substantive
changes to the Rules also provide additional detail in the rule
regarding current functionality, make the Rules more plain English,
update cross-references and paragraph lettering and numbering, delete
duplicative or unnecessary language and language that is no longer
applicable to the current functions of the Exchange, simplify and
streamline rule language, and update terms to provide consistency
throughout the proposed Market-Maker rules, all of which benefits
investors. The Exchange believes these changes and transparency the
proposed changes provide will protect investors, as they provide more
clarity and reduce complexity within the Rules, making the rule easier
to understand and comply with.
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 Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition, as they will apply to all potential Market-Makers and
Market-Maker types (i.e. applicants), and all Market-Makers and Market-
Maker types in the same manner. The Exchange reiterates that a majority
of the proposed rule change is intended to harmonize the Exchange rules
with that of the Affiliated Options Exchanges' rules. Thus, the
Exchange believes this proposed rule change will reduce the burden on
Exchange participants by providing consistent rules among the
affiliated exchanges upon migration. Such proposed rule changes in this
filing conform to the approved rules of the Affiliated Options
Exchanges, which have already been filed with the Commission. In
addition to this, the Exchange does not believes that the other
proposed changes will impose any burden on intramarket competition
because such changes serve to update and remove provisions or
requirements that are no longer necessary in the function and
maintenance of the Exchange and its Market-Maker program, or are
already ensured and/or implemented via other rules of the Exchange. As
such, these proposed changes will not impose any burden on intramarket
competition, but rather, will serve to relieve certain compliance
burdens for Market-Makers or surveillance burdens for the Exchange,
which will make available more market-making resources to allocate
toward classes that may need and consume more liquidity, or more
enhanced surveillance resources to monitor for Market-Maker compliance,
including general obligations, quoting obligations, and account
maintenance.
The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act, because majority
of the proposed change to the Market-Maker rules (i.e., registration,
appointments, good standing, general obligations, and quoting
obligations) is based on the rules of the Affiliated Options Exchange,
previously filed with the Commission. The Exchange also notes that to
the degree that other exchanges have varying obligations for Market-
Makers, market participants on other exchanges are welcome to become
Market-Makers on the Exchange if they determine that this proposed rule
change has made market making on Cboe Options more attractive or
favorable. The proposed changes to the rules that reflect functionality
that will be in place come October 7, 2019, will not impose any burden
on intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act but rather provide clear,
accurate rules for market participants surrounding the completion of
migration.
The proposed non-substantive changes are not intended to have any
impact on competition, as they do not impact trading on Cboe Options.
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 rule 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 if consistent with the protection of investors
and the public interest, provided that the self-regulatory organization
has given the Commission written notice of its intent to file 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,\35\ the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \36\ and Rule 19b-4(f)(6)
thereunder.\37\
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\35\ The Exchange has fulfilled this requirement.
\36\ 15 U.S.C. 78s(b)(3)(A).
\37\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
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.
[[Page 50558]]
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-2019-059 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-2019-059. 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 10:00 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-CBOE-2019-059 and should be submitted on
or before October 16, 2019.
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\38\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20698 Filed 9-24-19; 8:45 am]
BILLING CODE 8011-01-P
