Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Make Minor Updates and Consolidate Various Exchange Rules in Connection With Regulatory Reports, Records, and Audits on the Exchange, and Move Those Rules From the Currently Effective Rulebook to Proposed Chapter 7 of 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, 54231-54234 [2019-22017]
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Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–22015 Filed 10–8–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87216; File No. SR–CBOE–
2019–073]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Make Minor Updates
and Consolidate Various Exchange
Rules in Connection With Regulatory
Reports, Records, and Audits on the
Exchange, and Move Those Rules
From the Currently Effective Rulebook
to Proposed Chapter 7 of 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
October 3, 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 27, 2019, Cboe Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘Cboe
Options’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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 make
minor updates and consolidate various
Exchange Rules in connection with
regulatory reports, records, and audits
on the Exchange, and move those Rules
from the currently effective Rulebook
(‘‘current Rulebook’’) to proposed
Chapter 7 of 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/CBOELegal
RegulatoryHome.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
54231
(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. Cboe Options
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. 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 proposes to consolidate
current rules in connection with
regulatory reports, records, and audits,
including the rules related to the
Consolidated Audit Trail (‘‘CAT’’), on
the Exchange into sections of proposed
Chapter 7 in the shell Rulebook. The
Exchange notes that in addition to
consolidating and moving the various
rules related to reports, records, and
audits to proposed Chapter 7, the
proposed rule change deletes the rules
from the current Rulebook. The
proposed rule change moves and, where
applicable, consolidates the rules as
follows:
1. Purpose
In 2016, the Exchange’s parent
company, Cboe Global Markets, Inc.
CHAPTER 7—REGULATORY REPORTS, RECORDS, AND AUDITS
Section A. General
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7.1 Maintenance, Retention, and Furnishing of Books, Records, and
Other Information
7.1(a) ........................................................................................................
7.1(b) ........................................................................................................
7.1(c) .........................................................................................................
7.1(d) ........................................................................................................
33 17
2 17
1 15
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
3 15
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15.1 Maintenance, Retention and Furnishing of Books, Records, and
Other Information, including 15.1.01.
15.1.02.
15.1.03.
15.1.04.
CFR 240.19b–4.
U.S.C. 78s(b)(3)(A)(iii).
Frm 00130
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4 17
E:\FR\FM\09OCN1.SGM
CFR 240.19b–4(f)(6).
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Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
CHAPTER 7—REGULATORY REPORTS, RECORDS, AND AUDITS—Continued
7.1(e) ........................................................................................................
7.1(f) .........................................................................................................
7.1(g) ........................................................................................................
7.2 Reports of Uncovered Short Positions ............................................
7.3 Financial Reports .............................................................................
7.3(a) ........................................................................................................
7.3(b) ........................................................................................................
7.4 Audits ...............................................................................................
7.5 Automated Submission of Trading Data ..........................................
7.6 Securities Accounts and Orders of Market-Makers (note: Rule
7.6(a)–(c) currently in shell Rulebook).
7.6(d) ........................................................................................................
7.6(e) ........................................................................................................
7.6(f) .........................................................................................................
7.7 Risk Analysis of Market-Maker Accounts
7.7(a)–(b) ..................................................................................................
7.7(c) .........................................................................................................
7.8 Risk Analysis of Portfolio Margin Accounts .....................................
7.9 Regulatory Cooperation ...................................................................
7.10 Fingerprint-Based Background Checks of Exchange Directors,
Officers, Employees, and Others.
28.16 (corporate debt security Market-Makers), including 28.16.01, provision regarding current Rule 15.1.
21.30 (government securities options Market-Makers), including
21.30.01, provision regarding current Rule 15.1.
23.15 (interest rate options Market-Makers), including last sentence of
paragraph, provision regarding current Rule 15.1.
15.3 Reports of Uncovered Short Positions.
15.5 Financial Reports
15.5.01.
15.5.02.
15.6 Audits.
15.7 Automated Submission of Trading Data.
28.16 (corporate debt security options Market-Makers), provision regarding current Rule 8.9.
21.20 (government securities options Market-Makers), provision regarding current Rule 8.9.
23.15 (interest rate options Market-Makers), provision regarding current
Rule 8.9.
15.8(a)–(b) Risk Analysis of Market-Maker Accounts.
15.8.01.
15.8A Risk Analysis of Portfolio Margin Accounts.
15.9 Regulatory Cooperation.
15.10 Fingerprint-Based Background Checks of Exchange Directors,
Officers, Employees, and Others.
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Section B. Consolidated Audit Trail (CAT) Compliance Rule
7.20
Definitions ......................................................................................
6.85
Definitions.
7.21
7.22
7.23
7.24
7.25
7.26
7.27
7.28
7.29
7.30
7.31
7.32
Clock Synchronization ...................................................................
Industry Member Data Reporting ..................................................
Customer Information Reporting ....................................................
Industry Member Information Reporting ........................................
Time Stamps ..................................................................................
Clock Synchronization Rule Violation ............................................
Connectivity and Data Transmission .............................................
Development and Testing ..............................................................
Recordkeeping ...............................................................................
Timely, Accurate, and Complete Data ...........................................
Compliance Dates ..........................................................................
Fee Dispute Resolution .................................................................
6.86
6.87
6.88
6.89
6.90
6.91
6.92
6.93
6.94
6.95
6.96
6.97
Clock Synchronization.
Industry Member Data Reporting.
Customer Information Reporting.
Industry Member Information Reporting.
Time Stamps.
Clock Synchronization Rule Violation.
Connectivity and Data Transmission.
Development and Testing.
Recordkeeping.
Timely, Accurate, and Complete Data.
Compliance Dates.
Fee Dispute Resolution.
The proposed rule change makes only
non-substantive changes to the rules
being moved into the shell Rulebook in
order to update and/or incorporate
headings that better align with the
consolidated rules, update crossreferences to other rule text that will be
implemented upon migration, update
certain technical text formatting that
will be used in the Rules upon
migration (specifically, changing all
times to Eastern Time without time zone
indication pursuant to Rule 1.6 in the
shell Rulebook which states that unless
otherwise specified, all times in the
Rules are Eastern Time), incorporate
defined terms in the shell Rulebook, and
reformat the paragraph lettering and
numbering.
The proposed rule also makes nonsubstantive changes in connection with
removing redundant rule language. The
proposed rule change removes the list of
cross-referenced Rules that contain
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20:05 Oct 08, 2019
Jkt 250001
specific maintenance and furnishing of
information requirements under current
Rule 15.1.01. The Exchange believes
that because the current list of crossreferenced Rules is extensive, but not an
exhaustive list (as the current rule states
that Trading Permit Holders (‘‘TPHs’’)
must comply with all applicable
recordkeeping and reporting
requirements whether or not listed), and
contains rules that are no longer in
existence or have since been moved or
changed (e.g., Rule 6.59 is no longer in
the current Rulebook), the current list is
potentially confusing and unnecessarily
cumbersome for market participants as
written. Instead, the Exchange
maintains the language in current Rule
15.1.01 (and moves it to proposed
7.1(a)) that provides that Trading Permit
Holders must comply with all
applicable recordkeeping and reporting
requirements under the Rules. By
maintaining the language in the current
PO 00000
Frm 00131
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rule that covers all Rules that require
record retention and reporting
requirements, the proposed change does
not substantively alter the Rule. Also,
the Exchange believes that by providing
language that succinctly covers all Rules
that require or will require record
maintenance or reporting, the proposed
rule change will mitigate any potential
investor confusion, both upon
effectiveness of this proposed change
and whenever a new or changed rule is
incorporated into the Exchange
Rulebook. The proposed change also
incorporates the term ‘‘maintenance’’,
alongside the term production, in
proposed Rule 7.1(d) and (c) (current
Rules 15.1.02 and 15.1.03) [sic] which
accurately reflects the existing
obligations under the Rules, and in
accordance with Rule 7.1 (current Rule
15.1), regarding maintenance, retention,
and furnishing of books, records, and
other information. In addition, the
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Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
proposed rule change separates the
provisions in Rule 28.16 (regarding
Market-Makers in Corporate Debt
Security options), Rule 21.30 (regarding
Market-Makers in Government security
options), and Rule 23.15 (regarding
Market-Makers in interest rate options)
that are directly related to current Rule
15.1 from the provisions that are
directly related to current Rule 8.9, and
moves them into the applicable rule in
the shell Rulebook. The proposed rule
change also removes the language under
current Rules 28.16 and 21.30 which
states that the respective rules
supplement current Rule 8.9 (Rule 7.6
in the shell Rulebook) and Rule 15.1
(proposed Rule 7.1) and the
Interpretations and Policies thereunder.
This language is redundant given the
fact that these rules are being
consolidated into the rules in which
they reference. Finally, the Exchange
notes that it makes a non-substantive
change to the language, ‘‘See Rule
17.50(g)(2)’’, in current Rule 15.3
(proposed Rule 7.2), to instead state that
Trading Permit Holders may be subject
to fines pursuant to Rule 13.15(g)(2) (the
updated cross-reference in the shell
Rulebook) for violations of this Rule.
This does not alter the current
application of Rule 17.50(g)(2) (or shell
Rule 13.50(g)(2)) but merely adds
context which provides additional
clarity to investors regarding the
specific matter to which the crossreferenced rule governs and/or pertains.
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2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.5 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 6 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
5 15
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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20:05 Oct 08, 2019
the Section 6(b)(5) 7 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The proposed rule change does not
make any substantive changes to the
rules and is merely intended to
consolidate and update the Exchange’s
rules in anticipation of the technology
migration on October 7, 2019. The
Exchange believes that the nonsubstantive proposed changes, which
update technical text and formatting
(e.g., paragraph headings, time-related
references, and verbiage to accurately
reflect the maintenance and production
requirements), update rule crossreferences (as well as provide added
context surrounding one such crossreference in order to provide additional
clarity), consolidate and reorganize
rules and rule paragraphs and/or
Interpretations and Policies, incorporate
defined terms, and remove redundant
and/or cumbersome provisions that are
potentially confusing for market
participants, particularly in light of the
consolidated shell Rulebook format, will
foster cooperation and coordination
with those facilitating transactions in
securities and remove impediments to
and perfect the mechanism of a free and
open market and national market system
by simplifying the Exchange Rules and
Rulebook as a whole, and making its
Rules easier to follow and understand,
which will also result in less
burdensome and more efficient
regulatory compliance.
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 reiterates that the proposed
rule change is being proposed in the
context of a technology migration of the
Cboe Affiliated Exchanges, and not as a
competitive filing. The Exchange does
not believe that the proposed rule
change will impose any burden on
intramarket competition because it does
not make any substantive changes to the
current Exchange Rules. The proposed
rule change merely intends to provide
consolidated rules upon migration,
which are consistent with the technical
text and formatting in the shell
Rulebook that will be in place come
October 7, 2019. The Exchange does not
believe that the proposed rule change
will impose any burden on intermarket
competition because the proposed rules
are the same as the Exchange’s current
7 Id.
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54233
rules, all of which have all been
previously filed with the Commission.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 8 and Rule 19b–
4(f)(6) thereunder.9
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 10 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 11
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the Exchange
may implement the proposed rule
change at the time of its anticipated
October 7, 2019 system migration. The
Exchange believes that waiver of the
operative delay is appropriate because,
as the Exchange discussed above, its
proposal does not make any substantive
changes to the Exchange’s rules, but
merely relocates current rules regarding
reporting, records, and audit to Chapter
7 of the Shell Rulebook. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest because the proposal
does not raise any new or novel issues
and makes only non-substantive
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
10 17 CFR 240.19b–4(f)(6).
11 17 CFR 240.19b–4(f)(6)(iii).
9 17
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54234
Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
changes to the rules. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal as operative upon filing.12
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.
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–2019–073 and
should be submitted on or before
October 30, 2019.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2019–073 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
PaperComments
• 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–2019–073. 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
12 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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[FR Doc. 2019–22017 Filed 10–8–19; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–87206; File No. SR–Phlx–
2019–40]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the Pilot
Related to the Market-Wide Circuit
Breaker in Rule 133
October 3, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 26, 2019, Nasdaq PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
pilot related to the market-wide circuit
breaker in Rule 133.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.cchwallstreet.com/,
at the principal office of the Exchange,
13 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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Frm 00133
Fmt 4703
Sfmt 4703
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
Rule 133 provides a methodology for
determining when to halt trading in all
stocks due to extraordinary market
volatility (i.e., market-wide circuit
breakers). The market-wide circuit
breaker (‘‘MWCB’’) mechanism under
Rule 133 was approved by the
Commission to operate on a pilot basis,
the term of which was to coincide with
the pilot period for the Plan to Address
Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS
(the ‘‘LULD Plan’’),3 including any
extensions to the pilot period for the
LULD Plan.4 The Commission recently
approved an amendment to the LULD
Plan for it to operate on a permanent,
rather than pilot, basis.5 In light of the
proposal to make the LULD Plan
permanent, the Exchange amended Rule
133 to untie the pilot’s effectiveness
from that of the LULD Plan and to
extend the pilot’s effectiveness to the
close of business on October 18, 2019.6
The Exchange now proposes to amend
Rule 133 to extend the pilot to the close
of business on October 18, 2020. This
filing does not propose any substantive
3 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012). The
LULD Plan provides a mechanism to address
extraordinary market volatility in individual
securities.
4 See Securities Exchange Act Release Nos. 67090
(May 31, 2012), 77 FR 33531 (June 6, 2012) (SR–
Phlx–2011–129) (Approval Order); and 68816
(February 1, 2013), 78 FR 9760 (February 11, 2013)
(SR–Phlx–2013–11) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change to Delay the
Operative Date of a Rule Change to Exchange Rule
133).
5 See Securities Exchange Act Release No. 85623
(April 11, 2019), 84 FR 16086 (April 17, 2019).
6 See Securities Exchange Act Release No. 85579
(April 9, 2019), 84 FR 15258 (April 15, 2019) (SR–
Phlx–2019–12).
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]]>Agencies
[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Notices]
[Pages 54231-54234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22017]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87216; File No. SR-CBOE-2019-073]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Make
Minor Updates and Consolidate Various Exchange Rules in Connection With
Regulatory Reports, Records, and Audits on the Exchange, and Move Those
Rules From the Currently Effective Rulebook to Proposed Chapter 7 of
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
October 3, 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 27, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to make minor updates and consolidate various Exchange Rules in
connection with regulatory reports, records, and audits on the
Exchange, and move those Rules from the currently effective Rulebook
(``current Rulebook'') to proposed Chapter 7 of 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. Cboe Options 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. 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 proposes to consolidate current rules in connection
with regulatory reports, records, and audits, including the rules
related to the Consolidated Audit Trail (``CAT''), on the Exchange into
sections of proposed Chapter 7 in the shell Rulebook. The Exchange
notes that in addition to consolidating and moving the various rules
related to reports, records, and audits to proposed Chapter 7, the
proposed rule change deletes the rules from the current Rulebook. The
proposed rule change moves and, where applicable, consolidates the
rules as follows:
Chapter 7--Regulatory Reports, Records, and Audits
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------------------------------------------------------------------------
Section A. General
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7.1 Maintenance, Retention, and
Furnishing of Books, Records, and
Other Information
7.1(a)................................. 15.1 Maintenance, Retention and
Furnishing of Books, Records,
and Other Information,
including 15.1.01.
7.1(b)................................. 15.1.02.
7.1(c)................................. 15.1.03.
7.1(d)................................. 15.1.04.
[[Page 54232]]
7.1(e)................................. 28.16 (corporate debt security
Market-Makers), including
28.16.01, provision regarding
current Rule 15.1.
7.1(f)................................. 21.30 (government securities
options Market-Makers),
including 21.30.01, provision
regarding current Rule 15.1.
7.1(g)................................. 23.15 (interest rate options
Market-Makers), including last
sentence of paragraph,
provision regarding current
Rule 15.1.
7.2 Reports of Uncovered Short 15.3 Reports of Uncovered Short
Positions. Positions.
7.3 Financial Reports.................. 15.5 Financial Reports
7.3(a)................................. 15.5.01.
7.3(b)................................. 15.5.02.
7.4 Audits............................. 15.6 Audits.
7.5 Automated Submission of Trading 15.7 Automated Submission of
Data. Trading Data.
7.6 Securities Accounts and Orders of ...............................
Market-Makers (note: Rule 7.6(a)-(c)
currently in shell Rulebook).
7.6(d)................................. 28.16 (corporate debt security
options Market-Makers),
provision regarding current
Rule 8.9.
7.6(e)................................. 21.20 (government securities
options Market-Makers),
provision regarding current
Rule 8.9.
7.6(f)................................. 23.15 (interest rate options
Market-Makers), provision
regarding current Rule 8.9.
7.7 Risk Analysis of Market-Maker
Accounts
7.7(a)-(b)............................. 15.8(a)-(b) Risk Analysis of
Market-Maker Accounts.
7.7(c)................................. 15.8.01.
7.8 Risk Analysis of Portfolio Margin 15.8A Risk Analysis of
Accounts. Portfolio Margin Accounts.
7.9 Regulatory Cooperation............. 15.9 Regulatory Cooperation.
7.10 Fingerprint-Based Background 15.10 Fingerprint-Based
Checks of Exchange Directors, Background Checks of Exchange
Officers, Employees, and Others. Directors, Officers,
Employees, and Others.
------------------------------------------------------------------------
Section B. Consolidated Audit Trail (CAT) Compliance Rule
------------------------------------------------------------------------
7.20 Definitions....................... 6.85 Definitions.
------------------------------------------------------------------------
7.21 Clock Synchronization............. 6.86 Clock Synchronization.
7.22 Industry Member Data Reporting.... 6.87 Industry Member Data
Reporting.
7.23 Customer Information Reporting.... 6.88 Customer Information
Reporting.
7.24 Industry Member Information 6.89 Industry Member
Reporting. Information Reporting.
7.25 Time Stamps....................... 6.90 Time Stamps.
7.26 Clock Synchronization Rule 6.91 Clock Synchronization Rule
Violation. Violation.
7.27 Connectivity and Data Transmission 6.92 Connectivity and Data
Transmission.
7.28 Development and Testing........... 6.93 Development and Testing.
7.29 Recordkeeping..................... 6.94 Recordkeeping.
7.30 Timely, Accurate, and Complete 6.95 Timely, Accurate, and
Data. Complete Data.
7.31 Compliance Dates.................. 6.96 Compliance Dates.
7.32 Fee Dispute Resolution............ 6.97 Fee Dispute Resolution.
------------------------------------------------------------------------
The proposed rule change makes only non-substantive changes to the
rules being moved into the shell Rulebook in order to update and/or
incorporate headings that better align with the consolidated rules,
update cross-references to other rule text that will be implemented
upon migration, update certain technical text formatting that will be
used in the Rules upon migration (specifically, changing all times to
Eastern Time without time zone indication pursuant to Rule 1.6 in the
shell Rulebook which states that unless otherwise specified, all times
in the Rules are Eastern Time), incorporate defined terms in the shell
Rulebook, and reformat the paragraph lettering and numbering.
The proposed rule also makes non-substantive changes in connection
with removing redundant rule language. The proposed rule change removes
the list of cross-referenced Rules that contain specific maintenance
and furnishing of information requirements under current Rule 15.1.01.
The Exchange believes that because the current list of cross-referenced
Rules is extensive, but not an exhaustive list (as the current rule
states that Trading Permit Holders (``TPHs'') must comply with all
applicable recordkeeping and reporting requirements whether or not
listed), and contains rules that are no longer in existence or have
since been moved or changed (e.g., Rule 6.59 is no longer in the
current Rulebook), the current list is potentially confusing and
unnecessarily cumbersome for market participants as written. Instead,
the Exchange maintains the language in current Rule 15.1.01 (and moves
it to proposed 7.1(a)) that provides that Trading Permit Holders must
comply with all applicable recordkeeping and reporting requirements
under the Rules. By maintaining the language in the current rule that
covers all Rules that require record retention and reporting
requirements, the proposed change does not substantively alter the
Rule. Also, the Exchange believes that by providing language that
succinctly covers all Rules that require or will require record
maintenance or reporting, the proposed rule change will mitigate any
potential investor confusion, both upon effectiveness of this proposed
change and whenever a new or changed rule is incorporated into the
Exchange Rulebook. The proposed change also incorporates the term
``maintenance'', alongside the term production, in proposed Rule 7.1(d)
and (c) (current Rules 15.1.02 and 15.1.03) [sic] which accurately
reflects the existing obligations under the Rules, and in accordance
with Rule 7.1 (current Rule 15.1), regarding maintenance, retention,
and furnishing of books, records, and other information. In addition,
the
[[Page 54233]]
proposed rule change separates the provisions in Rule 28.16 (regarding
Market-Makers in Corporate Debt Security options), Rule 21.30
(regarding Market-Makers in Government security options), and Rule
23.15 (regarding Market-Makers in interest rate options) that are
directly related to current Rule 15.1 from the provisions that are
directly related to current Rule 8.9, and moves them into the
applicable rule in the shell Rulebook. The proposed rule change also
removes the language under current Rules 28.16 and 21.30 which states
that the respective rules supplement current Rule 8.9 (Rule 7.6 in the
shell Rulebook) and Rule 15.1 (proposed Rule 7.1) and the
Interpretations and Policies thereunder. This language is redundant
given the fact that these rules are being consolidated into the rules
in which they reference. Finally, the Exchange notes that it makes a
non-substantive change to the language, ``See Rule 17.50(g)(2)'', in
current Rule 15.3 (proposed Rule 7.2), to instead state that Trading
Permit Holders may be subject to fines pursuant to Rule 13.15(g)(2)
(the updated cross-reference in the shell Rulebook) for violations of
this Rule. This does not alter the current application of Rule
17.50(g)(2) (or shell Rule 13.50(g)(2)) but merely adds context which
provides additional clarity to investors regarding the specific matter
to which the cross-referenced rule governs and/or pertains.
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.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ 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) \7\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
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The proposed rule change does not make any substantive changes to
the rules and is merely intended to consolidate and update the
Exchange's rules in anticipation of the technology migration on October
7, 2019. The Exchange believes that the non-substantive proposed
changes, which update technical text and formatting (e.g., paragraph
headings, time-related references, and verbiage to accurately reflect
the maintenance and production requirements), update rule cross-
references (as well as provide added context surrounding one such
cross-reference in order to provide additional clarity), consolidate
and reorganize rules and rule paragraphs and/or Interpretations and
Policies, incorporate defined terms, and remove redundant and/or
cumbersome provisions that are potentially confusing for market
participants, particularly in light of the consolidated shell Rulebook
format, will foster cooperation and coordination with those
facilitating transactions in securities and remove impediments to and
perfect the mechanism of a free and open market and national market
system by simplifying the Exchange Rules and Rulebook as a whole, and
making its Rules easier to follow and understand, which will also
result in less burdensome and more efficient regulatory compliance.
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 reiterates that
the proposed rule change is being proposed in the context of a
technology migration of the Cboe Affiliated Exchanges, and not as a
competitive filing. The Exchange does not believe that the proposed
rule change will impose any burden on intramarket competition because
it does not make any substantive changes to the current Exchange Rules.
The proposed rule change merely intends to provide consolidated rules
upon migration, which are consistent with the technical text and
formatting in the shell Rulebook that will be in place come October 7,
2019. The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition because the proposed rules
are the same as the Exchange's current rules, all of which have all
been previously filed with the Commission.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \10\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the Exchange may implement the proposed rule change at the time of its
anticipated October 7, 2019 system migration. The Exchange believes
that waiver of the operative delay is appropriate because, as the
Exchange discussed above, its proposal does not make any substantive
changes to the Exchange's rules, but merely relocates current rules
regarding reporting, records, and audit to Chapter 7 of the Shell
Rulebook. The Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest because the proposal does not raise any new or novel issues
and makes only non-substantive
[[Page 54234]]
changes to the rules. Therefore, the Commission hereby waives the
operative delay and designates the proposal as operative upon
filing.\12\
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. 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. 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-2019-073 on the subject line.
PaperComments
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-2019-073. 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-2019-073 and should be submitted on
or before October 30, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22017 Filed 10-8-19; 8:45 am]
BILLING CODE 8011-01-P
