Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Relocate Various Exchange Rules From the Currently Effective to the Shell Structure for the Exchange's Rulebook That Will Become Effective Upon the Migration of the Exchange's Trading Platform, 56501-56504 [2019-22935]

Download as PDF Federal Register / Vol. 84, No. 204 / Tuesday, October 22, 2019 / Notices (e.g., $0.01 or $0.05) would promote just and equitable principles of trade and assist with the maintenance of fair and orderly markets because an order may never be posted for lower than its MPV and the alternative to holding the order at the MPV would be to cancel it.36 The Exchange believes the proposed clarification of how such orders are handled provides the collared order an opportunity for an execution (rather than being cancelled) and adds transparency and internal consistency to Exchange rules.37 The Commission notes that the Exchange believes that the Zero NBBO Collar Exception would improve the operation of the Trading Collar when the prevailing market is zero (which the Exchange states indicates market dislocation) at the time an incoming market order arrives.38 The Exchange states that absent the proposed Zero NBBO Collar Exception, a market order to buy (sell) that arrives when the NBB (NBO) is zero would trade based on the last sale price, if any.39 The Exchange notes that if there is no last sale price, the order would trade at the contra-side NBBO which may result in a bad execution price.40 In regards to the proposal to reject (as opposed to collar) incoming sell orders when the NBO is zero, the Exchange believes this change in functionality is necessary because any attempt to collar such an order would result in a negative number. In addition, the Exchange states that it has observed that it is extremely uncommon to have a no (zero) offer situation and believes it could be indicative of unstable market conditions.41 To avoid such orders receiving bad executions in times of market dislocation, the Exchange believes it would be appropriate to reject such orders.42 The Exchange also believes that it is appropriate that the Exchange cancel a market order that is collared when an NMS stock enters an LULD state because when the underlying NMS stock enters an LULD state, there may not be a reliable underlying reference price, there may be a wide bid/ask quotation differential in the option, and there may be less liquidity in the options markets.43 According to the Exchange, allowing a collared Market Order to execute (as opposed to cancel) in such circumstances could lead to 36 See id. id. 38 See id. 39 See id. 40 See id. 41 See id. 42 See id. 43 See id. at 46067–8. 37 See VerDate Sep<11>2014 17:02 Oct 21, 2019 Jkt 250001 executions at unintended prices (i.e., inferior to the NBBO), and could add to volatility in the options markets during times of extraordinary market volatility.44 The Exchange believes that this current treatment of collared market orders provides certainty to the treatment of Market Orders during these times, and the proposal to explicitly state this treatment in the rule text adds clarity and transparency to Exchange rules, thus promoting just and equitable principles of trade and removing impediments to, and perfecting the mechanism of, a free and open market and a national market system.45 The Exchange states that the proposed cancellation of an options order if the underlying NMS security is in an LULD state is not new or novel and is available on other options exchanges that offer similar collar functionality.46 The Exchange believes that the proposed rule changes would add transparency and specificity to Exchange rules.47 The Commission believes that the operation of the Trade Collar Protection mechanism set forth in the proposal is consistent with the Act. In addition, the Commission believes that the revised description of this mechanism should increase transparency with respect to how the mechanism operates and enhance investors’ understanding of how the mechanism may affect their orders in certain market conditions. Accordingly, the Commission believes that the proposal is reasonably designed to help prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,48 that the proposed rule change (SR–NYSEAMER– 2019–30) be, and it hereby is, approved. 44 See id. at 46068. id. 46 The Exchange cites CBOE Rule 6.3A(b)(1) (LULD rule citing Rule 6.2 regarding order handling); CBOE Rule 6.2, Interpretations and Policies .07 and NASDAQ Options Market Ch. V, Sec. 3(d). However, the Exchange notes that it believes that the rules of these other exchanges do not specifically contemplate the underlying security entering an LULD state while a market order is resting on the book, because such orders typically execute on arrival. See Notice, supra note 4, at 46068. 47 See id. 48 15 U.S.C. 78s(b)(2). 49 17 CFR 200.30–3(a)(12). 45 See PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 56501 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.49 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–22944 Filed 10–21–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87320; File No. SR–CBOE– 2019–095] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Relocate Various Exchange Rules From the Currently Effective to the Shell Structure for the Exchange’s Rulebook That Will Become Effective Upon the Migration of the Exchange’s Trading Platform October 16, 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 October 4, 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, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 relocate various Exchange Rules from the 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 proposed rule change also deletes certain Exchange Rules from the currently effective Rulebook that will no longer be applicable following the migration. 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/ 1 15 2 17 E:\FR\FM\22OCN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 22OCN1 56502 Federal Register / Vol. 84, No. 204 / Tuesday, October 22, 2019 / Notices CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose 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. 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 relocate certain rules currently in the currently effective Rulebook into the shell Rulebook. The Exchange notes that in addition to moving these various rules, the proposed rule change deletes the rules from the current Rulebook. It also proposes to delete certain current rules that, as a result of the rules already in the shell Rulebook, are either redundant or are no longer applicable to trading on the Exchange. The proposed rule change moves and, where applicable, removes the rules as follows: Shell rule Current rule 5.3 Bids and Offers (introductory paragraph) ........................................ 5.5(d) System Access and Connectivity (Mandatory Testing) .............. 6.43 Manner of Bidding and Offering. 6.23A(f) Trading Permit Holder Connectivity (Mandatory Systems Testing).3 6.11 Origins Eligible for Book Entry. 5.6(a) Order Types, Order Instructions, and Times-in-Force (Availability). 6.7 Off-Floor Transfers of Positions ....................................................... 6.8 Off-Floor RWA Transfers ................................................................. To be deleted ........................................................................................... To be deleted ........................................................................................... To be deleted ........................................................................................... To be deleted ........................................................................................... To be deleted ........................................................................................... The proposed changes are of a nonsubstantive nature and will not amend the relocated rules other than to update their rule numbers, conform paragraph structure and number/lettering format to that of the shell Rulebook, and make cross-reference changes to shell rules. The Exchange notes that the proposed change to incorporate the language under current Rule 6.11 into shell Rule 5.6(a) does not substantively change the current provision but updates it to streamline and simplify the language and the reflect shell rule text. Current Rule 6.11 states that after a class opens for trading, the System accepts for entry into the Book quotes of Market-Makers 3 The Exchange notes that this provision was removed from the currently effective Rulebook in filing SR–CBOE–2019–033. However, that filing inadvertently did not maintain this language in the shell Rulebook. See Securities Exchange Act Release No. 86374 (July 15, 2019), 84 FR 34963 (July 19, 2019) (SR–CBOE–2019–033) (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). VerDate Sep<11>2014 17:02 Oct 21, 2019 Jkt 250001 6.49A 6.49B 6.51A 6.53A 24.13 24A.11 24A.12 Off-Floor Transfers of Positions. Off-Floor RWA Transfers. Fines for Failure to Perform Certain Reporting Duties. Types order Formats. Trading Rotations. FLEX Index Appointed Market-Maker Account Equity. FLEX Appointed Market-Maker Financial Requirements. (including DPMs and LMMs) and orders of any origin in Hybrid classes. The proposed provision that relocates Rule 6.11 under shell Rule 5.6(a) states that after a class opens for trading pursuant to Rule 5.31 (the shell rule which will govern the opening auction process upon migration), the System accepts for entry into the Book orders and quotes with any Capacity. In other words, orders and quotes of any Capacity will be eligible to enter the Book. The Exchange notes that this is substantively the same provision as the current provision because all classes currently trade on the System, and, pursuant to shell Rule 1.1, upon migration, the term ‘‘Capacity’’ will be used to reference what is referred to as ‘‘origin’’ in the currently effective rules.4 Therefore, the proposed language merely simplifies 4 See shell Rule 1.1, which defines ‘‘quote’’ or ‘‘quotations’’ as a firm bid or offer a Market-Maker (a) submits electronically in an order or bulk message (including to update any bid or offer submitted in a previous order or bulk message) or (b) represents in open outcry on the trading floor. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 and streamlines the current provision and updates terms to reflect terms in the shell Rulebook. The proposed change also adds current Rule 6.23A(f), which governs mandatory systems testing for Trading Permit Holders, to shell Rule 5.5(d). The Exchange notes that SR–CBOE–2019– 033 5 removed current Rule 6.23A, but did not incorporate it into the shell Rulebook in anticipation of migration. While that filing indicated that Rule 5.24 in the shell Rulebook covered the same provision as current Rule 6.23A(f), current Rule 6.23A(f) is broader than the required testing in shell Rule 5.24, which relates only to disaster recovery testing. Under current Rule 6.23A(f), the Exchange currently may require other types of testing, and therefore believes 5 See Securities and 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). E:\FR\FM\22OCN1.SGM 22OCN1 Federal Register / Vol. 84, No. 204 / Tuesday, October 22, 2019 / Notices it is appropriate to maintain this provision in the shell Rulebook. The Exchange notes that proposed 5.5(d) will merely continue to govern mandatory system testing upon the October 7, 2019 migration in the same manner in which Rule 6.23A(f) currently governs mandatory systems testing, and therefore will not substantively alter nor have any impact on trading on the Exchange or on TPHs. The proposed changes to remove certain rules are of a non-substantive nature because they delete rules that are redundant or not applicable as a result of other rules already in the shell Rulebook. The proposed rule change removes current Rule 6.53A, which covers order formats, as these formats relate solely to the Exchange’s current system, and therefore will not be applicable on the new system following the technology migration and information regarding order formats is already available in technical specifications on the Exchange’s website.6 The proposed change removes current Rule 24.13, which describes trading rotations for index options because it is redundant of the opening process in shell Rule 5.31 (current Rule 6.2) which governs the opening auction process for both equity options and index options. Pursuant to current Rule 24.13, the Exchange may provide for the opening rotation to be conducted using the procedures described in current Rule 24.13 or current Rule 6.2 (shell Rule 5.31). The Exchange has provided for the opening rotation to be conducted using the procedures described in current Rule 6.2 (shell Rule 5.31). Additionally, the Exchange pursuant to current Rule 6.2 (proposed Rule 5.31) has authority to deviate from the opening rotation procedures, while Designated Primary Market-Makers (‘‘DPMs’’) and Lead Market-Makers (‘‘LMMs’’) do not. Therefore, deletion of current Rule 24.13 will have no impact on the opening of index options. Index options will continue to open for trading pursuant to the same process as other options as set forth in current Rule 6.2 (shell Rule 5.31).7 The proposed rule change removes Rule 6.51A because this Rule was deleted in 1992 and merely refers to 6 See Cboe US Options FIX Specifications (October 3, 2019), available at https://cdn.cboe.com/ resources/membership/US_Options_FIX_ Specification.pdf; and Cboe US Options BOE Specifications (October 3, 2019), available at https:// cdn.cboe.com/resources/membership/US_Options_ BOE_Specification.pdf. 7 The Commission previously approved certain changes to the Exchange’s opening trading process for. VerDate Sep<11>2014 17:02 Oct 21, 2019 Jkt 250001 current Rule 17.50 (shell Rule 13.15).8 Finally, the proposed rule change deletes current Rule 24A.11, in connection with FLEX Index appointed Market-Maker account equity, and Rule 24A.12, in connection with FLEX Index appointed Market-Maker financial requirements, because the Exchange does not currently have any FLEX Appointed Market-Makers, and does not intend to have any following migration. In other rule filings, the Exchange previously deleted various current Rules related to FLEX Appointed MarketMakers, and inadvertently did not omit current Rules 24A.11 and 24A.22 in those rule filings.9 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.10 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 11 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 12 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. As stated, the proposed rule change makes no substantive changes to the rules. The proposed rule change is merely intended to relocate the Exchange’s rules to the shell Rulebook 8 Rule 13.15(g) of the shell Rulebook describes fines that may be imposed for failure to perform certain reporting duties. See, e.g., Rule 13.15(g)(4) (failure to submit trade information on time and failure to submit trade information to the price reporter). 9 See Securities Exchange Act Release No. 87024 (September 19, 2019), 84 FR 50545 (September 25, 2019) (SR–CBOE–2019–059) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Certain Rules Relating To MarketMakers Upon Migration to the Trading System Used by Cboe Affiliated Exchanges); and SR–CBOE– 2019–084 (filed October 2, 2019). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). 12 Id. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 56503 and update their numbers, paragraph structure, including number and lettering format, cross-references, and terms found in the shell Rules, as well as removing rules that are either redundant or no longer applicable to the Exchange, in order to conform to the shell Rulebook as a whole in anticipation of the technology migration on October 7, 2019. As such, the proposed rule change is designed to promote just and equitable principles of trade, 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, by improving the way the Exchange’s Rulebook is organized, making it easier to read, and, particularly, helping market participants better understand the rules of the Exchange, 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 Exchange’s system to the same technology platform as that used by the Cboe Affiliated Exchanges and a related reorganization of the Rulebook, 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 deletes rules that are redundant or no longer applicable in light of the rules already in the shell Rulebook, will allow the provision that currently governs mandatory systems testing to continue to govern mandatory systems testing upon migration, and makes nonsubstantive changes to the rules by relocating the rules and updating their paragraph structure and crossreferences, to conform to 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 substantially the same as the Exchange’s current rules, all of which have all been previously filed with the Commission. E:\FR\FM\22OCN1.SGM 22OCN1 56504 Federal Register / Vol. 84, No. 204 / Tuesday, October 22, 2019 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 13 and Rule 19b–4(f)(6) thereunder.14 Because the 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, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 15 and Rule 19b–4(f)(6) thereunder.16 A proposed rule change filed under Rule 19b–4(f)(6) 17 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),18 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately. The Exchange notes that the proposed rule change is merely relocating certain rules to its shell rulebook—which includes corresponding updates to rule numbers, cross-references, and other references— in order to conform these rules to the shell rulebook upon the technology migration explained above. The Exchange believes that the proposed rule change will make its rules easier to read and understand for all investors. The Exchange also asserts that the relocation of the rules explained above will not impose any significant burden 13 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 15 15 U.S.C. 78s(b)(3)(A). 16 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s 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 Commission has waived that requirement in this case. 17 17 CFR 240.19b–4(f)(6). 18 17 CFR 240.19b–4(f)(6)(iii). 14 17 VerDate Sep<11>2014 17:02 Oct 21, 2019 Jkt 250001 on competition as the substance of the rules remains unchanged. The Commission agrees that allowing this proposed rule change to become operative upon filing in order to facilitate the Exchange’s technology migration—without changing the substance of these Exchange Rules—is consistent with the protection of investors and the public interest. For this reason, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.19 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 shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. 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 offices 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–2019–095, and should be submitted on or before November 12, 2019. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2019–095 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–2019–095. 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 19 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 [FR Doc. 2019–22935 Filed 10–21–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87313; File No. SR– NYSEArca–2019–72] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Certificate of Incorporation of Intercontinental Exchange, Inc. October 16, 2019. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on October 3, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to 20 17 CFR 200.30–3(a)(12), (59). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\22OCN1.SGM 22OCN1

Agencies

[Federal Register Volume 84, Number 204 (Tuesday, October 22, 2019)]
[Notices]
[Pages 56501-56504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22935]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87320; File No. SR-CBOE-2019-095]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Relocate Various Exchange Rules From the Currently Effective to the 
Shell Structure for the Exchange's Rulebook That Will Become Effective 
Upon the Migration of the Exchange's Trading Platform

October 16, 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 October 4, 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, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 relocate various Exchange Rules from the 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 
proposed rule change also deletes certain Exchange Rules from the 
currently effective Rulebook that will no longer be applicable 
following the migration. 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/

[[Page 56502]]

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 relocate certain rules currently in the 
currently effective Rulebook into the shell Rulebook. The Exchange 
notes that in addition to moving these various rules, the proposed rule 
change deletes the rules from the current Rulebook. It also proposes to 
delete certain current rules that, as a result of the rules already in 
the shell Rulebook, are either redundant or are no longer applicable to 
trading on the Exchange. The proposed rule change moves and, where 
applicable, removes the rules as follows:

------------------------------------------------------------------------
               Shell rule                          Current rule
------------------------------------------------------------------------
5.3 Bids and Offers (introductory        6.43 Manner of Bidding and
 paragraph).                              Offering.
5.5(d) System Access and Connectivity    6.23A(f) Trading Permit Holder
 (Mandatory Testing).                     Connectivity (Mandatory
                                          Systems Testing).\3\
5.6(a) Order Types, Order Instructions,  6.11 Origins Eligible for Book
 and Times-in-Force (Availability).       Entry.
6.7 Off-Floor Transfers of Positions...  6.49A Off-Floor Transfers of
                                          Positions.
6.8 Off-Floor RWA Transfers............  6.49B Off-Floor RWA Transfers.
To be deleted..........................  6.51A Fines for Failure to
                                          Perform Certain Reporting
                                          Duties.
To be deleted..........................  6.53A Types order Formats.
To be deleted..........................  24.13 Trading Rotations.
To be deleted..........................  24A.11 FLEX Index Appointed
                                          Market-Maker Account Equity.
To be deleted..........................  24A.12 FLEX Appointed Market-
                                          Maker Financial Requirements.
------------------------------------------------------------------------

    The proposed changes are of a non-substantive nature and will not 
amend the relocated rules other than to update their rule numbers, 
conform paragraph structure and number/lettering format to that of the 
shell Rulebook, and make cross-reference changes to shell rules.
---------------------------------------------------------------------------

    \3\ The Exchange notes that this provision was removed from the 
currently effective Rulebook in filing SR-CBOE-2019-033. However, 
that filing inadvertently did not maintain this language in the 
shell Rulebook. See Securities Exchange Act Release No. 86374 (July 
15, 2019), 84 FR 34963 (July 19, 2019) (SR-CBOE-2019-033) (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).
---------------------------------------------------------------------------

    The Exchange notes that the proposed change to incorporate the 
language under current Rule 6.11 into shell Rule 5.6(a) does not 
substantively change the current provision but updates it to streamline 
and simplify the language and the reflect shell rule text. Current Rule 
6.11 states that after a class opens for trading, the System accepts 
for entry into the Book quotes of Market-Makers (including DPMs and 
LMMs) and orders of any origin in Hybrid classes. The proposed 
provision that relocates Rule 6.11 under shell Rule 5.6(a) states that 
after a class opens for trading pursuant to Rule 5.31 (the shell rule 
which will govern the opening auction process upon migration), the 
System accepts for entry into the Book orders and quotes with any 
Capacity. In other words, orders and quotes of any Capacity will be 
eligible to enter the Book. The Exchange notes that this is 
substantively the same provision as the current provision because all 
classes currently trade on the System, and, pursuant to shell Rule 1.1, 
upon migration, the term ``Capacity'' will be used to reference what is 
referred to as ``origin'' in the currently effective rules.\4\ 
Therefore, the proposed language merely simplifies and streamlines the 
current provision and updates terms to reflect terms in the shell 
Rulebook.
---------------------------------------------------------------------------

    \4\ See shell Rule 1.1, which defines ``quote'' or 
``quotations'' as a firm bid or offer a Market-Maker (a) submits 
electronically in an order or bulk message (including to update any 
bid or offer submitted in a previous order or bulk message) or (b) 
represents in open outcry on the trading floor.
---------------------------------------------------------------------------

    The proposed change also adds current Rule 6.23A(f), which governs 
mandatory systems testing for Trading Permit Holders, to shell Rule 
5.5(d). The Exchange notes that SR-CBOE-2019-033 \5\ removed current 
Rule 6.23A, but did not incorporate it into the shell Rulebook in 
anticipation of migration. While that filing indicated that Rule 5.24 
in the shell Rulebook covered the same provision as current Rule 
6.23A(f), current Rule 6.23A(f) is broader than the required testing in 
shell Rule 5.24, which relates only to disaster recovery testing. Under 
current Rule 6.23A(f), the Exchange currently may require other types 
of testing, and therefore believes

[[Page 56503]]

it is appropriate to maintain this provision in the shell Rulebook. The 
Exchange notes that proposed 5.5(d) will merely continue to govern 
mandatory system testing upon the October 7, 2019 migration in the same 
manner in which Rule 6.23A(f) currently governs mandatory systems 
testing, and therefore will not substantively alter nor have any impact 
on trading on the Exchange or on TPHs.
---------------------------------------------------------------------------

    \5\ See Securities and 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 proposed changes to remove certain rules are of a non-
substantive nature because they delete rules that are redundant or not 
applicable as a result of other rules already in the shell Rulebook. 
The proposed rule change removes current Rule 6.53A, which covers order 
formats, as these formats relate solely to the Exchange's current 
system, and therefore will not be applicable on the new system 
following the technology migration and information regarding order 
formats is already available in technical specifications on the 
Exchange's website.\6\ The proposed change removes current Rule 24.13, 
which describes trading rotations for index options because it is 
redundant of the opening process in shell Rule 5.31 (current Rule 6.2) 
which governs the opening auction process for both equity options and 
index options. Pursuant to current Rule 24.13, the Exchange may provide 
for the opening rotation to be conducted using the procedures described 
in current Rule 24.13 or current Rule 6.2 (shell Rule 5.31). The 
Exchange has provided for the opening rotation to be conducted using 
the procedures described in current Rule 6.2 (shell Rule 5.31). 
Additionally, the Exchange pursuant to current Rule 6.2 (proposed Rule 
5.31) has authority to deviate from the opening rotation procedures, 
while Designated Primary Market-Makers (``DPMs'') and Lead Market-
Makers (``LMMs'') do not. Therefore, deletion of current Rule 24.13 
will have no impact on the opening of index options. Index options will 
continue to open for trading pursuant to the same process as other 
options as set forth in current Rule 6.2 (shell Rule 5.31).\7\
---------------------------------------------------------------------------

    \6\ See Cboe US Options FIX Specifications (October 3, 2019), 
available at https://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf; and Cboe US Options BOE 
Specifications (October 3, 2019), available at https://cdn.cboe.com/resources/membership/US_Options_BOE_Specification.pdf.
    \7\ The Commission previously approved certain changes to the 
Exchange's opening trading process for.
---------------------------------------------------------------------------

    The proposed rule change removes Rule 6.51A because this Rule was 
deleted in 1992 and merely refers to current Rule 17.50 (shell Rule 
13.15).\8\ Finally, the proposed rule change deletes current Rule 
24A.11, in connection with FLEX Index appointed Market-Maker account 
equity, and Rule 24A.12, in connection with FLEX Index appointed 
Market-Maker financial requirements, because the Exchange does not 
currently have any FLEX Appointed Market-Makers, and does not intend to 
have any following migration. In other rule filings, the Exchange 
previously deleted various current Rules related to FLEX Appointed 
Market-Makers, and inadvertently did not omit current Rules 24A.11 and 
24A.22 in those rule filings.\9\
---------------------------------------------------------------------------

    \8\ Rule 13.15(g) of the shell Rulebook describes fines that may 
be imposed for failure to perform certain reporting duties. See, 
e.g., Rule 13.15(g)(4) (failure to submit trade information on time 
and failure to submit trade information to the price reporter).
    \9\ See Securities Exchange Act Release No. 87024 (September 19, 
2019), 84 FR 50545 (September 25, 2019) (SR-CBOE-2019-059) (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); and SR-CBOE-2019-
084 (filed October 2, 2019).
---------------------------------------------------------------------------

2. Statutory Basis

    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
---------------------------------------------------------------------------

    As stated, the proposed rule change makes no substantive changes to 
the rules. The proposed rule change is merely intended to relocate the 
Exchange's rules to the shell Rulebook and update their numbers, 
paragraph structure, including number and lettering format, cross-
references, and terms found in the shell Rules, as well as removing 
rules that are either redundant or no longer applicable to the 
Exchange, in order to conform to the shell Rulebook as a whole in 
anticipation of the technology migration on October 7, 2019. As such, 
the proposed rule change is designed to promote just and equitable 
principles of trade, 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, by improving the way the 
Exchange's Rulebook is organized, making it easier to read, and, 
particularly, helping market participants better understand the rules 
of the Exchange, 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 Exchange's system to the same technology 
platform as that used by the Cboe Affiliated Exchanges and a related 
reorganization of the Rulebook, 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 deletes rules that are 
redundant or no longer applicable in light of the rules already in the 
shell Rulebook, will allow the provision that currently governs 
mandatory systems testing to continue to govern mandatory systems 
testing upon migration, and makes non-substantive changes to the rules 
by relocating the rules and updating their paragraph structure and 
cross-references, to conform to 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 substantially the same as the Exchange's 
current rules, all of which have all been previously filed with the 
Commission.

[[Page 56504]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the 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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 
Commission has waived that requirement in this case.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately. The Exchange notes that 
the proposed rule change is merely relocating certain rules to its 
shell rulebook--which includes corresponding updates to rule numbers, 
cross-references, and other references--in order to conform these rules 
to the shell rulebook upon the technology migration explained above. 
The Exchange believes that the proposed rule change will make its rules 
easier to read and understand for all investors. The Exchange also 
asserts that the relocation of the rules explained above will not 
impose any significant burden on competition as the substance of the 
rules remains unchanged. The Commission agrees that allowing this 
proposed rule change to become operative upon filing in order to 
facilitate the Exchange's technology migration--without changing the 
substance of these Exchange Rules--is consistent with the protection of 
investors and the public interest. For this reason, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
operative upon filing.\19\
---------------------------------------------------------------------------

    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 shall 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-2019-095 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-2019-095. 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 offices 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-2019-095, and should be submitted 
on or before November 12, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22935 Filed 10-21-19; 8:45 am]
BILLING CODE 8011-01-P
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