Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add the Consolidated Audit Trail Industry Member Compliance Rules to the List of Minor Rule Violations in Rule 8.15, 42039-42042 [2020-14967]

Download as PDF Federal Register / Vol. 85, No. 134 / Monday, July 13, 2020 / Notices competitive environment because it waives fees for Qualifying Firms and is designed to reduce monthly costs for Floor participants whose operations continue to be disrupted despite the fact that the Trading Floor has partially reopened. In reducing this monthly financial burden, the proposed change would allow affected participants to reallocate funds to assist with the cost of shifting and maintaining their prior fully-staffed on-Floor operations to offFloor. Absent this change, Qualifying Firms may experience an unintended increase in the cost of doing business on the Exchange, which would make the Exchange a less competitive venue on which to trade as compared to other options exchanges. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 16 of the Act and subparagraph (f)(2) of Rule 19b–4 17 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) 18 of the Act to determine whether the proposed rule change should be approved or disapproved. jbell on DSKJLSW7X2PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2020–60 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–NYSEArca–2020–60. 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–NYSEArca–2020–60, and should be submitted on or before August 3, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–14968 Filed 7–10–20; 8:45 am] BILLING CODE 8011–01–P U.S.C. 78s(b)(3)(A). 17 17 CFR 240.19b–4(f)(2). 18 15 U.S.C. 78s(b)(2)(B). SECURITIES AND EXCHANGE COMMISSION [No. 34–89236; File No. SR–CboeEDGA– 2020–020] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add the Consolidated Audit Trail Industry Member Compliance Rules to the List of Minor Rule Violations in Rule 8.15 July 7, 2020. 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 July 2, 2020, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) 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 Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and approving the proposal on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) proposes to add the Consolidated Audit Trail (‘‘CAT’’) industry member compliance rules (‘‘CAT Compliance Rules’’) to the list of minor rule violations in Rule 8.15. 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://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), 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. 16 15 VerDate Sep<11>2014 20:25 Jul 10, 2020 1 15 19 17 Jkt 250001 PO 00000 CFR 200.30–3(a)(12). Frm 00102 Fmt 4703 Sfmt 4703 42039 2 17 E:\FR\FM\13JYN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 13JYN1 42040 Federal Register / Vol. 85, No. 134 / Monday, July 13, 2020 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change jbell on DSKJLSW7X2PROD with NOTICES 1. Purpose In order to implement the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’) the Exchange codified the CAT Compliance Rules in Rules 4.5 through 4.16.3 The CAT NMS Plan was filed by the Plan Participants to comply with Rule 613 of Regulation NMS under the Exchange Act,4 and each Plan Participant accordingly has adopted the same compliance rules as in Exchange’s Rules 4.5 through 4.16. The common compliance rules adopted by each Plan Participant are designed to require industry members to comply with the provisions of the CAT NMS Plan, which broadly calls for industry members to record and report timely and accurate customer, order, and trade information relating to activity in NMS Securities and OTC Equity Securities. Rule 8.15 provides for disposition of certain violations through assessment of fines in lieu of conducting a formal disciplinary proceeding. Rule 8.15.01, specifically, sets forth the list of specific EDGA Rules under which a any Member, associated person of a Member, or registered or non-registered employee of a Member may be subject to a fine for violations of such Rules. The Exchange proposes to amend Rule 8.15.01 to add the CAT Compliance Rules in Rules 4.5 through 4.16 to the list of rules in Rule 8.15.01 eligible for disposition pursuant to a minor fine; specifically, under proposed Rule 8.15.01(h).5 Proposed Rule 8.15.01(h) provides that for failures to comply with the Consolidated Audit Trail Compliance Rule requirements of Rules 3 See Securities Exchange Act Release Nos. 79962 (February 3, 2017), 82 FR 10047 (February 9, 2017) (SR–BatsEDGA–2017–03); and 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (Order Approving Proposed Rule Changes To Adopt Consolidated Audit Trail Compliance Rules). 4 17 CFR 242.613. 5 FINRA’s maximum fine for minor rule violations under FINRA Rule 9216(b) is $2,500. The Exchange will apply an identical maximum fine amount for eligible violations of Rules 4.5 through 4.16 to achieve consistency with FINRA and also amend its minor rule violation plan (‘‘MRVP’’) to include such fines. Like FINRA, the Exchange would be able to pursue a fine greater than $2,500 for violations of Rules 4.5 through 4.16 in a regular disciplinary proceeding or a letter of consent under Chapter 8 as appropriate. Any fine imposed in excess of $2,500 or not otherwise covered by Rule 19d–1(c)(2) of the Act would be subject to prompt notice to the Commission pursuant to Rule 19d–1 under the Act. As noted below, in assessing the appropriateness of a minor rule fine with respect to CAT Compliance Rules, the Exchange will be guided by the same factors that FINRA utilizes. See text accompanying notes 7–8 [sic], infra. VerDate Sep<11>2014 20:25 Jul 10, 2020 Jkt 250001 4.5 through 4.16, the Exchange may impose a minor rule violation fine of up to $2,500. The Exchange may seek other disciplinary action for more serious violations. The Exchange is coordinating with the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and other Plan Participants to promote harmonized and consistent enforcement of all the Plan Participants’ CAT Compliance Rules. The Commission recently approved a Rule 17d–2 Plan under which the regulation of CAT Compliance Rules will be allocated among Plan Participants to reduce regulatory duplication for industry members that are members of more than one Participant (‘‘common members’’).6 Under the Rule 17d–2 Plan, the regulation of CAT Compliance Rules with respect to common members that are members of FINRA is allocated to FINRA. Similarly, under the Rule 17d– 2 Plan, responsibility for common members of multiple other Plan Participants and not a member of FINRA will be allocated among those other Plan Participants, including to the Exchange. For those non-common members who are allocated to EDGA pursuant to the Rule 17d–2 Plan, the Exchange and FINRA have entered into a Regulatory Services Agreement (‘‘RSA’’) pursuant to which FINRA will assist the Exchange with conducting surveillance, investigation, examination, and enforcement activity in connection with the CAT Compliance Rules on the Exchange’s behalf. The Exchange expects that the other exchanges will be entering into similar RSAs. The Exchange notes that this proposal is based upon the FINRA filing to amend FINRA Rule 9217 in order to add FINRA’s corresponding CAT Compliance Rules to FINRA’s list of rules that are eligible for minor rule violation plan treatment.7 The Exchange also notes that the New York Stock Exchange LLC (‘‘NYSE’’) submitted a filing to amend its Minor Rule Violation Plan (‘‘MRVP’’) to add its CAT Compliance Rules in a manner consistent with FINRA’s proposal,8 and other Plan Participants intend to submit the same. Thus, in order to achieve consistency with FINRA and the other Plan Participants, the Exchange proposes to adopt fines up to $2,500 in connection with minor rule fines for violations of the CAT Compliance Rules (Rules 4.5 through 4.16) in proposed Rule 8.15.01(h) under the Exchange’s MRVP. In connection with FINRA’s proposed amendment to FINRA Rule 9217 to make FINRA’s CAT Compliance Rules MRVP eligible, FINRA has stated that it will apply the minor fines for CAT Compliance Rules in the same manner that FINRA has for its similar existing audit trail-related rules.9 Accordingly, in order to promote regulatory consistency, the Exchange plans to do the same. Specifically, application of a minor fine with respect to CAT Compliance Rule violations will be guided by the same factors that FINRA references in its filing. However, more formal disciplinary proceedings may be warranted instead of minor rule dispositions in certain circumstances such as where violations prevent regulatory users of the CAT from performing their regulatory functions. Where minor rule dispositions are appropriate, the following factors help guide the determination of fine amounts: • Total number of reports that are not submitted or submitted late; • The timeframe over which the violations occur; • Whether violations are batched; • Whether the violations are the result of the actions of one individual or the result of faulty systems or procedures; • Whether the firm has taken remedial measures to correct the violations; • Prior minor rule violations within the past 24 months; • Collateral effects that the failure has on customers; and • Collateral effects that the failure has on the Exchange’s ability to perform its regulatory function.10 Upon effectiveness of this rule change, the Exchange will publish a regulatory bulletin notifying its Members of the rule change and the specific factors that will be considered in connection with assessing minor rule fines described above. For the foregoing reasons, the Exchange believes that the proposed rule change will result in a coordinated, harmonized approach to CAT Compliance Rule enforcement across Plan Participants that will be consistent with the approach FINRA has taken with the CAT rules. 6 See Securities Exchange Act Release No. 88366 (March 12, 2020), 85 FR 15238 (March 17, 2020). 7 See Securities Exchange Act Release No. 88870 (May 14, 2020), 85 FR 30768 (May 20, 2020) (SR– FINRA–2020–013). 8 See SR–NYSE–2020–51 (filed June 12, 2020). 9 See supra note 7; see also FINRA Notice to Members 04–19 (March 2004) available at https:// www.finra.org/rules-guidance/notices/04-19 (providing specific factors used to inform dispositions for violations of OATS reporting rules). 10 See id. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 E:\FR\FM\13JYN1.SGM 13JYN1 Federal Register / Vol. 85, No. 134 / Monday, July 13, 2020 / Notices 2. Statutory Basis jbell on DSKJLSW7X2PROD with NOTICES 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.11 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 12 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) 13 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Minor rule fines provide a meaningful sanction for minor or technical violations of rules when the conduct at issue does not warrant stronger, immediately reportable disciplinary sanctions. The inclusion of a rule in the Exchange’s MRVP does not minimize the importance of compliance with the rule, nor does it preclude the Exchange from choosing to pursue violations of eligible rules through a letter of consent if the nature of the violations or prior disciplinary history warrants more significant sanctions. Rather, the Exchange believes that the proposed rule change will strengthen the Exchange’s ability to carry out its oversight and enforcement responsibilities in cases where full disciplinary proceedings are unwarranted in view of the minor nature of the particular violation. The Exchange believes the option to impose a minor rule sanction gives the Exchange additional flexibility to administer its enforcement program in the most effective and efficient manner while still fully meeting the Exchange’s remedial objectives in addressing violative conduct.14 Specifically, the 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). 13 Id. 14 Pursuant to Rule 8.15(a) and (e), the Exchange has the discretion to impose a fine in lieu of commencing a disciplinary proceeding for a violation that is minor in nature. Rule 8.15(e) states specifically that nothing in Rule 8.15 requires the VerDate Sep<11>2014 20:25 Jul 10, 2020 Jkt 250001 proposed rule change is designed to prevent fraudulent and manipulative acts and practices because it will provide the Exchange the ability to issue a minor rule fine for violations of the CAT Compliance Rules in Rules 4.5 through 4.16 where a more formal disciplinary action may not be warranted or appropriate consistent with the approach of other Plan Participants for the same conduct. In connection with the fine level specified in the proposed rule change, adding proposed Rule 8.15.01(h) to specifically provide that for violations of the CAT Compliance Rules in Rules 4.5 through 4.16 the Exchange may impose a fine not to exceed $2,500 would further the goal of transparency within the Exchange’s rules. Adopting the same cap as FINRA for minor rule fines in connection with the CAT Compliance Rules would also promote regulatory consistency across selfregulatory organizations. The Exchange further believes that the proposed amendment to Rule 8.15.01 is consistent with Section 6(b)(6) of the Act,15 which provides that members and persons associated with members shall be appropriately disciplined for violation of the provisions of the rules of the exchange, by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, being suspended or barred from being associated with a member, or any other fitting sanction. As noted, the proposed rule change would provide the Exchange the ability to sanction minor or technical violations of Rules 4.5 through 4.16 pursuant to the Exchange’s rules. Finally, the Exchange also believes that the proposed change is designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.16 Rule 8.15 does not preclude a Member, associated person of a Member, or registered or non-registered employee of a Member from contesting an alleged violation and receiving a hearing on the matter with the same procedural rights through a litigated disciplinary proceeding. 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 Exchange to impose a fine pursuant to Rule 8.15 with respect to the violation of any Rule included in any such listing. 15 15 U.S.C. 78f(b)(6). 16 15 U.S.C. 78f(b)(7) and 78f(d). PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 42041 necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not intended to address competitive issues but rather is concerned solely with making the CAT Compliance Rules in Rules 4.5 through 4.16 eligible for a minor rule fine disposition, thereby strengthening the Exchange’s ability to carry out its oversight and enforcement functions and deter potential violative conduct. Also, as stated above, the proposed rule change is consistent with similar proposals recently filed by FINRA and NYSE, and other Plan Participants intend to submit the same. 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. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeEDGA–2020–020 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–CboeEDGA–2020–020. 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 E:\FR\FM\13JYN1.SGM 13JYN1 42042 Federal Register / Vol. 85, No. 134 / Monday, July 13, 2020 / Notices 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–CboeEDGA–2020–020 and should be submitted on or before August 3, 2020. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change jbell on DSKJLSW7X2PROD with NOTICES The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.17 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,18 which requires that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments and to perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission also believes that the proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the Act 19 which require that the rules of an exchange enforce compliance with, and provide appropriate discipline for, violations of Commission and Exchange rules. Finally, the Commission finds that the proposal is consistent with the public interest, the protection of investors, or otherwise in furtherance of the purposes of the Act, as required by Rule 19d– 1(c)(2) under the Act,20 which governs minor rule violation plans. As stated above, the Exchange proposes to add the CAT Compliance Rules to the list of minor rule violations in Rule 8.15 to be consistent with the approach FINRA has taken for minor violations of its corresponding CAT 17 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 18 15 U.S.C. 78f(b)(5). 19 15 U.S.C. 78f(b)(1) and 78f(b)(6). 20 17 CFR 240.19d–1(c)(2). VerDate Sep<11>2014 20:25 Jul 10, 2020 Jkt 250001 Compliance Rules.21 The Commission has already approved FINRA’s treatment of CAT Compliance Rules violations when it approved the addition of CAT Compliance Rules to FINRA’s MRVP.22 As noted in that order, and similarly herein, the Commission believes that Exchange’s treatment of CAT Compliance Rules violations as part of its MRVP provides a reasonable means of addressing violations that do not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. However, the Commission expects that, as with FINRA, the Exchange will continue to conduct surveillance with due diligence and make determinations based on its findings, on a case-by-case basis, regarding whether a sanction under the rule is appropriate, or whether a violation requires formal disciplinary action. Accordingly, the Commission believes the proposal raises no novel or significant issues. For the same reasons discussed above, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,23 for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice of the filing thereof in the Federal Register. The proposal merely adds the CAT Compliance Rules to the Exchange’s MRVP and harmonizes its application with FINRA’s application of CAT Compliance Rules under its own MRVP. Accordingly, the Commission believes that a full notice-and-comment period is not necessary before approving the proposal. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act 24 and Rule 19d–1(c)(2) thereunder,25 that the proposed rule change (SR–CboeEDGA– 2020–020) be, and hereby is, approved on an accelerated basis. 21 As discussed above, the Exchange has entered into a Rule 17d–2 Plan and an RSA with FINRA with respect to the CAT Compliance Rules. The Commission notes that, unless relieved by the Commission of its responsibility, as may be the case under the Rule 17d–2 Plan, the Exchange continues to bear the responsibility for self-regulatory conduct and liability for self-regulatory failures, not the selfregulatory organization retained to perform regulatory functions on the Exchange’s behalf pursuant to an RSA. See Securities Exchange Release No. 61419 (January 26, 2010), 75 FR 5157 (February 1, 2010) (SR–BATS–2009–031), note 93 and accompanying text. 22 See supra note 7. 23 15 U.S.C. 78s(b)(2). 24 15 U.S.C. 78s(b)(2). 25 17 CFR 240.19d–1(c)(2). PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–14967 Filed 7–10–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89239; File No. SR–CBOE– 2020–064] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule in Connection With Migration July 7, 2020. 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 July 2, 2020, 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 the Substance of the Proposed Rule Change Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend its Fees Schedule in connection with migration. The text of the proposed rule change is provided in Exhibit 5.3 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Exchange notes that subsequent to the Original Filing that proposed these changes on October 1 and 2, 2019 (SR–CBOE–2019–077 and SR–CBOE–2019–082) and subsequent to the Second Proposed Rule Change and Third Proposed Rule Change Filings that proposed these changes on November 29, 2019 (SR–CBOE–2019–111) and January 28, 2020 (SR–CBOE–2020–005), the Exchange submitted SR–CBOE–2020–021 which adopted Footnote 12. Footnote 12 governs pricing changes in the event the Exchange trading floor becomes inoperable and is appended to the MarketMaker Tier Appointment Fees and Floor Broker Trading Permit Sliding Scales tables. Additionally, subsequent to the Fourth Proposed Rule Change filed on March 27, 2020 (SR–CBOE–2020–028), the Exchange submitted SR–CBOE–2020–044, which appended Footnotes 41 to the Market maker Tier Appointment Fees table and the Floor Broker Trading Surcharge. Lastly, subsequent to the Exchange’s Fifth Proposed Rule Change filed on May 22, 2020 (SR–CBOE–2020–48), the Exchange submitted (1) SR–CBOE–2020–058, which adopted new Footnote 24, appended Footnote 24 in the Market-Maker Tier Appointment Fees table and 1 15 E:\FR\FM\13JYN1.SGM 13JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 134 (Monday, July 13, 2020)]
[Notices]
[Pages 42039-42042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14967]


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SECURITIES AND EXCHANGE COMMISSION

[No. 34-89236; File No. SR-CboeEDGA-2020-020]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Order Granting Accelerated Approval of a Proposed Rule 
Change To Add the Consolidated Audit Trail Industry Member Compliance 
Rules to the List of Minor Rule Violations in Rule 8.15

July 7, 2020.
    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 July 2, 2020, Cboe EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons and approving the proposal on an 
accelerated basis.
---------------------------------------------------------------------------

    \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 EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') proposes to 
add the Consolidated Audit Trail (``CAT'') industry member compliance 
rules (``CAT Compliance Rules'') to the list of minor rule violations 
in Rule 8.15. 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://markets.cboe.com/us/equities/regulation/rule_filings/edga/), 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.

[[Page 42040]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In order to implement the National Market System Plan Governing the 
Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'') the 
Exchange codified the CAT Compliance Rules in Rules 4.5 through 
4.16.\3\ The CAT NMS Plan was filed by the Plan Participants to comply 
with Rule 613 of Regulation NMS under the Exchange Act,\4\ and each 
Plan Participant accordingly has adopted the same compliance rules as 
in Exchange's Rules 4.5 through 4.16. The common compliance rules 
adopted by each Plan Participant are designed to require industry 
members to comply with the provisions of the CAT NMS Plan, which 
broadly calls for industry members to record and report timely and 
accurate customer, order, and trade information relating to activity in 
NMS Securities and OTC Equity Securities.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release Nos. 79962 (February 3, 
2017), 82 FR 10047 (February 9, 2017) (SR-BatsEDGA-2017-03); and 
80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (Order 
Approving Proposed Rule Changes To Adopt Consolidated Audit Trail 
Compliance Rules).
    \4\ 17 CFR 242.613.
---------------------------------------------------------------------------

    Rule 8.15 provides for disposition of certain violations through 
assessment of fines in lieu of conducting a formal disciplinary 
proceeding. Rule 8.15.01, specifically, sets forth the list of specific 
EDGA Rules under which a any Member, associated person of a Member, or 
registered or non-registered employee of a Member may be subject to a 
fine for violations of such Rules. The Exchange proposes to amend Rule 
8.15.01 to add the CAT Compliance Rules in Rules 4.5 through 4.16 to 
the list of rules in Rule 8.15.01 eligible for disposition pursuant to 
a minor fine; specifically, under proposed Rule 8.15.01(h).\5\ Proposed 
Rule 8.15.01(h) provides that for failures to comply with the 
Consolidated Audit Trail Compliance Rule requirements of Rules 4.5 
through 4.16, the Exchange may impose a minor rule violation fine of up 
to $2,500. The Exchange may seek other disciplinary action for more 
serious violations.
---------------------------------------------------------------------------

    \5\ FINRA's maximum fine for minor rule violations under FINRA 
Rule 9216(b) is $2,500. The Exchange will apply an identical maximum 
fine amount for eligible violations of Rules 4.5 through 4.16 to 
achieve consistency with FINRA and also amend its minor rule 
violation plan (``MRVP'') to include such fines. Like FINRA, the 
Exchange would be able to pursue a fine greater than $2,500 for 
violations of Rules 4.5 through 4.16 in a regular disciplinary 
proceeding or a letter of consent under Chapter 8 as appropriate. 
Any fine imposed in excess of $2,500 or not otherwise covered by 
Rule 19d-1(c)(2) of the Act would be subject to prompt notice to the 
Commission pursuant to Rule 19d-1 under the Act. As noted below, in 
assessing the appropriateness of a minor rule fine with respect to 
CAT Compliance Rules, the Exchange will be guided by the same 
factors that FINRA utilizes. See text accompanying notes 7-8 [sic], 
infra.
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    The Exchange is coordinating with the Financial Industry Regulatory 
Authority, Inc. (``FINRA'') and other Plan Participants to promote 
harmonized and consistent enforcement of all the Plan Participants' CAT 
Compliance Rules. The Commission recently approved a Rule 17d-2 Plan 
under which the regulation of CAT Compliance Rules will be allocated 
among Plan Participants to reduce regulatory duplication for industry 
members that are members of more than one Participant (``common 
members'').\6\ Under the Rule 17d-2 Plan, the regulation of CAT 
Compliance Rules with respect to common members that are members of 
FINRA is allocated to FINRA. Similarly, under the Rule 17d-2 Plan, 
responsibility for common members of multiple other Plan Participants 
and not a member of FINRA will be allocated among those other Plan 
Participants, including to the Exchange. For those non-common members 
who are allocated to EDGA pursuant to the Rule 17d-2 Plan, the Exchange 
and FINRA have entered into a Regulatory Services Agreement (``RSA'') 
pursuant to which FINRA will assist the Exchange with conducting 
surveillance, investigation, examination, and enforcement activity in 
connection with the CAT Compliance Rules on the Exchange's behalf. The 
Exchange expects that the other exchanges will be entering into similar 
RSAs.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 88366 (March 12, 
2020), 85 FR 15238 (March 17, 2020).
---------------------------------------------------------------------------

    The Exchange notes that this proposal is based upon the FINRA 
filing to amend FINRA Rule 9217 in order to add FINRA's corresponding 
CAT Compliance Rules to FINRA's list of rules that are eligible for 
minor rule violation plan treatment.\7\ The Exchange also notes that 
the New York Stock Exchange LLC (``NYSE'') submitted a filing to amend 
its Minor Rule Violation Plan (``MRVP'') to add its CAT Compliance 
Rules in a manner consistent with FINRA's proposal,\8\ and other Plan 
Participants intend to submit the same. Thus, in order to achieve 
consistency with FINRA and the other Plan Participants, the Exchange 
proposes to adopt fines up to $2,500 in connection with minor rule 
fines for violations of the CAT Compliance Rules (Rules 4.5 through 
4.16) in proposed Rule 8.15.01(h) under the Exchange's MRVP. In 
connection with FINRA's proposed amendment to FINRA Rule 9217 to make 
FINRA's CAT Compliance Rules MRVP eligible, FINRA has stated that it 
will apply the minor fines for CAT Compliance Rules in the same manner 
that FINRA has for its similar existing audit trail-related rules.\9\ 
Accordingly, in order to promote regulatory consistency, the Exchange 
plans to do the same. Specifically, application of a minor fine with 
respect to CAT Compliance Rule violations will be guided by the same 
factors that FINRA references in its filing. However, more formal 
disciplinary proceedings may be warranted instead of minor rule 
dispositions in certain circumstances such as where violations prevent 
regulatory users of the CAT from performing their regulatory functions. 
Where minor rule dispositions are appropriate, the following factors 
help guide the determination of fine amounts:
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 88870 (May 14, 
2020), 85 FR 30768 (May 20, 2020) (SR-FINRA-2020-013).
    \8\ See SR-NYSE-2020-51 (filed June 12, 2020).
    \9\ See supra note 7; see also FINRA Notice to Members 04-19 
(March 2004) available at https://www.finra.org/rules-guidance/notices/04-19 (providing specific factors used to inform 
dispositions for violations of OATS reporting rules).
---------------------------------------------------------------------------

     Total number of reports that are not submitted or 
submitted late;
     The timeframe over which the violations occur;
     Whether violations are batched;
     Whether the violations are the result of the actions of 
one individual or the result of faulty systems or procedures;
     Whether the firm has taken remedial measures to correct 
the violations;
     Prior minor rule violations within the past 24 months;
     Collateral effects that the failure has on customers; and
     Collateral effects that the failure has on the Exchange's 
ability to perform its regulatory function.\10\
---------------------------------------------------------------------------

    \10\ See id.
---------------------------------------------------------------------------

    Upon effectiveness of this rule change, the Exchange will publish a 
regulatory bulletin notifying its Members of the rule change and the 
specific factors that will be considered in connection with assessing 
minor rule fines described above.
    For the foregoing reasons, the Exchange believes that the proposed 
rule change will result in a coordinated, harmonized approach to CAT 
Compliance Rule enforcement across Plan Participants that will be 
consistent with the approach FINRA has taken with the CAT rules.

[[Page 42041]]

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.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
---------------------------------------------------------------------------

    Minor rule fines provide a meaningful sanction for minor or 
technical violations of rules when the conduct at issue does not 
warrant stronger, immediately reportable disciplinary sanctions. The 
inclusion of a rule in the Exchange's MRVP does not minimize the 
importance of compliance with the rule, nor does it preclude the 
Exchange from choosing to pursue violations of eligible rules through a 
letter of consent if the nature of the violations or prior disciplinary 
history warrants more significant sanctions. Rather, the Exchange 
believes that the proposed rule change will strengthen the Exchange's 
ability to carry out its oversight and enforcement responsibilities in 
cases where full disciplinary proceedings are unwarranted in view of 
the minor nature of the particular violation. The Exchange believes the 
option to impose a minor rule sanction gives the Exchange additional 
flexibility to administer its enforcement program in the most effective 
and efficient manner while still fully meeting the Exchange's remedial 
objectives in addressing violative conduct.\14\ Specifically, the 
proposed rule change is designed to prevent fraudulent and manipulative 
acts and practices because it will provide the Exchange the ability to 
issue a minor rule fine for violations of the CAT Compliance Rules in 
Rules 4.5 through 4.16 where a more formal disciplinary action may not 
be warranted or appropriate consistent with the approach of other Plan 
Participants for the same conduct.
---------------------------------------------------------------------------

    \14\ Pursuant to Rule 8.15(a) and (e), the Exchange has the 
discretion to impose a fine in lieu of commencing a disciplinary 
proceeding for a violation that is minor in nature. Rule 8.15(e) 
states specifically that nothing in Rule 8.15 requires the Exchange 
to impose a fine pursuant to Rule 8.15 with respect to the violation 
of any Rule included in any such listing.
---------------------------------------------------------------------------

    In connection with the fine level specified in the proposed rule 
change, adding proposed Rule 8.15.01(h) to specifically provide that 
for violations of the CAT Compliance Rules in Rules 4.5 through 4.16 
the Exchange may impose a fine not to exceed $2,500 would further the 
goal of transparency within the Exchange's rules. Adopting the same cap 
as FINRA for minor rule fines in connection with the CAT Compliance 
Rules would also promote regulatory consistency across self-regulatory 
organizations.
    The Exchange further believes that the proposed amendment to Rule 
8.15.01 is consistent with Section 6(b)(6) of the Act,\15\ which 
provides that members and persons associated with members shall be 
appropriately disciplined for violation of the provisions of the rules 
of the exchange, by expulsion, suspension, limitation of activities, 
functions, and operations, fine, censure, being suspended or barred 
from being associated with a member, or any other fitting sanction. As 
noted, the proposed rule change would provide the Exchange the ability 
to sanction minor or technical violations of Rules 4.5 through 4.16 
pursuant to the Exchange's rules.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    Finally, the Exchange also believes that the proposed change is 
designed to provide a fair procedure for the disciplining of members 
and persons associated with members, consistent with Sections 6(b)(7) 
and 6(d) of the Act.\16\ Rule 8.15 does not preclude a Member, 
associated person of a Member, or registered or non-registered employee 
of a Member from contesting an alleged violation and receiving a 
hearing on the matter with the same procedural rights through a 
litigated disciplinary proceeding.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b)(7) and 78f(d).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but rather is concerned 
solely with making the CAT Compliance Rules in Rules 4.5 through 4.16 
eligible for a minor rule fine disposition, thereby strengthening the 
Exchange's ability to carry out its oversight and enforcement functions 
and deter potential violative conduct. Also, as stated above, the 
proposed rule change is consistent with similar proposals recently 
filed by FINRA and NYSE, and other Plan Participants intend to submit 
the same.

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. 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-CboeEDGA-2020-020 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-CboeEDGA-2020-020. 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

[[Page 42042]]

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-
CboeEDGA-2020-020 and should be submitted on or before August 3, 2020.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\17\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\18\ which requires that the 
rules of an exchange be designed to promote just and equitable 
principles of trade, to remove impediments and to perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Commission 
also believes that the proposal is consistent with Sections 6(b)(1) and 
6(b)(6) of the Act \19\ which require that the rules of an exchange 
enforce compliance with, and provide appropriate discipline for, 
violations of Commission and Exchange rules. Finally, the Commission 
finds that the proposal is consistent with the public interest, the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act, as required by Rule 19d-1(c)(2) under the Act,\20\ which 
governs minor rule violation plans.
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    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \20\ 17 CFR 240.19d-1(c)(2).
---------------------------------------------------------------------------

    As stated above, the Exchange proposes to add the CAT Compliance 
Rules to the list of minor rule violations in Rule 8.15 to be 
consistent with the approach FINRA has taken for minor violations of 
its corresponding CAT Compliance Rules.\21\ The Commission has already 
approved FINRA's treatment of CAT Compliance Rules violations when it 
approved the addition of CAT Compliance Rules to FINRA's MRVP.\22\ As 
noted in that order, and similarly herein, the Commission believes that 
Exchange's treatment of CAT Compliance Rules violations as part of its 
MRVP provides a reasonable means of addressing violations that do not 
rise to the level of requiring formal disciplinary proceedings, while 
providing greater flexibility in handling certain violations. However, 
the Commission expects that, as with FINRA, the Exchange will continue 
to conduct surveillance with due diligence and make determinations 
based on its findings, on a case-by-case basis, regarding whether a 
sanction under the rule is appropriate, or whether a violation requires 
formal disciplinary action. Accordingly, the Commission believes the 
proposal raises no novel or significant issues.
---------------------------------------------------------------------------

    \21\ As discussed above, the Exchange has entered into a Rule 
17d-2 Plan and an RSA with FINRA with respect to the CAT Compliance 
Rules. The Commission notes that, unless relieved by the Commission 
of its responsibility, as may be the case under the Rule 17d-2 Plan, 
the Exchange continues to bear the responsibility for self-
regulatory conduct and liability for self-regulatory failures, not 
the self-regulatory organization retained to perform regulatory 
functions on the Exchange's behalf pursuant to an RSA. See 
Securities Exchange Release No. 61419 (January 26, 2010), 75 FR 5157 
(February 1, 2010) (SR-BATS-2009-031), note 93 and accompanying 
text.
    \22\ See supra note 7.
---------------------------------------------------------------------------

    For the same reasons discussed above, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\23\ for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of the notice of the filing thereof in the Federal 
Register. The proposal merely adds the CAT Compliance Rules to the 
Exchange's MRVP and harmonizes its application with FINRA's application 
of CAT Compliance Rules under its own MRVP. Accordingly, the Commission 
believes that a full notice-and-comment period is not necessary before 
approving the proposal.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\24\ and Rule 19d-1(c)(2) thereunder,\25\ that the proposed rule change 
(SR-CboeEDGA-2020-020) be, and hereby is, approved on an accelerated 
basis.
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    \24\ 15 U.S.C. 78s(b)(2).
    \25\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14967 Filed 7-10-20; 8:45 am]
BILLING CODE 8011-01-P

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