Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Interpretations and Policies to Rule 6.13 in Connection With Market-Makers' Complex Orders, Quoting Obligations and Volume, 74775-74777 [2020-25730]
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Federal Register / Vol. 85, No. 226 / Monday, November 23, 2020 / Notices
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–CboeEDGX–2020–054, and
should be submitted on or before
December 14, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–25729 Filed 11–20–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90439; File No. SR–C2–
2020–017]
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its
Interpretations and Policies to Rule
6.13 in Connection With MarketMakers’ Complex Orders, Quoting
Obligations and Volume
November 17, 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 November
3, 2020, Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) 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
Exchange filed the proposal pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) proposes to amend
its Interpretations and Policies to Rule
6.13 in connection with Market-Makers’
complex orders, quoting obligations and
volume. 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/
options/regulation/rule_filings/ctwo/),
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
The Exchange proposes to adopt new
Interpretation and Policy .02 to Rule
6.13 which provides that complex
strategies are included when
determining whether a Market Maker
exceeds the 25% volume threshold in
its non-appointed classes pursuant to
Rule 8.6(f).5 The Exchange also
proposes to make clarifying,
nonsubstantive updates to Interpretation
and Policy .01 to Rule 6.13.
Rule 6.13 governs trading of complex
orders on the Exchange and, currently,
Interpretation and Policy .01 to Rule
6.13 specifically provides that MarketMakers are not required to quote on the
COB. Complex strategies are not subject
to any quoting requirements that apply
to Market-Makers in the simple market.
Interpretation and Policy [sic] to Rule
6.13 also states that the Exchange does
not take into account Market-Makers’
volume executed in complex strategies
when determining whether Market5 As
a result of the proposed Interpretation and
Policy, the proposed rule change accordingly
updates the subsequent Interpretation and Policy
numbering.
Jkt 253001
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
74775
Makers meet their quoting obligations in
the simple market. The proposed rule
change updates Interpretation and
Policy .01 to Rule 6.13 in order to
provide additional clarity and
consistency with the rules that provide
for a Market-Maker’s quoting
requirements and obligations.
Specifically, pursuant to Rule 8.6, a
Market-Maker must satisfy quoting
obligations in each of its appointed
classes. As such, the proposed updates
to Interpretation and Policy .01 to Rule
6.13 to [sic] make it clear that a MarketMaker’s orders in complex strategies are
not subject to a Market-Maker’s quoting
requirements in its appointed classes
nor are considered in determining
whether a Market-Maker has satisfied its
quoting obligations in its appointed
classes. Also, the proposed rule change
also updates Interpretation and Policy
.01 to Rule 6.13 as it inadvertently refers
to volume executed rather than orders,
as ‘‘quoting’’ obligations relate to the
submission of quotes and orders rather
than executed volume. More
specifically, pursuant to Rule 8.6, a
Market-Maker’s bids and offers entered
in the simple market are considered in
determining whether a Market-Maker
satisfies its quoting obligations,
therefore, the proposed rule change
amends Interpretation and Policy .01 to
Rule 6.13 to more appropriately reflect
this. The proposed change also updates
the language in Interpretation and
Policy .01 to Rule 6.13 to read in plain
English.
Current Rule 8.6(f) provides that a
Market-Maker is considered an order
entry firm (‘‘OEF’’) 6 under the Rules in
all classes in which the Market-Maker
has no appointment, and limits the total
number of contracts a Market-Maker
may execute in classes in which it has
no appointment to 25% of the total
number of all contracts the MarketMarker executes on the Exchange in any
calendar quarter. The Exchange does not
currently include executed complex
order volume when determining
whether a Market-Maker has exceeded
this threshold. The Exchange’s affiliated
options exchange, Cboe Exchange, Inc.
(‘‘Cboe Options’’) has a rule in place
that is substantially the same as C2 Rule
8.6(f); however, Cboe Options currently
considers a Market Maker’s executed
complex order volume as well as a
Market Maker’s executed simple order
volume in determining whether a
Market-Maker has exceeded the 25%
6 See Rule 1.1., which defines an ‘‘Order Entry
Firm’’ or ‘‘OEF’’ as a Trading Permit Holder that
represents as agent customer orders on the
Exchange or that is a non-Market-Maker conducting
proprietary trading.
E:\FR\FM\23NON1.SGM
23NON1
74776
Federal Register / Vol. 85, No. 226 / Monday, November 23, 2020 / Notices
volume threshold in its non-appointed
classes.7 In order to harmonize this
practice across the affiliated options
exchanges,8 the Exchange now proposes
to change its current interpretation and
adopt proposed Interpretation and
Policy .02 to Rule 6.13 to provide that
a Market-Maker’s orders for complex
strategies executed in classes in which
it has no appointment are included in
the total number of all contracts the
Market-Maker executes on the Exchange
in any calendar quarter in determining
whether the Market-Maker exceeds the
25% threshold pursuant to Rule 8.6(f).
The Exchange notes that Rule 8.6(f) is
designed to prevent a Market-Maker
from executing volume in nonappointed option classes in an amount
disproportionate to volume executed in
its appointed option classes, potentially
in derogation of the performance of its
obligations and provision of liquidity in
its appointed option classes. As such,
the proposed rule change is consistent
with and supports the purposed [sic] of
Rule 8.6(f) by including complex orders
in this calculation. Therefore, the
proposed rule change considers a
Market-Maker’s orders executed in
complex strategies representative of a
Market-Maker’s total volume on the
Exchange.
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.9 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 10 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
7 The Exchange notes too that Cboe Options
intends to simultaneously submit a rule filing to
codify its current practice in calculating its MarketMakers’ simple and complex volume in nonappointed classes in its corresponding
Interpretations and Policies to Rule 6.13.
8 The Exchange’s affiliated options exchange,
Cboe EDGX Exchange, Inc. (‘‘EDGX Options’’)
intends to simultaneously submit a substantively
identical rule filing to clarify that it will calculate
its Market Makers’ simple and complex volume in
non-appointed classes pursuant to Cboe Options’
current practice.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
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17:07 Nov 20, 2020
Jkt 253001
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) 11 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system by
providing that the Exchange considers a
Market-Maker’s complex order volume
when calculating the 25% threshold of
volume in non-appointed classes
pursuant to Rule 8.6(f) and thereby
harmonizing the Exchange’s rules with
that of the corresponding rules of its
affiliated options exchanges.12
Specifically, Rule 8.6(f) is designed to
prevent a Market-Maker from executing
volume in non-appointed option classes
in an amount disproportionate to
volume executed in its appointed option
classes, potentially in derogation of the
performance of its obligations and
provision of liquidity in its appointed
option classes. As stated above, the
Exchange believes that a Market-Maker’s
orders executed in complex strategies
are representative of a Market-Maker’s
total volume on the Exchange. Thus,
including such in its calculation of
volume in non-appointed classes will
help to ensure that Market-Makers
perform their obligations and provide
liquidity in appointed classes in an
appropriate manner as compared to
non-appointed classes, and is thereby
consistent with and supports the
purpose of Rule 8.6(f). The Exchange
also believes that codifying that a
Market-Maker’s complex order volume
counts towards its Market-Maker’s total
volume on the Exchange may mitigate
any potential confusion regarding this
calculation so that Market-Makers have
more clarity regarding their obligations
in appointed classes in an appropriate
manner as compared to non-appointed
classes. As such, the Exchange believes
the proposed rule change will
contribute to the protection of investors
and the public interest by adding
transparency and clarity to the
Exchange’s Rules by codifying its
affiliated options exchange’s current
interpretation of how to a MarketMaker’s executed volume on the
Exchange is calculated. In addition, the
Exchange believes the proposed changes
to Interpretation and Policy .01 of
Exchange Rule 6.13 will add clarity by
11 Id.
12 See
PO 00000
supra notes 7 and 8.
Frm 00113
Fmt 4703
Sfmt 4703
revising the Rule to provide that orders
entered in appointed classes, rather than
volume executed, is considered in
connection with determining whether a
Market-Maker meets it quoting
obligations pursuant to Rule 8.6 in its
appointed classes as well as updating
the language to read in plain English.
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 intended to codify in new
Interpretation and Policy .02 to Rule
6.13 that the Exchange will consider a
Market-Maker’s complex strategy
execution volume in calculating its
volume per quarter pursuant to Rule
8.6(f) and harmonize this calculation
with the manner in which the
exchange’s affiliated options exchange,
Cboe Options, currently calculates
Market-Maker executed volume in nonappointed classes. The proposed rule
change also corrects an inadvertent error
in Interpretation and Policy .01 to 6.13
indicating that executed volume rather
than entered orders are considered
when determining compliance with a
Market-Maker’s quoting obligations.
Thus, the Exchange believes this
proposed rule change will benefit
Exchange participants by providing
specific guidance and additional clarity
within the Exchange Rules, as well as
between the rules of the affiliated
options exchanges.
Additionally, the Exchange believes
that the proposed rule change regarding
the applicability of Rule 8.6(f) to a
Market-Maker’s executions in the COB
does not impose any burden on
intramarket competition because it
applies to all Market-Makers in the same
manner. The proposed rule change
codifies its affiliated options exchange’s
existing interpretation of such
calculation in its corresponding rules. It
does not modify any existing MarketMaker obligations. The Exchange
believes that the proposed rule change
does not impose any burden on
intermarket competition because it
relates to an obligation regarding
Market-Maker executed volume only on
the Exchange.
The Exchange believes that the
proposed rule change will relieve any
burden on market participants because
it serves to provide Market-Makers with
rules that ensure that Market-Makers are
performing their obligations in
appointed options classes in an
appropriate manner as compared to
E:\FR\FM\23NON1.SGM
23NON1
Federal Register / Vol. 85, No. 226 / Monday, November 23, 2020 / Notices
non-appointed classes. Ensuring that
Market-Makers execute a certain amount
of their volume in appointed classes
will contribute to sufficient liquidity in
those classes, which benefits the market
and investors as a whole.
Additionally, the proposed
nonsubstantive updates to Interpretation
and Policy .01 to Rule 6.13 are not
competitive in nature and, instead, are
intended to correct an inadvertently
used term and provide clarity and
consistency within the Rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 13 and Rule 19b–4(f)(6) 14
thereunder. At any time within 60 days
of the filing of the proposed rule change,
the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
C2–2020–017 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–C2–2020–017. 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–C2–2020–017, and should
be submitted on or before December 14,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–25730 Filed 11–20–20; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
13 15
14 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
VerDate Sep<11>2014
17:07 Nov 20, 2020
15 17
Jkt 253001
PO 00000
CFR 200.30–3(a)(12).
Frm 00114
Fmt 4703
Sfmt 4703
74777
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90444; File No. SR–
CboeBZX–2020–042]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
To Accommodate Exchange Listing
and Trading of Options-Linked
Securities
November 17, 2020.
On May 15, 2020, Cboe BZX
Exchange, Inc. (‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to permit Exchange listing and
trading of Options-Linked Securities.
The proposed rule change was
published for comment in the Federal
Register on June 3, 2020.3 On July 9,
2020, pursuant to Section 19(b)(2) of the
Act,4 the Commission designated a
longer period within which to approve
the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
On September 1, 2020, the Commission
instituted proceedings under Section
19(b)(2)(B) of the Act 6 to determine
whether to approve or disapprove the
proposed rule change.7 The Commission
has received no comment letters on the
proposed rule change.
Section 19(b)(2) of the Act 8 provides
that, after initiating disapproval
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of filing of the proposed rule
change. The Commission may extend
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 88968
(May 28, 2020), 85 FR 34270.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 89267,
85 FR 42933 (July 15, 2020).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 89722,
85 FR 55337 (September 4, 2020). Specifically, the
Commission instituted proceedings to allow for
additional analysis of the proposed rule change’s
consistency with Section 6(b)(5) of the Act, which
requires, among other things, that the rules of a
national securities exchange be ‘‘designed to
prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles
of trade,’’ and ‘‘to protect investors and the public
interest.’’ See id. at 55338 (citing 15 U.S.C.
78f(b)(5)).
8 15 U.S.C. 78s(b)(2).
2 17
E:\FR\FM\23NON1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 226 (Monday, November 23, 2020)]
[Notices]
[Pages 74775-74777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25730]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90439; File No. SR-C2-2020-017]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Interpretations and Policies to Rule 6.13 in Connection With
Market-Makers' Complex Orders, Quoting Obligations and Volume
November 17, 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 November 3, 2020, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') 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
Exchange filed the proposal pursuant to Section 19(b)(3)(A)(iii) of the
Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to
amend its Interpretations and Policies to Rule 6.13 in connection with
Market-Makers' complex orders, quoting obligations and volume. 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/options/regulation/rule_filings/ctwo/), 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
The Exchange proposes to adopt new Interpretation and Policy .02 to
Rule 6.13 which provides that complex strategies are included when
determining whether a Market Maker exceeds the 25% volume threshold in
its non-appointed classes pursuant to Rule 8.6(f).\5\ The Exchange also
proposes to make clarifying, nonsubstantive updates to Interpretation
and Policy .01 to Rule 6.13.
---------------------------------------------------------------------------
\5\ As a result of the proposed Interpretation and Policy, the
proposed rule change accordingly updates the subsequent
Interpretation and Policy numbering.
---------------------------------------------------------------------------
Rule 6.13 governs trading of complex orders on the Exchange and,
currently, Interpretation and Policy .01 to Rule 6.13 specifically
provides that Market-Makers are not required to quote on the COB.
Complex strategies are not subject to any quoting requirements that
apply to Market-Makers in the simple market. Interpretation and Policy
[sic] to Rule 6.13 also states that the Exchange does not take into
account Market-Makers' volume executed in complex strategies when
determining whether Market-Makers meet their quoting obligations in the
simple market. The proposed rule change updates Interpretation and
Policy .01 to Rule 6.13 in order to provide additional clarity and
consistency with the rules that provide for a Market-Maker's quoting
requirements and obligations. Specifically, pursuant to Rule 8.6, a
Market-Maker must satisfy quoting obligations in each of its appointed
classes. As such, the proposed updates to Interpretation and Policy .01
to Rule 6.13 to [sic] make it clear that a Market-Maker's orders in
complex strategies are not subject to a Market-Maker's quoting
requirements in its appointed classes nor are considered in determining
whether a Market-Maker has satisfied its quoting obligations in its
appointed classes. Also, the proposed rule change also updates
Interpretation and Policy .01 to Rule 6.13 as it inadvertently refers
to volume executed rather than orders, as ``quoting'' obligations
relate to the submission of quotes and orders rather than executed
volume. More specifically, pursuant to Rule 8.6, a Market-Maker's bids
and offers entered in the simple market are considered in determining
whether a Market-Maker satisfies its quoting obligations, therefore,
the proposed rule change amends Interpretation and Policy .01 to Rule
6.13 to more appropriately reflect this. The proposed change also
updates the language in Interpretation and Policy .01 to Rule 6.13 to
read in plain English.
Current Rule 8.6(f) provides that a Market-Maker is considered an
order entry firm (``OEF'') \6\ under the Rules in all classes in which
the Market-Maker has no appointment, and limits the total number of
contracts a Market-Maker may execute in classes in which it has no
appointment to 25% of the total number of all contracts the Market-
Marker executes on the Exchange in any calendar quarter. The Exchange
does not currently include executed complex order volume when
determining whether a Market-Maker has exceeded this threshold. The
Exchange's affiliated options exchange, Cboe Exchange, Inc. (``Cboe
Options'') has a rule in place that is substantially the same as C2
Rule 8.6(f); however, Cboe Options currently considers a Market Maker's
executed complex order volume as well as a Market Maker's executed
simple order volume in determining whether a Market-Maker has exceeded
the 25%
[[Page 74776]]
volume threshold in its non-appointed classes.\7\ In order to harmonize
this practice across the affiliated options exchanges,\8\ the Exchange
now proposes to change its current interpretation and adopt proposed
Interpretation and Policy .02 to Rule 6.13 to provide that a Market-
Maker's orders for complex strategies executed in classes in which it
has no appointment are included in the total number of all contracts
the Market-Maker executes on the Exchange in any calendar quarter in
determining whether the Market-Maker exceeds the 25% threshold pursuant
to Rule 8.6(f). The Exchange notes that Rule 8.6(f) is designed to
prevent a Market-Maker from executing volume in non-appointed option
classes in an amount disproportionate to volume executed in its
appointed option classes, potentially in derogation of the performance
of its obligations and provision of liquidity in its appointed option
classes. As such, the proposed rule change is consistent with and
supports the purposed [sic] of Rule 8.6(f) by including complex orders
in this calculation. Therefore, the proposed rule change considers a
Market-Maker's orders executed in complex strategies representative of
a Market-Maker's total volume on the Exchange.
---------------------------------------------------------------------------
\6\ See Rule 1.1., which defines an ``Order Entry Firm'' or
``OEF'' as a Trading Permit Holder that represents as agent customer
orders on the Exchange or that is a non-Market-Maker conducting
proprietary trading.
\7\ The Exchange notes too that Cboe Options intends to
simultaneously submit a rule filing to codify its current practice
in calculating its Market-Makers' simple and complex volume in non-
appointed classes in its corresponding Interpretations and Policies
to Rule 6.13.
\8\ The Exchange's affiliated options exchange, Cboe EDGX
Exchange, Inc. (``EDGX Options'') intends to simultaneously submit a
substantively identical rule filing to clarify that it will
calculate its Market Makers' simple and complex volume in non-
appointed classes pursuant to Cboe Options' current practice.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market and a national market system by providing that the Exchange
considers a Market-Maker's complex order volume when calculating the
25% threshold of volume in non-appointed classes pursuant to Rule
8.6(f) and thereby harmonizing the Exchange's rules with that of the
corresponding rules of its affiliated options exchanges.\12\
Specifically, Rule 8.6(f) is designed to prevent a Market-Maker from
executing volume in non-appointed option classes in an amount
disproportionate to volume executed in its appointed option classes,
potentially in derogation of the performance of its obligations and
provision of liquidity in its appointed option classes. As stated
above, the Exchange believes that a Market-Maker's orders executed in
complex strategies are representative of a Market-Maker's total volume
on the Exchange. Thus, including such in its calculation of volume in
non-appointed classes will help to ensure that Market-Makers perform
their obligations and provide liquidity in appointed classes in an
appropriate manner as compared to non-appointed classes, and is thereby
consistent with and supports the purpose of Rule 8.6(f). The Exchange
also believes that codifying that a Market-Maker's complex order volume
counts towards its Market-Maker's total volume on the Exchange may
mitigate any potential confusion regarding this calculation so that
Market-Makers have more clarity regarding their obligations in
appointed classes in an appropriate manner as compared to non-appointed
classes. As such, the Exchange believes the proposed rule change will
contribute to the protection of investors and the public interest by
adding transparency and clarity to the Exchange's Rules by codifying
its affiliated options exchange's current interpretation of how to a
Market-Maker's executed volume on the Exchange is calculated. In
addition, the Exchange believes the proposed changes to Interpretation
and Policy .01 of Exchange Rule 6.13 will add clarity by revising the
Rule to provide that orders entered in appointed classes, rather than
volume executed, is considered in connection with determining whether a
Market-Maker meets it quoting obligations pursuant to Rule 8.6 in its
appointed classes as well as updating the language to read in plain
English.
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\12\ See supra notes 7 and 8.
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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 intended to codify in new Interpretation
and Policy .02 to Rule 6.13 that the Exchange will consider a Market-
Maker's complex strategy execution volume in calculating its volume per
quarter pursuant to Rule 8.6(f) and harmonize this calculation with the
manner in which the exchange's affiliated options exchange, Cboe
Options, currently calculates Market-Maker executed volume in non-
appointed classes. The proposed rule change also corrects an
inadvertent error in Interpretation and Policy .01 to 6.13 indicating
that executed volume rather than entered orders are considered when
determining compliance with a Market-Maker's quoting obligations. Thus,
the Exchange believes this proposed rule change will benefit Exchange
participants by providing specific guidance and additional clarity
within the Exchange Rules, as well as between the rules of the
affiliated options exchanges.
Additionally, the Exchange believes that the proposed rule change
regarding the applicability of Rule 8.6(f) to a Market-Maker's
executions in the COB does not impose any burden on intramarket
competition because it applies to all Market-Makers in the same manner.
The proposed rule change codifies its affiliated options exchange's
existing interpretation of such calculation in its corresponding rules.
It does not modify any existing Market-Maker obligations. The Exchange
believes that the proposed rule change does not impose any burden on
intermarket competition because it relates to an obligation regarding
Market-Maker executed volume only on the Exchange.
The Exchange believes that the proposed rule change will relieve
any burden on market participants because it serves to provide Market-
Makers with rules that ensure that Market-Makers are performing their
obligations in appointed options classes in an appropriate manner as
compared to
[[Page 74777]]
non-appointed classes. Ensuring that Market-Makers execute a certain
amount of their volume in appointed classes will contribute to
sufficient liquidity in those classes, which benefits the market and
investors as a whole.
Additionally, the proposed nonsubstantive updates to Interpretation
and Policy .01 to Rule 6.13 are not competitive in nature and, instead,
are intended to correct an inadvertently used term and provide clarity
and consistency within the Rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and
Rule 19b-4(f)(6) \14\ thereunder. At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
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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-C2-2020-017 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-C2-2020-017. 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-C2-2020-017, and should be submitted on
or before December 14, 2020.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25730 Filed 11-20-20; 8:45 am]
BILLING CODE 8011-01-P
