Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Interpretations and Policies to Rule 5.33 in Connection With Market-Makers' Complex Orders, Quoting Obligations and Volume, 74770-74772 [2020-25731]
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74770
Federal Register / Vol. 85, No. 226 / Monday, November 23, 2020 / Notices
II. Initial Administrative Actions
The Commission establishes Docket
No. CP2021–28 to consider the Postal
Service’s Notice. Interested persons may
express views and offer comments on
whether the planned changes are
consistent with 39 U.S.C. 3632, 3633,
and 3642, 39 CFR part 3035, and 39 CFR
3040 subparts B and E. Comments are
due no later than December 2, 2020. For
specific details of the planned price
changes, interested persons are
encouraged to review the Notice, which
is available on the Commission’s
website at www.prc.gov.
Pursuant to 39 U.S.C. 505,
Christopher C. Mohr is appointed to
serve as Public Representative to
represent the interests of the general
public in this docket.
III. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. CP2021–28 to provide interested
persons an opportunity to express views
and offer comments on whether the
planned changes are consistent with 39
U.S.C. 3632, 3633, and 3642, 39 CFR
part 3035, and 39 CFR 3040 subparts B
and E.
2. Comments are due no later than
December 2, 2020.
3. Pursuant to 39 U.S.C. 505, the
Commission appoints Christopher C.
Mohr to serve as an officer of the
Commission (Public Representative) to
represent the interests of the general
public in this docket.
4. The Secretary shall arrange for
publication of this Order in the Federal
Register.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2020–25753 Filed 11–20–20; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90440; File No. SR–CBOE–
2020–109]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its
Interpretations and Policies to Rule
5.33 in Connection With MarketMakers’ Complex Orders, Quoting
Obligations and Volume
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
17:07 Nov 20, 2020
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe’’) proposes to amend its
Interpretations and Policies to Rule 5.33
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://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to adopt new
Interpretation and Policy .02 to Rule
5.33 to codify how complex strategy
volume is counted when determining
whether a Market-Maker exceeds the
25% volume threshold in its non1 15
November 17, 2020.
VerDate Sep<11>2014
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
3, 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 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.
Jkt 253001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
appointed classes pursuant to Rule
5.52(g) and when determining whether
a Market-Maker exceeds the electronic
volume thresholds in its appointed
classes pursuant to 5.52(d)(1) and
(d)(2).5 The Exchange also proposes to
make clarifying, nonsubstantive updates
to Interpretation and Policy .01 to Rule
5.33.
Rule 5.33 governs trading of complex
orders on the Exchange and, currently,
Interpretation and Policy .01 to Rule
5.33 specifically provides that MarketMakers are not required to quote on the
Complex Order Book (‘‘COB’’). Complex
strategies are not subject to any quoting
requirements that are applicable to
Market-Makers in the simple market for
individual options series or classes.
Interpretation and Policy .01 to Rule
5.33 also states that volume executed in
complex strategies is not taken into
consideration when determining
whether Market Makers are meeting
quoting obligations applicable to Market
Makers in the simple market for
individual options. The proposed rule
change updates Interpretation and
Policy .01 to Rule 5.33 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 5.52, 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 5.33 to more
appropriately reflect this. The proposed
change also harmonizes the spelling of
Market-Maker with the definition set
forth in Rule 1.1 and updates the
language to read in plain English, and,
to the extent possible, with the language
in corresponding Interpretation and
Policy .01 to Rule 6.13 of its affiliated
options exchange, Cboe C2 Exchange,
Inc. (‘‘C2’’).
Current Rule 5.52(g) 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 Market5 As a result of the proposed Interpretation and
Policy, the proposed rule change accordingly
updates the subsequent Interpretation and Policy
numbering.
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
Federal Register / Vol. 85, No. 226 / Monday, November 23, 2020 / Notices
Marker executes on the Exchange in any
calendar quarter. Rule 5.52(d)(1)
provides that if a Market-Maker never
trades more than 20% of the MarketMaker’s contract volume electronically
in an appointed class during any
calendar quarter, a Market-Maker will
not be obligated to quote electronically
in any designated percentage of series
within that class pursuant to
subparagraph (d)(2), and Rule 5.52(d)(2)
provides that If a Market-Maker trades
more than 20% of the Market-Maker’s
contract volume electronically in an
appointed class during any calendar
quarter, commencing the next calendar
quarter, a Market-Maker must provide
continuous electronic quotes. The
Exchange currently considers all
contracts executed by a Market-Maker,
regardless of whether they are executed
in the simple or complex book, in
determining whether a Market-Maker
has exceeded the 25% volume threshold
in its non-appointed classes and the
20% electronic volume threshold in its
appointed classes. The Exchange now
proposes to codify this in proposed
Interpretation and Policy .02 to Rule
5.33. Specifically, the proposed rule
change makes it clear that a MarketMaker’s orders for complex strategies
executed in classes in which it has no
appointment are included in the total
number of all contracts the MarketMaker executes on the Exchange in any
calendar quarter in determining whether
the Market-Maker exceeds the 25%
threshold pursuant to Rule 5.52(g) and
makes it clear that a Market-Maker’s
orders for complex strategies executed
in classes in which it has an
appointment are included in the total
number of all contracts the MarketMaker executes electronically in an
appointed class during any calendar
quarter in determining whether the
Market-Maker exceeds the electronic
volume threshold pursuant to Rule
5.52(d)(1) and (d)(2).
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.7 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 8 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
7 15
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
17:07 Nov 20, 2020
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) 9 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
codifying 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 5.52(g) and when
calculating the 20% threshold of
electronic volume in its appointed
classes. Specifically, Rule 5.52(g) 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. Similarly,
Rule 5.52(d)(1) and (d)(2) are designed
to prevent a Market-Maker from
executing electronic volume in its
appointed classes in an amount
disproportionate to volume executed on
the trading floor in its appointed classes
without being obligated to stream
continuous electronic quotes. Both Rule
5.52(g) and Rule 5.52(d)(1) and (d)(2)
prevent a Market-Maker from executing
volume in a manner that potentially
derogates the performance of its
obligations and provision of liquidity in
its appointed option classes. As such,
the Exchange believes that including
complex volume in these calculations is
consistent with and supports the
purpose of Rule 5.52(g) and Rule
5.52(d)(1) and (d)(2), which, thereby,
will help to ensure that a Market-Maker
executes volume in a manner that is
consistent with the performance of its
quoting obligations and provision of
liquidity in its appointed classes. The
proposed rule change makes it clear that
a Market-Maker’s orders executed in
complex strategies are considered
representative of a Market-Maker’s total
volume on the Exchange. The Exchange
believes this 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
9 Id.
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Frm 00108
Fmt 4703
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74771
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 an existing practice in
calculating a Market-Maker’s executed
volume on the Exchange. In addition,
the Exchange believes the proposed
changes to Interpretation and Policy .01
of Exchange Rule 5.33 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 its quoting obligations pursuant
to Rule 5.52 in its appointed classes,
conforming the spelling of MarketMaker with its applicable definition in
Rule 1.1 and (to the extent possible)
with the language of its affiliated
options exchange’s corresponding
provisions, and 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 a
current Exchange interpretation that a
Market-Maker’s complex strategy
execution volume is considered when
calculating its volume per quarter
pursuant to Rule 5.52(g) and correct an
inadvertent error 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 clarity within the Exchange
Rules.
Additionally, the Exchange believes
that the proposed rule change regarding
the applicability of Rule 5.52(g) 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 an existing interpretation of the
Rules and therefore does not modify any
existing Market-Maker obligations or
manner in which a Market-Maker’s nonappointed volume is calculated. 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.
E:\FR\FM\23NON1.SGM
23NON1
74772
Federal Register / Vol. 85, No. 226 / Monday, November 23, 2020 / Notices
Additionally, the proposed
nonsubstantive updates to Interpretation
and Policy .01 to Rule 5.33 are not
competitive in nature and, instead, are
intended to correct an inadvertently
used term and provide clarity and
consistency within the Rules and, to the
extent possible, with the corresponding
rule language of its affiliated options
exchange.
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 10 and Rule 19b–4(f)(6) 11
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:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2020–109. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2020–109, and
should be submitted on or before
December 14, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–25731 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
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2020–109 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90437; File No. SR–
CboeEDGX–2020–054]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Interpretations and Policies to Rule
21.20 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 EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend its Interpretations and Policies to
Rule 21.20 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/edgx/),
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
10 15
11 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
VerDate Sep<11>2014
17:07 Nov 20, 2020
12 17
Jkt 253001
PO 00000
CFR 200.30–3(a)(12).
Frm 00109
Fmt 4703
Sfmt 4703
E:\FR\FM\23NON1.SGM
23NON1
]]>Agencies
[Federal Register Volume 85, Number 226 (Monday, November 23, 2020)]
[Notices]
[Pages 74770-74772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25731]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90440; File No. SR-CBOE-2020-109]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Interpretations and Policies to Rule 5.33 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 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
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
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe'') proposes to
amend its Interpretations and Policies to Rule 5.33 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://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt new Interpretation and Policy .02 to
Rule 5.33 to codify how complex strategy volume is counted when
determining whether a Market-Maker exceeds the 25% volume threshold in
its non-appointed classes pursuant to Rule 5.52(g) and when determining
whether a Market-Maker exceeds the electronic volume thresholds in its
appointed classes pursuant to 5.52(d)(1) and (d)(2).\5\ The Exchange
also proposes to make clarifying, nonsubstantive updates to
Interpretation and Policy .01 to Rule 5.33.
---------------------------------------------------------------------------
\5\ As a result of the proposed Interpretation and Policy, the
proposed rule change accordingly updates the subsequent
Interpretation and Policy numbering.
---------------------------------------------------------------------------
Rule 5.33 governs trading of complex orders on the Exchange and,
currently, Interpretation and Policy .01 to Rule 5.33 specifically
provides that Market-Makers are not required to quote on the Complex
Order Book (``COB''). Complex strategies are not subject to any quoting
requirements that are applicable to Market-Makers in the simple market
for individual options series or classes. Interpretation and Policy .01
to Rule 5.33 also states that volume executed in complex strategies is
not taken into consideration when determining whether Market Makers are
meeting quoting obligations applicable to Market Makers in the simple
market for individual options. The proposed rule change updates
Interpretation and Policy .01 to Rule 5.33 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 5.52, 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
5.33 to more appropriately reflect this. The proposed change also
harmonizes the spelling of Market-Maker with the definition set forth
in Rule 1.1 and updates the language to read in plain English, and, to
the extent possible, with the language in corresponding Interpretation
and Policy .01 to Rule 6.13 of its affiliated options exchange, Cboe C2
Exchange, Inc. (``C2'').
Current Rule 5.52(g) 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-
[[Page 74771]]
Marker executes on the Exchange in any calendar quarter. Rule
5.52(d)(1) provides that if a Market-Maker never trades more than 20%
of the Market-Maker's contract volume electronically in an appointed
class during any calendar quarter, a Market-Maker will not be obligated
to quote electronically in any designated percentage of series within
that class pursuant to subparagraph (d)(2), and Rule 5.52(d)(2)
provides that If a Market-Maker trades more than 20% of the Market-
Maker's contract volume electronically in an appointed class during any
calendar quarter, commencing the next calendar quarter, a Market-Maker
must provide continuous electronic quotes. The Exchange currently
considers all contracts executed by a Market-Maker, regardless of
whether they are executed in the simple or complex book, in determining
whether a Market-Maker has exceeded the 25% volume threshold in its
non-appointed classes and the 20% electronic volume threshold in its
appointed classes. The Exchange now proposes to codify this in proposed
Interpretation and Policy .02 to Rule 5.33. Specifically, the proposed
rule change makes it clear 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 5.52(g) and
makes it clear that a Market-Maker's orders for complex strategies
executed in classes in which it has an appointment are included in the
total number of all contracts the Market-Maker executes electronically
in an appointed class during any calendar quarter in determining
whether the Market-Maker exceeds the electronic volume threshold
pursuant to Rule 5.52(d)(1) and (d)(2).
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 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 codifying 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
5.52(g) and when calculating the 20% threshold of electronic volume in
its appointed classes. Specifically, Rule 5.52(g) 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. Similarly, Rule 5.52(d)(1) and (d)(2) are
designed to prevent a Market-Maker from executing electronic volume in
its appointed classes in an amount disproportionate to volume executed
on the trading floor in its appointed classes without being obligated
to stream continuous electronic quotes. Both Rule 5.52(g) and Rule
5.52(d)(1) and (d)(2) prevent a Market-Maker from executing volume in a
manner that potentially derogates the performance of its obligations
and provision of liquidity in its appointed option classes. As such,
the Exchange believes that including complex volume in these
calculations is consistent with and supports the purpose of Rule
5.52(g) and Rule 5.52(d)(1) and (d)(2), which, thereby, will help to
ensure that a Market-Maker executes volume in a manner that is
consistent with the performance of its quoting obligations and
provision of liquidity in its appointed classes. The proposed rule
change makes it clear that a Market-Maker's orders executed in complex
strategies are considered representative of a Market-Maker's total
volume on the Exchange. The Exchange believes this 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 an existing practice
in calculating a Market-Maker's executed volume on the Exchange. In
addition, the Exchange believes the proposed changes to Interpretation
and Policy .01 of Exchange Rule 5.33 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 its quoting obligations pursuant to Rule 5.52 in its
appointed classes, conforming the spelling of Market-Maker with its
applicable definition in Rule 1.1 and (to the extent possible) with the
language of its affiliated options exchange's corresponding provisions,
and 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 a current Exchange
interpretation that a Market-Maker's complex strategy execution volume
is considered when calculating its volume per quarter pursuant to Rule
5.52(g) and correct an inadvertent error 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 clarity within the Exchange Rules.
Additionally, the Exchange believes that the proposed rule change
regarding the applicability of Rule 5.52(g) 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 an existing interpretation of the
Rules and therefore does not modify any existing Market-Maker
obligations or manner in which a Market-Maker's non-appointed volume is
calculated. 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.
[[Page 74772]]
Additionally, the proposed nonsubstantive updates to Interpretation
and Policy .01 to Rule 5.33 are not competitive in nature and, instead,
are intended to correct an inadvertently used term and provide clarity
and consistency within the Rules and, to the extent possible, with the
corresponding rule language of its affiliated options exchange.
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 \10\ and
Rule 19b-4(f)(6) \11\ 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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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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-CBOE-2020-109 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2020-109. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2020-109, and should be submitted
on or before December 14, 2020.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25731 Filed 11-20-20; 8:45 am]
BILLING CODE 8011-01-P
