Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rule 25.3, Which Governs the Exchange's Minor Rule Violation Plan, in Connection With Certain Minor Rule Violations and Applicable Fines, 73029-73033 [2021-27819]

Download as PDF Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Notices issuers, and other persons using its facilities’ are designed to perfect the operation of a free and open market and a national market system, and to protect investors and the public interest; are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers; and do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act; as well as any other provision of the Act, or the rules and regulations thereunder.55 V. Commission’s Solicitation of Comments The Commission requests written views, data, and arguments with respect to the concerns identified above as well as any other relevant concerns. Such comments should be submitted by January 13, 2022. Rebuttal comments should be submitted by January 27, 2022. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.56 The Commission asks that commenters address the sufficiency and merit of the Exchanges’ statements in support of the proposals, in addition to any other comments they may wish to submit about the proposed rule changes. Interested persons are invited to submit written data, views, and arguments concerning the proposed rule changes, including whether the proposed rule changes are consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments jspears on DSK121TN23PROD with NOTICES1 • 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 Nos. SR– NYSE–2021–67, SR–NYSEAMER–2021– 43, SR–NYSEArca–2021–97, SR– NYSECHX–2021–17, SR–NYSENAT– 2021–23 on the subject line. 55 See 15 U.S.C. 78f(b)(4), (5), and (8). U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the Commission flexibility to determine what type of proceeding—either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by an SRO. See Securities Acts Amendments of 1975, Report of the Senate Committee on Banking, Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 56 15 VerDate Sep<11>2014 20:50 Dec 22, 2021 Jkt 256001 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 Nos. SR–NYSE–2021–67, SR– NYSEAMER–2021–43, SR–NYSEArca– 2021–97, SR–NYSECHX–2021–17, and SR–NYSENAT–2021–23. The 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 changes that are filed with the Commission, and all written communications relating to the proposed rule changes 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 such filing also will be available for inspection and copying at the principal office of the Exchanges. 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 publicly available. All submissions should refer to File Nos. SR–NYSE–2021–67, SR–NYSEAMER– 2021–43, SR–NYSEArca–2021–97, SR– NYSECHX–2021–17, and SR– NYSENAT–2021–23 and should be submitted on or before January 13, 2022. Rebuttal comments should be submitted by January 27, 2022. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(3)(C) of the Act,57 that File Nos. SR–NYSE–2021–67, SR– NYSEAMER–2021–43, SR–NYSEArca– 2021–97, SR–NYSECHX–2021–17, and SR–NYSENAT–2021–23, be and hereby are, temporarily suspended. In addition, the Commission is instituting proceedings to determine whether the proposed rule changes should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.58 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–27815 Filed 12–22–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93815; File No. SR– CboeEDGX–2021–052] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rule 25.3, Which Governs the Exchange’s Minor Rule Violation Plan, in Connection With Certain Minor Rule Violations and Applicable Fines December 17, 2021. 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 December 6, 2021, 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 and II below, which Items have been prepared by the self-regulatory organization. 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 Options’’) proposes to amend Rule 25.3, which governs the Exchange’s Minor Rule Violation Plan (‘‘MRVP’’), in connection with certain minor rule violations and applicable fines. 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. 58 17 CFR 200.30–3(a)(57) and (58). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 57 15 PO 00000 U.S.C. 78s(b)(3)(C). Frm 00113 Fmt 4703 Sfmt 4703 73029 E:\FR\FM\23DEN1.SGM 23DEN1 73030 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Notices 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 jspears on DSK121TN23PROD with NOTICES1 1. Purpose The Exchange proposes to amend its MRVP in Rule 25.3 in connection with certain minor rule violations and applicable fines. Rule 25.3 provides for disposition of specific violations through assessment of fines in lieu of conducting a formal disciplinary proceeding.3 Current Rule 25.3(a)–(g) sets forth a list of specific Exchange Rules under which an Options Member, associated person of an Options Member, or registered or non-registered employee of an Options Member may be subject to a fine for violations of such Rules and the applicable fines that may be imposed by the Exchange. Specifically, the proposed rule change amends Rule 25.3 by: (1) Eliminating the violation of Rule 22.6(a) in Rule 25.3(c), which currently imposes fines for violations of Rules 22.6(a) through (c) (Market Maker Quotations); (2) relocating violations of Rule 22.6(b) (regarding Market Maker initial quote volume requirements) and Rule 22.6(c) (regarding Market Maker two-sided quote requirements) to Rule 25.3(d),4 which currently imposes fines for violations of Rule 22.6(d) (regarding Market Maker continuous quoting obligations) so that a single MRVP provision governs violations of a Market Maker’s quoting obligations; and (3) updating the fine schedule applicable to minor rule violations related to a Market Maker Quoting Obligations (i.e., Rules 3 The Exchange may, with respect to any such violation, proceed under Rule 8.15 (Imposition of Fines for Minor Violation(s) of Rules) and impose the fine set forth in Rule 25.3(a)–(g). 4 As a result of the proposed elimination or relocation of the rule violations listed under Rule 25.3(c), the proposed rule change ultimately eliminates Rule 25.3(c) from the MRVP and subsequently renumbers current Rules 25.3(d), 25.3(e), 25.3(f) and 25.3(g) to Rules 25.3(c), 25.3(d), 25.3(e) and 25.3(f), respectively VerDate Sep<11>2014 20:50 Dec 22, 2021 Jkt 256001 22.6(b)–(d), as proposed) in Rule 25.3(d). First, the proposed rule change eliminates the violation of 22.6(a) currently in Rule 25.3(c) of the MRVP. Specifically, Rule 22.6(a) requires a Market Maker to submit bids and offers that are firm for all orders. The Exchange no longer believes violations of Rule 22.6(a) to be minor in nature and therefore proposes to remove it from the list of rules in Rule 25.3 eligible for a minor rule fine disposition. Particularly, the Exchange believes that violations of Rule 22.6(a) may directly impact trading on the Exchange, the maintenance of a fair and orderly market and customer protections because honoring firm quotations is vital in promoting efficient functioning of intermarket price priority and trading in general. Pursuant to Rule 25.3, the Exchange is not required to proceed under said Rules as to any rule violation and may, whenever such action is deemed appropriate, commence a disciplinary proceeding under Chapter VIII (Discipline) rules as to any such violation. The Exchange notes that the proposed rule change is consistent with the MRVP of its affiliated options exchange, Cboe Exchange, Inc. (‘‘Cboe Options’’), which recently filed a proposal, approved by the Commission,5 to no longer include such violations as eligible for a minor rule disposition on Cboe Options for the same reason—it no longer believed violations of the firm quote requirement to be minor in nature. The proposed rule change next relocates violations of Rules 22.6(b) and (c), currently in Rule 25.3(c) of the MRVP, to Rule 25.3(d) (Rule 25.3(c), as amended) 6 of the MRVP. The Exchange notes that Rule 22.6 governs Market Maker quoting obligations on the Exchange and, more specifically, Rule 22.6(b) requires a Market Maker to submit initial quotes that contain certain volume and Rule 22.6(c) requires a Market Maker to submit two-sided quotes. As stated above, Rule 25.3(d) currently imposes certain fines for a Market Maker’s failure to meet the continuous quoting obligations in Rule 22.6(d). By relocating violations of Rules 22.6(b) and (c) to join violations of Rule 22.6(d) in Rule 25.3(d) of the MRVP, the proposed rule change amends the MRVP to impose the same fine schedule for violations of a Market Maker’s quoting obligations. The proposed rule change 5 See Securities Exchange Act Release No. 92702 (August 18, 2021), 86 FR 47346 (August 24, 2021) (SR–CBOE–2021–045) (Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Amend Rule 13.15, Which Governs the Exchange’s Minor Rule Violation Plan). 6 See supra note 4. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 subsequently renames Rule 25.3(d) as ‘‘Market Maker Quoting Obligations’’. The Exchange notes that the proposed rule change is consistent, and intended to harmonize to the extent possible, with the MRVP of the Exchange’s affiliated options exchange, Cboe Exchange, Inc. (‘‘Cboe Options’’), which imposes the one fine schedule for a market maker’s failure to meet its quoting obligations on Cboe Options, including failure to meet continuous quoting requirements and failure to meet initial quote volume requirements.7 The Exchange’s affiliated options exchanges, Cboe BZX Exchange, Inc. (‘‘BZX Options’’) and Cboe C2 Exchange, Inc. (‘‘C2’’), also intend to file a proposal to update their MRVPs in connection with the violations of market maker quoting requirements on BZX Options and C2, to the extent possible, in an identical manner. Additionally, while current Rule 25.3(c) provides that each paragraph of such sections subject to this Rule shall be treated separately for purposes of determining the number of cumulative violations, the corresponding Cboe Options MRVP provision applicable to violations of market maker quoting obligations does not contain this language and Cboe Options may aggregate violations across sections governing market maker quoting obligations. Therefore, in order to harmonize the process for imposing minor rule violation fines for market maker violation of quoting obligations across the Exchange and its affiliated options exchanges,8 the proposed rule change does not relocate such language currently in 25.3(c) to Rule 25.3(d), and, as a result, the Exchange will likewise be able to choose to aggregate violations across sections governing market maker quoting obligations. Additionally, the Exchange notes that Rule 25.3(d) already permits the Exchange to aggregate violations of a Market Maker’s continuous quoting obligations into a single offense. Specifically, Rule 25.3(d) provides that violations occurring during a calendar month are aggregated and sanctioned as a single offense. To accommodate the addition of the Market Maker two-sided quote and initial quote volume requirements to Rule 25.3(d) and harmonize Rule 25.3(d) with that of Cboe Option’s corresponding MRVP provision, the proposed rule change updates this language to provide that violations occurring during a calendar 7 See Cboe Options Rule 13.15(g)(9). indicated above, BZX Options intends to file a proposal to update its MRVP in connection with violations of market maker quoting requirements on BZX Options in an identical manner. 8 As E:\FR\FM\23DEN1.SGM 23DEN1 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Notices jspears on DSK121TN23PROD with NOTICES1 month may be aggregated and sanctioned as a single offense.9 The proposed rule change also updates the fine schedule heading in Rule 25.3(d) to reflect that fines may be imposed per the number of offenses, rather than violations, which more accurately reflects the manner in which the Exchange aggregates violations as a single offense under Rule 25.3(d), currently and as proposed. The proposed rule change next amends the fine schedule in Rule 25.3(d) (Rule 25.3(c), as amended) 10 applicable to Market Makers for violations of their quoting obligations (Rules 22.6(b)–(d), as proposed) in order to harmonize, to the extent possible, this MRVP provision with the corresponding Cboe Options MRVP provision applicable to violations of a market makers quoting obligations on Cboe Options. The current fine schedule in Rule 25.3(d), currently applicable to violations of a Market Maker’s continuous quoting obligations, sets forth the following: For the first violation during any rolling 24-month period (i.e., one period),11 the fine schedule imposed by Rule 25.3(d) currently permits the Exchange to give a Letter of Caution. For a second violation during the same period, the fine schedule currently permits the Exchange to apply a fine of $1,000. For a third violation in the same period, the fine schedule currently permits the Exchange to apply a fine of $25,000. For a fourth violation in the same period, the fine schedule currently permits the Exchange to apply a fine of $5,000. Finally, for five or more violations in the same period, the fine schedule currently permits the Exchange to proceed with formal disciplinary action. 9 The Exchange also notes that the current provision requiring the Exchange to aggregate and sanction violations as a single offense, applicable to violations of a Market Maker’s continuous quoting obligations, currently conflicts with Rule 22.6(d) and a Market Maker’s continuous quoting obligations. Specifically, pursuant to Rule 22.6(d)(1), the Exchange determines compliance by a Market Maker with the continuous quoting obligation in Rule 22.6(d) on a monthly basis; however, determining compliance with the continuous quoting obligations on a monthly basis does not relieve a Market Maker from meeting this obligation on a daily basis, nor does it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet this obligation each trading day. Therefore, the Exchange believes that, notwithstanding the proposed relocation of Rules 22.6(b) and (c) to Rule 25.3(d), it should have the flexibility to be able to separately charge for violations of a Market Maker’s continuous quoting obligations on a monthly basis and a daily basis. 10 See supra note 4. 11 See Rule 25.3, which provides that a subsequent violation is calculated on the basis of a rolling 24-month period (‘‘Period’’). VerDate Sep<11>2014 20:50 Dec 22, 2021 Jkt 256001 The proposed rule change updates the fine schedule to provide that, during any rolling 24-month period, the Exchange may continue to give a Letter of Caution for a first offense,12 may apply a fine of $1,500 for a second offense,13 may apply a fine of $3,000 for a third offense, and may proceed with formal disciplinary action for subsequent offenses. As described above, and as is the case for all rule violations covered under Rule 25.3, the Exchange may determine that it is appropriate to commence a formal disciplinary proceeding for a violation of Market Maker quoting obligations and may choose to proceed under the Exchange’s formal disciplinary rules rather than its MRVP. The Exchange may continue to aggregate similar violations generally if the conduct was unintentional, there was no injury to public investors, or the violations resulted from a single systemic problem or cause that has been corrected, .and treat such violations as a single offense.14 The Exchange believes it is appropriate to increase the fine amounts for a second and third offense and to remove the fine imposed for a fourth offense and proceed with formal disciplinary proceedings for subsequent offenses following a third offense. Particularly, the Exchange believes that applying a higher fine per second and third offenses in connection with a Market Maker’s quoting obligations 15 and, ultimately, formal disciplinary proceedings for any subsequent offenses during a rolling 24-month period, will allow the Exchange to levy progressively larger fines and greater penalties (i.e., formal disciplinary proceedings following a third offense) against repeat-offenders. The Exchange believes this fine structure may serve to more effectively deter repeat-offenders while continuing to provide reasonable warning for a first offense during a 12 As stated herein, the proposed rule change also updates the fine schedule heading to reflect that fines may be imposed per the number of offenses, rather than violations, which more accurately reflects the manner in which the Exchange aggregates violations as a single offense under Rule 25.3(d), currently and as proposed. 13 Any fine imposed pursuant to the Exchange’s MRVP that does not exceed $2,500 and is not contested shall not be publicly reported, except as may be required by Rule 19d–1 under the Act or as may be required by any other regulatory authority. See Rule 8.15(a). 14 See Rule 8.15(a). 15 The proposed fine amounts are also an increase from the fines in Rule 25.3(c) currently imposed for violations of Market Maker initial quote volume and two-sided requirements. The Exchange notes, however, that Rule 25.3(c) currently imposes fines per violation whereas Rule 25.3(d) imposes fines per offense, which may be cumulative violations of Market Maker quoting obligations, as proposed. PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 73031 rolling 24-month period. The Exchange notes that the proposed fine schedule for violations of a Market Maker’s quoting obligations is identical to the fine schedule under the MRVP of Cboe Options for market maker violations of quoting obligations on Cboe Options, including a continuous quoting requirement and initial volume requirement. The Exchange further notes that the proposed change is intended to provide for consistency across the Exchange’s MRVP and the MRVPs of its affiliated options exchanges, Cboe Options, BZX Options and Cboe C2 Exchange, Inc. (‘‘C2’’), as BZX Options and C2 also intend to file proposals to update their minor rule violation fines for violations of market maker quoting requirements on their exchanges in an identical manner. 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.16 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 17 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. The Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 18 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the proposed rule change to remove the firm quote requirement, which it no longer considers violations of which to be minor in nature, as eligible for a minor rule fine disposition under its MRVP, will assist the Exchange in preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade, and will serve to remove impediments to and perfect the mechanism of a free and open market and a national market 16 15 17 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 18 Id. E:\FR\FM\23DEN1.SGM 23DEN1 jspears on DSK121TN23PROD with NOTICES1 73032 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Notices system, and, in general, protect investors and the public interest. Particularly, the Exchange believes that violations of the firm quote requirement may directly impact trading on the Exchange, maintenance of a fair and orderly market, and customer protection. As such, the Exchange does not believe violations of this rule to be minor in nature and, instead, should be handled under its formal disciplinary rules, rather than imposing fines pursuant to its MRVP. Also, and as stated above, the proposed rule change is consistent with the MRVP of its affiliated options exchange, Cboe Options, which, for the same reasons provided herein, no longer includes violations of the firm quote requirement as eligible for a minor rule disposition on Cboe Options.19 The Exchange believes that the proposed rule change to apply the same MRVP fine schedule for violations of a Market Makers quoting obligations pursuant to Rule 22.6 (i.e., Rules 22.6(b)–(d)) and the same process for imposing such fines—that is, permitting the Exchange to aggregate violations of such Market Maker obligations into a single offense—will assist the Exchange in preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade by uniformly imposing penalties and procedures for failure to satisfy obligations governed by the same Rule. Additionally, the Exchange believes the proposed rule change will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest because it is intended to harmonize the Exchange’s MRVP in connection with Market Maker quoting obligations with that of Cboe Options, as well as BZX Options,20 thereby providing consistent structures and procedures across MRVP provisions applicable to market maker obligations on the affiliated options exchanges. The Exchange also believes that the proposed rule change, in connection with the fine schedule for violations of a Market Maker’s quoting obligations in Rule 25.3(d), as proposed, to increase the fine amounts for a second and third offense 21 and to remove the fine imposed for a fourth offense and proceed with formal disciplinary proceedings for subsequent offenses following a third offense will assist the Exchange in preventing fraudulent and 19 See supra note 5. supra note 8. 21 See supra note 15. manipulative acts and practices and promoting just and equitable principles of trade, and will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. Particularly, the Exchange believes that applying a higher fine per second and third offenses and, ultimately, formal disciplinary proceedings for any subsequent offenses during a rolling 24-month period, will allow the Exchange to levy progressively larger fines and greater penalties (i.e., formal disciplinary proceedings following a third offense) against repeat-offenders which may serve to more effectively deter repeatoffenders while providing reasonable warning for a first offense during a rolling 24-month period. The Exchange believes that more effectively deterring repeat-offenders, while continuing to make first instance offenders aware of their quoting obligation violations and the subsequent consequences for continued failure, will, in turn, further motivate Market Makers to continue to uphold their quoting obligations, providing liquid markets to the benefit of all investors. The Exchange again notes that the proposed fine schedule is consistent with the fine schedule under Cboe Options’ MRVP applicable to violations of Market Maker quoting requirements on Cboe Options, including a continuous quoting requirement and initial quote volume requirement. As described above, BZX Options and C2 intend to file proposals to update their minor rule violation fines applicable to violations of market maker quoting obligations in the same manner as Cboe Options and as proposed herein. As such, the proposed rule change is also designed to benefit investors by providing from consistent penalties across the MRVPs of the Exchange and its affiliated options exchanges. The Exchange further believes that the proposed rule changes to Rule 25.3 are consistent with Section 6(b)(6) of the Act,22 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 removes a Rule listed as eligible for a minor rule fine disposition under the Exchange’s MRVP that the Exchange no longer believes violations of which are minor in nature and is more appropriately disciplined through the Exchange’s formal disciplinary procedures, amends the MRVP provisions so that the same fine schedule, and process to impose such fines, uniformly applies to violations of a Market Maker’s quoting obligations in Rule 22.6, and amends the fine schedule applicable to Market Maker failures to meet their quoting obligations in a manner that appropriately sanctions such failures. 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.23 Rule 25.3, currently and as amended, does not preclude an Options Member, associated person of an Options Member, or registered or non-registered employee of an Options 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 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 amending its MRVP in connection with rules eligible for a minor rule fine disposition and with the fine schedule for Market Maker failures to meet their quoting obligations. The Exchange believes the proposed rule changes, overall, will strengthen the Exchange’s ability to carry out its oversight and enforcement functions and deter potential violative conduct. 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period 20 See VerDate Sep<11>2014 20:50 Dec 22, 2021 22 15 Jkt 256001 PO 00000 U.S.C. 78f(b)(6). Frm 00116 Fmt 4703 23 15 Sfmt 4703 E:\FR\FM\23DEN1.SGM U.S.C. 78f(b)(7) and 78f(d). 23DEN1 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Notices to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be 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: jspears on DSK121TN23PROD with NOTICES1 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– CboeEDGX–2021–052 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–CboeEDGX–2021–052. 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 VerDate Sep<11>2014 20:50 Dec 22, 2021 Jkt 256001 to make available publicly. All submissions should refer to File Number SR–CboeEDGX–2021–052, and should be submitted on or before January 13, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–27819 Filed 12–22–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93823; File No. SR–Phlx– 2021–74] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Pricing Schedule at Equity 7, Section 3 December 17, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 9, 2021, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Equity 7, Section 3 to restate the Exchange’s schedule of transaction credits and charges, to eliminate the Qualified Market Maker Program (the ‘‘QMM Program’’), and to eliminate the Enhanced Market Quality Program (the ‘‘EMQ Program’’), as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq .com/rulebook/phlx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 73033 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 purpose of the proposed rule change is to amend Equity 7, Section 3 to restate the Exchange’s schedule of credits and charges, to eliminate the QMM Program, which the Exchange established in 2019 and amended in 2021,3 and to eliminate the EMQ Program, which the Exchange both established and modified in 2021.4 The Exchange also proposes to eliminate obsolete text from Equity 7, Section 3(a). Restatement of Schedule of Credits and Charges Pursuant to Equity 7, Section 3, and under the heading ‘‘Order Execution and Routing,’’ the Exchange presently provides a series of credits to member organizations that enter displayed and non-displayed orders/quotes that execute on the Exchange and impose charges upon member organizations that remove liquidity from the Exchange. To the extent that member organizations satisfy additional volume-based criteria, they may qualify for credits that are higher than or charges that are lower than standard transaction rates. As part of its periodic efforts to invigorate and grow the Exchange by increasing the attractiveness and effectiveness of the incentives it offers to its member organizations, the Exchange proposes to substantially restate its schedule of credits and charges. These changes will provide increased overall rebate opportunities available to members that 3 See Securities Exchange Act Release No. 34– 91159 (February 18, 2021), 86 FR 11343 (February 24, 2021) (SR–Phlx–2021–09); Securities Exchange Act Release No. 34–85862 (May 15, 2019), 84 FR 23112 (May 21, 2019) (SR–Phlx–2019–19). 4 See Securities Exchange Act Release No. 34– 93406 (October 22, 2021), 86 FR 59767 (October 28, 2021) (SR–Phlx–2021–64); Securities Exchange Act Release No. 34–92754 (August 25, 2021), 86 FR 48789 (August 31, 2021) (SR–Phlx–2021–47). E:\FR\FM\23DEN1.SGM 23DEN1

Agencies

[Federal Register Volume 86, Number 244 (Thursday, December 23, 2021)]
[Notices]
[Pages 73029-73033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27819]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93815; File No. SR-CboeEDGX-2021-052]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing of a Proposed Rule Change To Amend Rule 25.3, Which Governs 
the Exchange's Minor Rule Violation Plan, in Connection With Certain 
Minor Rule Violations and Applicable Fines

December 17, 2021.
    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 December 6, 2021, 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 and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'') 
proposes to amend Rule 25.3, which governs the Exchange's Minor Rule 
Violation Plan (``MRVP''), in connection with certain minor rule 
violations and applicable fines. 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.

[[Page 73030]]

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 amend its MRVP in Rule 25.3 in connection 
with certain minor rule violations and applicable fines. Rule 25.3 
provides for disposition of specific violations through assessment of 
fines in lieu of conducting a formal disciplinary proceeding.\3\ 
Current Rule 25.3(a)-(g) sets forth a list of specific Exchange Rules 
under which an Options Member, associated person of an Options Member, 
or registered or non-registered employee of an Options Member may be 
subject to a fine for violations of such Rules and the applicable fines 
that may be imposed by the Exchange. Specifically, the proposed rule 
change amends Rule 25.3 by: (1) Eliminating the violation of Rule 
22.6(a) in Rule 25.3(c), which currently imposes fines for violations 
of Rules 22.6(a) through (c) (Market Maker Quotations); (2) relocating 
violations of Rule 22.6(b) (regarding Market Maker initial quote volume 
requirements) and Rule 22.6(c) (regarding Market Maker two-sided quote 
requirements) to Rule 25.3(d),\4\ which currently imposes fines for 
violations of Rule 22.6(d) (regarding Market Maker continuous quoting 
obligations) so that a single MRVP provision governs violations of a 
Market Maker's quoting obligations; and (3) updating the fine schedule 
applicable to minor rule violations related to a Market Maker Quoting 
Obligations (i.e., Rules 22.6(b)-(d), as proposed) in Rule 25.3(d).
---------------------------------------------------------------------------

    \3\ The Exchange may, with respect to any such violation, 
proceed under Rule 8.15 (Imposition of Fines for Minor Violation(s) 
of Rules) and impose the fine set forth in Rule 25.3(a)-(g).
    \4\ As a result of the proposed elimination or relocation of the 
rule violations listed under Rule 25.3(c), the proposed rule change 
ultimately eliminates Rule 25.3(c) from the MRVP and subsequently 
renumbers current Rules 25.3(d), 25.3(e), 25.3(f) and 25.3(g) to 
Rules 25.3(c), 25.3(d), 25.3(e) and 25.3(f), respectively
---------------------------------------------------------------------------

    First, the proposed rule change eliminates the violation of 22.6(a) 
currently in Rule 25.3(c) of the MRVP. Specifically, Rule 22.6(a) 
requires a Market Maker to submit bids and offers that are firm for all 
orders. The Exchange no longer believes violations of Rule 22.6(a) to 
be minor in nature and therefore proposes to remove it from the list of 
rules in Rule 25.3 eligible for a minor rule fine disposition. 
Particularly, the Exchange believes that violations of Rule 22.6(a) may 
directly impact trading on the Exchange, the maintenance of a fair and 
orderly market and customer protections because honoring firm 
quotations is vital in promoting efficient functioning of intermarket 
price priority and trading in general. Pursuant to Rule 25.3, the 
Exchange is not required to proceed under said Rules as to any rule 
violation and may, whenever such action is deemed appropriate, commence 
a disciplinary proceeding under Chapter VIII (Discipline) rules as to 
any such violation. The Exchange notes that the proposed rule change is 
consistent with the MRVP of its affiliated options exchange, Cboe 
Exchange, Inc. (``Cboe Options''), which recently filed a proposal, 
approved by the Commission,\5\ to no longer include such violations as 
eligible for a minor rule disposition on Cboe Options for the same 
reason--it no longer believed violations of the firm quote requirement 
to be minor in nature.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 92702 (August 18, 
2021), 86 FR 47346 (August 24, 2021) (SR-CBOE-2021-045) (Notice of 
Filing and Order Granting Accelerated Approval of a Proposed Rule 
Change To Amend Rule 13.15, Which Governs the Exchange's Minor Rule 
Violation Plan).
---------------------------------------------------------------------------

    The proposed rule change next relocates violations of Rules 22.6(b) 
and (c), currently in Rule 25.3(c) of the MRVP, to Rule 25.3(d) (Rule 
25.3(c), as amended) \6\ of the MRVP. The Exchange notes that Rule 22.6 
governs Market Maker quoting obligations on the Exchange and, more 
specifically, Rule 22.6(b) requires a Market Maker to submit initial 
quotes that contain certain volume and Rule 22.6(c) requires a Market 
Maker to submit two-sided quotes. As stated above, Rule 25.3(d) 
currently imposes certain fines for a Market Maker's failure to meet 
the continuous quoting obligations in Rule 22.6(d). By relocating 
violations of Rules 22.6(b) and (c) to join violations of Rule 22.6(d) 
in Rule 25.3(d) of the MRVP, the proposed rule change amends the MRVP 
to impose the same fine schedule for violations of a Market Maker's 
quoting obligations. The proposed rule change subsequently renames Rule 
25.3(d) as ``Market Maker Quoting Obligations''. The Exchange notes 
that the proposed rule change is consistent, and intended to harmonize 
to the extent possible, with the MRVP of the Exchange's affiliated 
options exchange, Cboe Exchange, Inc. (``Cboe Options''), which imposes 
the one fine schedule for a market maker's failure to meet its quoting 
obligations on Cboe Options, including failure to meet continuous 
quoting requirements and failure to meet initial quote volume 
requirements.\7\ The Exchange's affiliated options exchanges, Cboe BZX 
Exchange, Inc. (``BZX Options'') and Cboe C2 Exchange, Inc. (``C2''), 
also intend to file a proposal to update their MRVPs in connection with 
the violations of market maker quoting requirements on BZX Options and 
C2, to the extent possible, in an identical manner.
---------------------------------------------------------------------------

    \6\ See supra note 4.
    \7\ See Cboe Options Rule 13.15(g)(9).
---------------------------------------------------------------------------

    Additionally, while current Rule 25.3(c) provides that each 
paragraph of such sections subject to this Rule shall be treated 
separately for purposes of determining the number of cumulative 
violations, the corresponding Cboe Options MRVP provision applicable to 
violations of market maker quoting obligations does not contain this 
language and Cboe Options may aggregate violations across sections 
governing market maker quoting obligations. Therefore, in order to 
harmonize the process for imposing minor rule violation fines for 
market maker violation of quoting obligations across the Exchange and 
its affiliated options exchanges,\8\ the proposed rule change does not 
relocate such language currently in 25.3(c) to Rule 25.3(d), and, as a 
result, the Exchange will likewise be able to choose to aggregate 
violations across sections governing market maker quoting obligations. 
Additionally, the Exchange notes that Rule 25.3(d) already permits the 
Exchange to aggregate violations of a Market Maker's continuous quoting 
obligations into a single offense. Specifically, Rule 25.3(d) provides 
that violations occurring during a calendar month are aggregated and 
sanctioned as a single offense. To accommodate the addition of the 
Market Maker two-sided quote and initial quote volume requirements to 
Rule 25.3(d) and harmonize Rule 25.3(d) with that of Cboe Option's 
corresponding MRVP provision, the proposed rule change updates this 
language to provide that violations occurring during a calendar

[[Page 73031]]

month may be aggregated and sanctioned as a single offense.\9\ The 
proposed rule change also updates the fine schedule heading in Rule 
25.3(d) to reflect that fines may be imposed per the number of 
offenses, rather than violations, which more accurately reflects the 
manner in which the Exchange aggregates violations as a single offense 
under Rule 25.3(d), currently and as proposed.
---------------------------------------------------------------------------

    \8\ As indicated above, BZX Options intends to file a proposal 
to update its MRVP in connection with violations of market maker 
quoting requirements on BZX Options in an identical manner.
    \9\ The Exchange also notes that the current provision requiring 
the Exchange to aggregate and sanction violations as a single 
offense, applicable to violations of a Market Maker's continuous 
quoting obligations, currently conflicts with Rule 22.6(d) and a 
Market Maker's continuous quoting obligations. Specifically, 
pursuant to Rule 22.6(d)(1), the Exchange determines compliance by a 
Market Maker with the continuous quoting obligation in Rule 22.6(d) 
on a monthly basis; however, determining compliance with the 
continuous quoting obligations on a monthly basis does not relieve a 
Market Maker from meeting this obligation on a daily basis, nor does 
it prohibit the Exchange from taking disciplinary action against a 
Market Maker for failing to meet this obligation each trading day. 
Therefore, the Exchange believes that, notwithstanding the proposed 
relocation of Rules 22.6(b) and (c) to Rule 25.3(d), it should have 
the flexibility to be able to separately charge for violations of a 
Market Maker's continuous quoting obligations on a monthly basis and 
a daily basis.
---------------------------------------------------------------------------

    The proposed rule change next amends the fine schedule in Rule 
25.3(d) (Rule 25.3(c), as amended) \10\ applicable to Market Makers for 
violations of their quoting obligations (Rules 22.6(b)-(d), as 
proposed) in order to harmonize, to the extent possible, this MRVP 
provision with the corresponding Cboe Options MRVP provision applicable 
to violations of a market makers quoting obligations on Cboe Options. 
The current fine schedule in Rule 25.3(d), currently applicable to 
violations of a Market Maker's continuous quoting obligations, sets 
forth the following:
---------------------------------------------------------------------------

    \10\ See supra note 4.
---------------------------------------------------------------------------

    For the first violation during any rolling 24-month period (i.e., 
one period),\11\ the fine schedule imposed by Rule 25.3(d) currently 
permits the Exchange to give a Letter of Caution. For a second 
violation during the same period, the fine schedule currently permits 
the Exchange to apply a fine of $1,000. For a third violation in the 
same period, the fine schedule currently permits the Exchange to apply 
a fine of $25,000. For a fourth violation in the same period, the fine 
schedule currently permits the Exchange to apply a fine of $5,000. 
Finally, for five or more violations in the same period, the fine 
schedule currently permits the Exchange to proceed with formal 
disciplinary action.
---------------------------------------------------------------------------

    \11\ See Rule 25.3, which provides that a subsequent violation 
is calculated on the basis of a rolling 24-month period 
(``Period'').
---------------------------------------------------------------------------

    The proposed rule change updates the fine schedule to provide that, 
during any rolling 24-month period, the Exchange may continue to give a 
Letter of Caution for a first offense,\12\ may apply a fine of $1,500 
for a second offense,\13\ may apply a fine of $3,000 for a third 
offense, and may proceed with formal disciplinary action for subsequent 
offenses. As described above, and as is the case for all rule 
violations covered under Rule 25.3, the Exchange may determine that it 
is appropriate to commence a formal disciplinary proceeding for a 
violation of Market Maker quoting obligations and may choose to proceed 
under the Exchange's formal disciplinary rules rather than its MRVP. 
The Exchange may continue to aggregate similar violations generally if 
the conduct was unintentional, there was no injury to public investors, 
or the violations resulted from a single systemic problem or cause that 
has been corrected, .and treat such violations as a single offense.\14\
---------------------------------------------------------------------------

    \12\ As stated herein, the proposed rule change also updates the 
fine schedule heading to reflect that fines may be imposed per the 
number of offenses, rather than violations, which more accurately 
reflects the manner in which the Exchange aggregates violations as a 
single offense under Rule 25.3(d), currently and as proposed.
    \13\ Any fine imposed pursuant to the Exchange's MRVP that does 
not exceed $2,500 and is not contested shall not be publicly 
reported, except as may be required by Rule 19d-1 under the Act or 
as may be required by any other regulatory authority. See Rule 
8.15(a).
    \14\ See Rule 8.15(a).
---------------------------------------------------------------------------

    The Exchange believes it is appropriate to increase the fine 
amounts for a second and third offense and to remove the fine imposed 
for a fourth offense and proceed with formal disciplinary proceedings 
for subsequent offenses following a third offense. Particularly, the 
Exchange believes that applying a higher fine per second and third 
offenses in connection with a Market Maker's quoting obligations \15\ 
and, ultimately, formal disciplinary proceedings for any subsequent 
offenses during a rolling 24-month period, will allow the Exchange to 
levy progressively larger fines and greater penalties (i.e., formal 
disciplinary proceedings following a third offense) against repeat-
offenders. The Exchange believes this fine structure may serve to more 
effectively deter repeat-offenders while continuing to provide 
reasonable warning for a first offense during a rolling 24-month 
period. The Exchange notes that the proposed fine schedule for 
violations of a Market Maker's quoting obligations is identical to the 
fine schedule under the MRVP of Cboe Options for market maker 
violations of quoting obligations on Cboe Options, including a 
continuous quoting requirement and initial volume requirement. The 
Exchange further notes that the proposed change is intended to provide 
for consistency across the Exchange's MRVP and the MRVPs of its 
affiliated options exchanges, Cboe Options, BZX Options and Cboe C2 
Exchange, Inc. (``C2''), as BZX Options and C2 also intend to file 
proposals to update their minor rule violation fines for violations of 
market maker quoting requirements on their exchanges in an identical 
manner.
---------------------------------------------------------------------------

    \15\ The proposed fine amounts are also an increase from the 
fines in Rule 25.3(c) currently imposed for violations of Market 
Maker initial quote volume and two-sided requirements. The Exchange 
notes, however, that Rule 25.3(c) currently imposes fines per 
violation whereas Rule 25.3(d) imposes fines per offense, which may 
be cumulative violations of Market Maker quoting obligations, as 
proposed.
---------------------------------------------------------------------------

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.\16\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \17\ 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. The Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \18\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change to remove the 
firm quote requirement, which it no longer considers violations of 
which to be minor in nature, as eligible for a minor rule fine 
disposition under its MRVP, will assist the Exchange in preventing 
fraudulent and manipulative acts and practices and promoting just and 
equitable principles of trade, and will serve to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market

[[Page 73032]]

system, and, in general, protect investors and the public interest. 
Particularly, the Exchange believes that violations of the firm quote 
requirement may directly impact trading on the Exchange, maintenance of 
a fair and orderly market, and customer protection. As such, the 
Exchange does not believe violations of this rule to be minor in nature 
and, instead, should be handled under its formal disciplinary rules, 
rather than imposing fines pursuant to its MRVP. Also, and as stated 
above, the proposed rule change is consistent with the MRVP of its 
affiliated options exchange, Cboe Options, which, for the same reasons 
provided herein, no longer includes violations of the firm quote 
requirement as eligible for a minor rule disposition on Cboe 
Options.\19\
---------------------------------------------------------------------------

    \19\ See supra note 5.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change to apply the 
same MRVP fine schedule for violations of a Market Makers quoting 
obligations pursuant to Rule 22.6 (i.e., Rules 22.6(b)-(d)) and the 
same process for imposing such fines--that is, permitting the Exchange 
to aggregate violations of such Market Maker obligations into a single 
offense--will assist the Exchange in preventing fraudulent and 
manipulative acts and practices and promoting just and equitable 
principles of trade by uniformly imposing penalties and procedures for 
failure to satisfy obligations governed by the same Rule. Additionally, 
the Exchange believes the proposed rule change will serve to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest because it is intended to harmonize the Exchange's MRVP 
in connection with Market Maker quoting obligations with that of Cboe 
Options, as well as BZX Options,\20\ thereby providing consistent 
structures and procedures across MRVP provisions applicable to market 
maker obligations on the affiliated options exchanges.
---------------------------------------------------------------------------

    \20\ See supra note 8.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed rule change, in 
connection with the fine schedule for violations of a Market Maker's 
quoting obligations in Rule 25.3(d), as proposed, to increase the fine 
amounts for a second and third offense \21\ and to remove the fine 
imposed for a fourth offense and proceed with formal disciplinary 
proceedings for subsequent offenses following a third offense will 
assist the Exchange in preventing fraudulent and manipulative acts and 
practices and promoting just and equitable principles of trade, and 
will serve to remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general, protect 
investors and the public interest. Particularly, the Exchange believes 
that applying a higher fine per second and third offenses and, 
ultimately, formal disciplinary proceedings for any subsequent offenses 
during a rolling 24-month period, will allow the Exchange to levy 
progressively larger fines and greater penalties (i.e., formal 
disciplinary proceedings following a third offense) against repeat-
offenders which may serve to more effectively deter repeat-offenders 
while providing reasonable warning for a first offense during a rolling 
24-month period. The Exchange believes that more effectively deterring 
repeat-offenders, while continuing to make first instance offenders 
aware of their quoting obligation violations and the subsequent 
consequences for continued failure, will, in turn, further motivate 
Market Makers to continue to uphold their quoting obligations, 
providing liquid markets to the benefit of all investors. The Exchange 
again notes that the proposed fine schedule is consistent with the fine 
schedule under Cboe Options' MRVP applicable to violations of Market 
Maker quoting requirements on Cboe Options, including a continuous 
quoting requirement and initial quote volume requirement. As described 
above, BZX Options and C2 intend to file proposals to update their 
minor rule violation fines applicable to violations of market maker 
quoting obligations in the same manner as Cboe Options and as proposed 
herein. As such, the proposed rule change is also designed to benefit 
investors by providing from consistent penalties across the MRVPs of 
the Exchange and its affiliated options exchanges.
---------------------------------------------------------------------------

    \21\ See supra note 15.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed rule changes to 
Rule 25.3 are consistent with Section 6(b)(6) of the Act,\22\ 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 removes a Rule listed as eligible for a 
minor rule fine disposition under the Exchange's MRVP that the Exchange 
no longer believes violations of which are minor in nature and is more 
appropriately disciplined through the Exchange's formal disciplinary 
procedures, amends the MRVP provisions so that the same fine schedule, 
and process to impose such fines, uniformly applies to violations of a 
Market Maker's quoting obligations in Rule 22.6, and amends the fine 
schedule applicable to Market Maker failures to meet their quoting 
obligations in a manner that appropriately sanctions such failures.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    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.\23\ Rule 25.3, currently and as amended, does not preclude an 
Options Member, associated person of an Options Member, or registered 
or non-registered employee of an Options Member from contesting an 
alleged violation and receiving a hearing on the matter with the same 
procedural rights through a litigated disciplinary proceeding.
---------------------------------------------------------------------------

    \23\ 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 amending its MRVP in connection with rules eligible for a 
minor rule fine disposition and with the fine schedule for Market Maker 
failures to meet their quoting obligations. The Exchange believes the 
proposed rule changes, overall, will strengthen the Exchange's ability 
to carry out its oversight and enforcement functions and deter 
potential violative conduct.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period

[[Page 73033]]

to be appropriate and publishes its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGX-2021-052 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-CboeEDGX-2021-052. 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-CboeEDGX-2021-052, and should be 
submitted on or before January 13, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27819 Filed 12-22-21; 8:45 am]
BILLING CODE 8011-01-P
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