Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Certain Fine Amounts in Rule 13.15, Which Governs the Exchange's Minor Rule Violation Plan, and Non-Substantive Clarifying Changes, 504-507 [2021-28571]

Download as PDF 504 Federal Register / Vol. 87, No. 3 / Wednesday, January 5, 2022 / Notices 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–NASDAQ–2021–101 and should be submitted on or before January 26, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2021–28519 Filed 1–4–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93887; File No. SR–C2– 2021–019] Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Certain Fine Amounts in Rule 13.15, Which Governs the Exchange’s Minor Rule Violation Plan, and NonSubstantive Clarifying Changes TKELLEY on DSK125TN23PROD with NOTICE December 30, 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 16, 2021, Cboe C2 Exchange, Inc. (the ‘‘Exchange’’ or ‘‘C2’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:05 Jan 04, 2022 Jkt 256001 publishing this notice to solicit comments on the proposed rule change from interested persons and approving the proposal on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 13.15, which governs the Exchange’s Minor Rule Violation Plan (‘‘MRVP’’), in connection with applicable fines, as well as a clarifying, nonsubstantive change. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/ctwo/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III 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 13.15(g)(14) in connection with the fine schedule applicable for minor rule violations of a Market-Maker’s quoting obligations and proposes to update language in Chapter 13 to reflect recent changes to Cboe Exchange, Inc. (‘‘Cboe Options’’) MRVP. Chapter 13 of the C2 Rulebook incorporates Cboe Options Chapter 13, in most part, by reference. Rule 13.15 provides for disposition of specific violations through assessment of fines in lieu of conducting a formal disciplinary proceeding. Rule 13.15(g) sets forth the list of specific Exchange Rules under which a Trading Permit Holder (‘‘TPH’’) or person associated with or employed by a TPH may be subject to a fine for violations of such Rules and the applicable fines that may be imposed by the Exchange. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 The proposed rule change amends the fine schedule applicable to MakerMakers for failure to meet Exchange continuous quoting obligations. The Exchange notes that because Cboe Options Rule 13.15(g)(9) 3 applies to violations of Cboe Options’ MarketMaker quoting obligations, this subparagraph is inapplicable to MarketMakers on C2. Instead, the Exchange maintains its own Rule 13.15(g)(14),4 which governs minor rule violations of C2 Market-Makers’ continuous quoting obligations. Specifically, Rule 13.15(g)(14) (13.15(g)(9), as amended) 5 provides that a fine will be imposed upon a Market-Maker in accordance with the fine schedule set forth below for failure to meet its continuous quoting obligations (Rule 5.52(d)): For the first offense during any rolling 24-month period, the fine schedule imposed by Rule 13.15(g)(14) currently permits the Exchange to apply a fine ranging between $2,000 and $4,000. For subsequent offenses during the same period, the fine schedule currently permits the Exchange to apply a fine ranging between $4,000 and $5,000. The proposed rule change updates the fine schedule to provide that, during any rolling 24-month period, the Exchange may give a Letter of Caution for a first offense, may apply a fine of $1,500 for a second offense, may apply a fine of $3,000 for a third offense,6 and may proceed with formal disciplinary action for subsequent offenses. As is the case for all rule violations covered under Rule 13.15(g), the Exchange may determine that a violation of MarketMaker quoting obligations is intentional, egregious, or otherwise not minor in nature and choose to proceed under the Exchange’s formal disciplinary rules rather than its MRVP.7 The Exchange may continue to aggregate individual 3 Previously Cboe Options Rule 13.15(g)(14). The paragraphs in Cboe Options Rule 13.15(g) were recently renumbered. See Securities Exchange Release No. 92702 (August 18, 2021), 86 FR 47346 (August 24, 2021) (SR–CBOE–2021–045). As a result, the proposed rule change updates Rules 13.15(g)(6), (g)(14), and (g)(19) to Rules (g)(4), (g)(9), and (g)(14), respectively, as well as references where applicable, to be consistent with the recently renumbered paragraphs in Cboe Options Rule 13.15(g). 4 See id. 5 See id. 6 The Exchange notes that Rule 13.15(a) authorizes the Exchange to impose a fine, not to exceed $5,000, for minor rule violations in lieu of commencing a disciplinary proceeding. Additionally, any fine imposed pursuant to Rule 13.15 that (1) does not exceed $2,500 and (2) is not contested, shall be reported by the Exchange to the Commission on a periodic, rather than a current, basis, except as may otherwise be required by Exchange Act Rule 19d–1 and by any other regulatory authority. 7 See Rule 13.15(f). E:\FR\FM\05JAN1.SGM 05JAN1 Federal Register / Vol. 87, No. 3 / Wednesday, January 5, 2022 / Notices TKELLEY on DSK125TN23PROD with NOTICE violations of particular rules and treat such violations as a single offense.8 The Exchange believes it is appropriate to remove the range of fines imposed for first and subsequent offenses and, instead, apply a letter of caution for a first offense, a specified fine amount for a second and a third offense, and formal disciplinary proceedings for subsequent offenses. Particularly, the Exchange believes that applying a lesser penalty (Letter of Caution) for a first offense and then providing a higher, itemized 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 against repeat-offenders (as opposed to a fine range for any offenses that may come after a first offense). The Exchange believes this fine structure may serve to more effectively deter repeat-offenders while providing 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 continuous quoting obligation is identical to the fine schedule under Cboe Options’ MRVP for market maker violations of continuous quoting obligations on Cboe Options. 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, Cboe BZX Exchange, Inc. (‘‘BZX Options’’) and Cboe EDGX Exchange, Inc. (‘‘EDGX’’), as BZX Options and EDGX Options also intend to file proposals to update their minor rule violation fines for market maker violations of continuous quoting requirements on their exchanges in an identical manner. The proposed rule change also makes a nonsubstantive, clarifying change to Chapter 13 by removing the provision which currently provides that Cboe Options Rules 13.15(g)(4), 13.15(g)(5) and 13.15(g)(7) do not apply to C2.9 Cboe Options recently eliminated these provisions from its MRVP; therefore, this provision is no longer applicable.10 8 See Rule 13.15(a). a result of removing this provision, the proposed rule change also makes a nonsubstantive change to the subsequent provision by updating the reference to multiple above paragraphs to instead reference a single above paragraph. 10 See Securities Exchange Release No. 92702 (August 18, 2021), 86 FR 47346 (August 24, 2021) (SR–CBOE–2021–045). 9 As VerDate Sep<11>2014 18:05 Jan 04, 2022 Jkt 256001 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.11 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 12 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 13 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the proposed rule change to remove the range of fines imposed for first and subsequent Market-Maker quoting offenses and, instead, apply a letter of caution for a first offense, a specified fine amount for a second and a third offense, and formal disciplinary proceedings for subsequent offenses 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 lesser penalty (Letter of Caution) for a first offense and then providing an itemized fine per second and third offenses and, ultimately, formal disciplinary proceedings for any subsequent offenses during a rolling 24month period, will allow the Exchange to levy greater penalties (i.e., formal disciplinary proceedings) against repeatoffenders (as opposed to a fine range for any offenses that may come after a first offense) which may serve to more effectively deter repeat-offenders while providing reasonable warning for a first offense during a rolling 24-month 11 15 12 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). PO 00000 Frm 00082 period. The Exchange believes that more effectively deterring repeat-offenders and making first instance offenders aware of their quoting obligation violations and the subsequent consequences for continued failure, will, in turn, further motivate MarketMakers 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 marker maker violations of continuous quoting requirements on Cboe Options. As described above, BZX Options and EDGX Options intend to file proposals to update their minor rule violation fines applicable to violations of market maker continuous 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. Additionally, the proposed clarification in Chapter 13 will benefit investors by providing for Rules that accurately reflect current Cboe Options Rule 13.15, which Chapter 13 incorporates, in most part, by reference. The Exchange further believes that the proposed rule changes to Rule 13.15(g) are consistent with Section 6(b)(6) of the Act,14 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 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.15 Rule 13.15, currently and as amended, does not preclude a TPH or person associated with or employed by a TPH from contesting an alleged violation and receiving a hearing on the matter with the same procedural rights through a litigated disciplinary proceeding. 14 15 13 Id. 15 15 Fmt 4703 Sfmt 4703 505 E:\FR\FM\05JAN1.SGM U.S.C. 78f(b)(6). U.S.C. 78f(b)(7) and 78f(d). 05JAN1 506 Federal Register / Vol. 87, No. 3 / Wednesday, January 5, 2022 / Notices 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 the fine schedule for Market-Maker failures to meet quoting obligations. The Exchange believes the proposed rule change 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. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– C2–2021–019 on the subject line. TKELLEY on DSK125TN23PROD with NOTICE Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–C2–2021–019. 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 VerDate Sep<11>2014 18:05 Jan 04, 2022 Jkt 256001 public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–C2–2021–019 and should be submitted on or before January 26, 2022. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.16 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,17 which requires that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments and to perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission also believes that the proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the Act 18 which require that the rules of an exchange enforce compliance with, and provide appropriate discipline for, violations of Commission and Exchange rules. Finally, the Commission finds that the proposal is consistent with the public interest, the protection of investors, or otherwise in furtherance of the purposes of the Act, as required by Rule 19d– 1(c)(2) under the Act,19 which governs minor rule violation plans. As stated above, generally the Exchange proposes to: (1) Amend the fine amounts applicable to a MakerMaker’s failure to meet the Exchange’s continuous quoting obligations, and (2) make non-substantive and clarifying 16 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 17 15 U.S.C. 78f(b)(5). 18 15 U.S.C. 78f(b)(1) and 78f(b)(6). 19 17 CFR 240.19d–1(c)(2). PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 changes to Chapter 13. Specifically, the Exchange proposes to amend the fine amounts in proposed Rule 13.15(g)(9) to provide that, during any rolling 24month period, the Exchange may give a Letter of Caution for a first offense, may apply a fine of $1,500 for a second offense, may apply a fine of $3,000 for a third offense, and may proceed with formal disciplinary action for subsequent offenses. The Commission believes that Rule 13.15, as incorporated by reference, is an effective way to discipline a member for a minor violation of a rule. The Commission finds that the Exchange’s proposal to amend the fine amounts related to a Market-Maker’s failure to meet the Exchange’s quoting obligations as required by Rule 5.52(d), as set forth in proposed Rule 13.15(g)(9), is consistent with the Act because it may help the Exchange’s ability to better carry out its oversight and enforcement responsibilities. The Commission also believes that the Exchange’s proposal to make non-substantive changes that reflect updated rule numbers is consistent with the Act because such changes will add clarity and accuracy to the Exchange’s rules. In approving the propose rule change, the Commission in no way minimizes the importance of compliance with the Exchange’s rules and all other rules subject to fines under Rule 13.15. The Commission believes that a violation of any self-regulatory organization’s rules, as well as Commission rules, is a serious matter. However, Rule 13.15 provides a reasonable means of addressing rule violations that may not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Commission expects that the Exchange will continue to conduct surveillance with due diligence and make a determination based on its findings, on a case-by-case basis, whether a fine of more or less than the recommended amount is appropriate for a violation under Rule 13.15 or whether a violation requires formal disciplinary action. For the same reasons discussed above, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,20 for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice of the filing thereof in the Federal Register. The proposal will assist the Exchange in preventing fraudulent and manipulative practices by allowing the Exchange to adequately enforce compliance with, and provide 20 15 E:\FR\FM\05JAN1.SGM U.S.C. 78s(b)(2). 05JAN1 Federal Register / Vol. 87, No. 3 / Wednesday, January 5, 2022 / Notices appropriate discipline for, violations of Exchange rules. Accordingly, the Commission believes that a full noticeand-comment period is not necessary before approving the proposal. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act 21 and Rule 19d–1(c)(2) thereunder,22 that the proposed rule change (SR–C2–2021– 019) be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2021–28571 Filed 1–4–22; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–93886; File No. SR– NASDAQ–2021–105] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay Implementation of SR–NASDAQ–2021– 009 December 30, 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 23, 2021, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. TKELLEY on DSK125TN23PROD with NOTICE I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to delay implementation of SR–NASDAQ–2021– 009. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. U.S.C. 78s(b)(2). CFR 240.19d–1(c)(2). 23 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 22 17 VerDate Sep<11>2014 18:05 Jan 04, 2022 Jkt 256001 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 SECURITIES AND EXCHANGE COMMISSION 21 15 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change On February 11, 2021, the Exchange filed a proposed rule change to make certain changes to the Exchange’s Limit Up-Limit Down (‘‘LULD’’) closing cross, including the timing of the LULD closing cross, the process for determining the LULD closing cross price, establishing price protections for the LULD closing cross, the handling of on-close orders, and the imbalance information disseminated for the LULD closing cross.3 The Exchange originally intended to implement the new functionalities in Q3 2021,4 and subsequently extended the implementation to Q4 2021 to allow the Exchange additional time to test and implement these functionalities.5 During the testing conducted to date, the Exchange has identified some changes that it wishes to make to the approved rule, which relate to the handling of certain Limit on Close orders during the LULD closing cross (‘‘Proposed Amendments’’).6 Accordingly, the Exchange proposes to delay implementation of SR–NASDAQ– 2021–009 until April 2022 so as to allow additional time for the Commission to consider the Proposed Amendments. If the Proposed Amendments are approved by the Commission, the Exchange will issue an Equity Trader Alert notifying market participants prior to implementing these functionalities. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,8 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, by allowing the Exchange additional time to test and implement the LULD closing cross changes, pending any Commission action on the Proposed Amendments. 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 not necessary or appropriate in furtherance of the purposes of the Act. The Exchange’s proposal to delay the implementation of SR–NASDAQ–2021– 009 does not impose an undue burden on competition. Delaying the implementation will simply allow the Exchange additional time to properly implement SR–NASDAQ–2021–009, pending any Commission action on the Proposed Amendments. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b– 4(f)(6) thereunder.10 7 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 8 15 3 See Securities Exchange Act Release No. 92068 (May 28, 2021), 86 FR 29864 (June 3, 2021) (SR– NASDAQ–2021–009). 4 Id. 5 See Securities Exchange Act Release No. 93250 (October 4, 2021), 86 FR 56307 (October 8, 2021) (SR–NASDAQ–2021–077). 6 The Exchange will submit a separate rule filing to address these changes. See SR–NASDAQ–2021– 101 (not yet published). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 507 E:\FR\FM\05JAN1.SGM 05JAN1

Agencies

[Federal Register Volume 87, Number 3 (Wednesday, January 5, 2022)]
[Notices]
[Pages 504-507]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28571]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93887; File No. SR-C2-2021-019]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Order Granting Accelerated Approval of a Proposed Rule 
Change Relating to Certain Fine Amounts in Rule 13.15, Which Governs 
the Exchange's Minor Rule Violation Plan, and Non-Substantive 
Clarifying Changes

December 30, 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 16, 2021, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons and approving the proposal on an 
accelerated basis.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend Rule 13.15, which governs the 
Exchange's Minor Rule Violation Plan (``MRVP''), in connection with 
applicable fines, as well as a clarifying, nonsubstantive change. The 
text of the proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III 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 13.15(g)(14) in 
connection with the fine schedule applicable for minor rule violations 
of a Market-Maker's quoting obligations and proposes to update language 
in Chapter 13 to reflect recent changes to Cboe Exchange, Inc. (``Cboe 
Options'') MRVP. Chapter 13 of the C2 Rulebook incorporates Cboe 
Options Chapter 13, in most part, by reference. Rule 13.15 provides for 
disposition of specific violations through assessment of fines in lieu 
of conducting a formal disciplinary proceeding. Rule 13.15(g) sets 
forth the list of specific Exchange Rules under which a Trading Permit 
Holder (``TPH'') or person associated with or employed by a TPH may be 
subject to a fine for violations of such Rules and the applicable fines 
that may be imposed by the Exchange.
    The proposed rule change amends the fine schedule applicable to 
Maker-Makers for failure to meet Exchange continuous quoting 
obligations. The Exchange notes that because Cboe Options Rule 
13.15(g)(9) \3\ applies to violations of Cboe Options' Market-Maker 
quoting obligations, this subparagraph is inapplicable to Market-Makers 
on C2. Instead, the Exchange maintains its own Rule 13.15(g)(14),\4\ 
which governs minor rule violations of C2 Market-Makers' continuous 
quoting obligations. Specifically, Rule 13.15(g)(14) (13.15(g)(9), as 
amended) \5\ provides that a fine will be imposed upon a Market-Maker 
in accordance with the fine schedule set forth below for failure to 
meet its continuous quoting obligations (Rule 5.52(d)):
---------------------------------------------------------------------------

    \3\ Previously Cboe Options Rule 13.15(g)(14). The paragraphs in 
Cboe Options Rule 13.15(g) were recently renumbered. See Securities 
Exchange Release No. 92702 (August 18, 2021), 86 FR 47346 (August 
24, 2021) (SR-CBOE-2021-045). As a result, the proposed rule change 
updates Rules 13.15(g)(6), (g)(14), and (g)(19) to Rules (g)(4), 
(g)(9), and (g)(14), respectively, as well as references where 
applicable, to be consistent with the recently renumbered paragraphs 
in Cboe Options Rule 13.15(g).
    \4\ See id.
    \5\ See id.
---------------------------------------------------------------------------

    For the first offense during any rolling 24-month period, the fine 
schedule imposed by Rule 13.15(g)(14) currently permits the Exchange to 
apply a fine ranging between $2,000 and $4,000. For subsequent offenses 
during the same period, the fine schedule currently permits the 
Exchange to apply a fine ranging between $4,000 and $5,000. The 
proposed rule change updates the fine schedule to provide that, during 
any rolling 24-month period, the Exchange may give a Letter of Caution 
for a first offense, may apply a fine of $1,500 for a second offense, 
may apply a fine of $3,000 for a third offense,\6\ and may proceed with 
formal disciplinary action for subsequent offenses. As is the case for 
all rule violations covered under Rule 13.15(g), the Exchange may 
determine that a violation of Market-Maker quoting obligations is 
intentional, egregious, or otherwise not minor in nature and choose to 
proceed under the Exchange's formal disciplinary rules rather than its 
MRVP.\7\ The Exchange may continue to aggregate individual

[[Page 505]]

violations of particular rules and treat such violations as a single 
offense.\8\
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    \6\ The Exchange notes that Rule 13.15(a) authorizes the 
Exchange to impose a fine, not to exceed $5,000, for minor rule 
violations in lieu of commencing a disciplinary proceeding. 
Additionally, any fine imposed pursuant to Rule 13.15 that (1) does 
not exceed $2,500 and (2) is not contested, shall be reported by the 
Exchange to the Commission on a periodic, rather than a current, 
basis, except as may otherwise be required by Exchange Act Rule 19d-
1 and by any other regulatory authority.
    \7\ See Rule 13.15(f).
    \8\ See Rule 13.15(a).
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    The Exchange believes it is appropriate to remove the range of 
fines imposed for first and subsequent offenses and, instead, apply a 
letter of caution for a first offense, a specified fine amount for a 
second and a third offense, and formal disciplinary proceedings for 
subsequent offenses. Particularly, the Exchange believes that applying 
a lesser penalty (Letter of Caution) for a first offense and then 
providing a higher, itemized 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 against repeat-
offenders (as opposed to a fine range for any offenses that may come 
after a first offense). The Exchange believes this fine structure may 
serve to more effectively deter repeat-offenders while providing 
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 continuous quoting obligation is 
identical to the fine schedule under Cboe Options' MRVP for market 
maker violations of continuous quoting obligations on Cboe Options. 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, Cboe BZX Exchange, Inc. 
(``BZX Options'') and Cboe EDGX Exchange, Inc. (``EDGX''), as BZX 
Options and EDGX Options also intend to file proposals to update their 
minor rule violation fines for market maker violations of continuous 
quoting requirements on their exchanges in an identical manner.
    The proposed rule change also makes a nonsubstantive, clarifying 
change to Chapter 13 by removing the provision which currently provides 
that Cboe Options Rules 13.15(g)(4), 13.15(g)(5) and 13.15(g)(7) do not 
apply to C2.\9\ Cboe Options recently eliminated these provisions from 
its MRVP; therefore, this provision is no longer applicable.\10\
---------------------------------------------------------------------------

    \9\ As a result of removing this provision, the proposed rule 
change also makes a nonsubstantive change to the subsequent 
provision by updating the reference to multiple above paragraphs to 
instead reference a single above paragraph.
    \10\ See Securities Exchange Release No. 92702 (August 18, 
2021), 86 FR 47346 (August 24, 2021) (SR-CBOE-2021-045).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \13\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change to remove the 
range of fines imposed for first and subsequent Market-Maker quoting 
offenses and, instead, apply a letter of caution for a first offense, a 
specified fine amount for a second and a third offense, and formal 
disciplinary proceedings for subsequent offenses 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 lesser penalty (Letter of Caution) for a first offense and 
then providing an itemized 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 
greater penalties (i.e., formal disciplinary proceedings) against 
repeat-offenders (as opposed to a fine range for any offenses that may 
come after a first offense) 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 and making 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 marker maker violations 
of continuous quoting requirements on Cboe Options. As described above, 
BZX Options and EDGX Options intend to file proposals to update their 
minor rule violation fines applicable to violations of market maker 
continuous 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.
    Additionally, the proposed clarification in Chapter 13 will benefit 
investors by providing for Rules that accurately reflect current Cboe 
Options Rule 13.15, which Chapter 13 incorporates, in most part, by 
reference.
    The Exchange further believes that the proposed rule changes to 
Rule 13.15(g) are consistent with Section 6(b)(6) of the Act,\14\ 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 amends the fine schedule applicable to 
Market-Maker failures to meet their quoting obligations in a manner 
that appropriately sanctions such failures.
---------------------------------------------------------------------------

    \14\ 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.\15\ Rule 13.15, currently and as amended, does not preclude a 
TPH or person associated with or employed by a TPH from contesting an 
alleged violation and receiving a hearing on the matter with the same 
procedural rights through a litigated disciplinary proceeding.
---------------------------------------------------------------------------

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

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[[Page 506]]

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 the fine schedule for 
Market-Maker failures to meet quoting obligations. The Exchange 
believes the proposed rule change 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. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-C2-2021-019 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-C2-2021-019. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-C2-2021-019 and should be 
submitted on or before January 26, 2022.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\16\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\17\ which requires that the 
rules of an exchange be designed to promote just and equitable 
principles of trade, to remove impediments and to perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Commission 
also believes that the proposal is consistent with Sections 6(b)(1) and 
6(b)(6) of the Act \18\ which require that the rules of an exchange 
enforce compliance with, and provide appropriate discipline for, 
violations of Commission and Exchange rules. Finally, the Commission 
finds that the proposal is consistent with the public interest, the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act, as required by Rule 19d-1(c)(2) under the Act,\19\ which 
governs minor rule violation plans.
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    \16\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \19\ 17 CFR 240.19d-1(c)(2).
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    As stated above, generally the Exchange proposes to: (1) Amend the 
fine amounts applicable to a Maker-Maker's failure to meet the 
Exchange's continuous quoting obligations, and (2) make non-substantive 
and clarifying changes to Chapter 13. Specifically, the Exchange 
proposes to amend the fine amounts in proposed Rule 13.15(g)(9) to 
provide that, during any rolling 24-month period, the Exchange may give 
a Letter of Caution for a first offense, may apply a fine of $1,500 for 
a second offense, may apply a fine of $3,000 for a third offense, and 
may proceed with formal disciplinary action for subsequent offenses.
    The Commission believes that Rule 13.15, as incorporated by 
reference, is an effective way to discipline a member for a minor 
violation of a rule. The Commission finds that the Exchange's proposal 
to amend the fine amounts related to a Market-Maker's failure to meet 
the Exchange's quoting obligations as required by Rule 5.52(d), as set 
forth in proposed Rule 13.15(g)(9), is consistent with the Act because 
it may help the Exchange's ability to better carry out its oversight 
and enforcement responsibilities. The Commission also believes that the 
Exchange's proposal to make non-substantive changes that reflect 
updated rule numbers is consistent with the Act because such changes 
will add clarity and accuracy to the Exchange's rules.
    In approving the propose rule change, the Commission in no way 
minimizes the importance of compliance with the Exchange's rules and 
all other rules subject to fines under Rule 13.15. The Commission 
believes that a violation of any self-regulatory organization's rules, 
as well as Commission rules, is a serious matter. However, Rule 13.15 
provides a reasonable means of addressing rule violations that may not 
rise to the level of requiring formal disciplinary proceedings, while 
providing greater flexibility in handling certain violations. The 
Commission expects that the Exchange will continue to conduct 
surveillance with due diligence and make a determination based on its 
findings, on a case-by-case basis, whether a fine of more or less than 
the recommended amount is appropriate for a violation under Rule 13.15 
or whether a violation requires formal disciplinary action.
    For the same reasons discussed above, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\20\ for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of the notice of the filing thereof in the Federal 
Register. The proposal will assist the Exchange in preventing 
fraudulent and manipulative practices by allowing the Exchange to 
adequately enforce compliance with, and provide

[[Page 507]]

appropriate discipline for, violations of Exchange rules. Accordingly, 
the Commission believes that a full notice-and-comment period is not 
necessary before approving the proposal.
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    \20\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\21\ and Rule 19d-1(c)(2) thereunder,\22\ that the proposed rule change 
(SR-C2-2021-019) be, and hereby is, approved on an accelerated basis.
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    \21\ 15 U.S.C. 78s(b)(2).
    \22\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2021-28571 Filed 1-4-22; 8:45 am]
BILLING CODE 8011-01-P
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