[Federal Register Volume 85, Number 99 (Thursday, May 21, 2020)]
[Notices]
[Pages 31008-31010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10931]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88886; File No. SR-CBOE-2020-047]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 5.24
May 15, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 15, 2020, Cboe Exchange, Inc. (the ``Exchange'') 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 Exchange filed the proposal as
a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 5.24. The text of the proposed rule change is provided
below.
(Additions are Italicized; Deletions are [Bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 5.24. Disaster Recovery
(a)-(d) No change.
(e) Loss of Trading Floor. If the Exchange trading floor becomes
inoperable, the Exchange will continue to operate in a screen-based
only environment using a floorless configuration of the System that is
operational while the trading floor facility is inoperable. The
Exchange will operate using this configuration only until the
Exchange's trading floor facility is operational. Open outcry trading
will not be available in the event the trading floor becomes
inoperable, except in accordance with paragraph (2) below and pursuant
to Rule 5.26, as applicable.
(1) Applicable Rules. In the event that the trading floor becomes
inoperable, trading will be conducted pursuant to all applicable System
Rules, except that open outcry Rules will not be in force, including
but not limited to the Rules (or applicable portions of the Rules) in
Chapter 5, Section G, and as follows (subparagraphs (A) through (E)
will be effective until [May 15] June 30, 2020):
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 5.24 regarding the Exchange's
business continuity and disaster recovery plans. Rule 5.24 describes
which Trading Permit Holders (``TPHs'') are required to connect to the
Exchange's backup systems as well as certain actions the Exchange may
take as part of its business continuity plans so that it may maintain
fair and orderly markets if unusual circumstances occurred that could
impact the Exchange's ability to conduct business. This includes what
actions the Exchange would take if its trading floor became inoperable.
Specifically, Rule 5.24(e) states if the Exchange trading floor becomes
inoperable, the Exchange will continue to operate in a screen-based
only environment using a floorless configuration of the System that is
operational while the trading floor facility is inoperable. The
Exchange would operate using that configuration only until the
Exchange's trading floor facility became operational. Open outcry
trading would not be available in the event the trading floor becomes
inoperable.\5\
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\5\ Pursuant to Rule 5.26, the Exchange may enter into a back-up
trading arrangement with another exchange, which could allow the
Exchange to use the facilities of a back-up exchange to conduct
trading of certain of its products. The Exchange currently has no
back-up trading arrangement in place with another exchange.
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Rule 5.24(e)(1) currently states in the event that the trading
floor becomes inoperable, trading will be conducted pursuant to all
applicable System Rules, except that open outcry Rules would not be in
force, including but not limited to the Rules (or applicable portions)
in Chapter 5, Section G,\6\ and that all non-trading rules of the
Exchange would continue to apply.\7\ The Exchange recently adopted
several rule changes that would apply during a time in which the
trading floor in inoperable, which are effective until May 15, 2020.\8\
[[Page 31009]]
The Exchange believes these rules were necessary to implement to
maintain a fair and orderly market while the trading floor was not
operable in order to create an all-electronic trading environment
similar to the otherwise unavailable open outcry trading environment.
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\6\ Chapter 5, Section G of the Exchange's rulebook sets forth
the rules and procedures for manual order handling and open outcry
trading on the Exchange.
\7\ The proposed rule change updates subparagraph numbering
throughout Rule 5.24(e)(1) to conform to numbering used throughout
the Rules.
\8\ See Securities Exchange Act Release Nos. 88386 (March 13,
2020), 85 FR 15823 (March 19, 2020) (SR-CBOE-2020-019); 88447 (March
20, 2020) (SR-CBOE-2020-023); 88490 (SR-CBOE-2020-026) (filed March
26, 2020); and SR-CBOE-2020-031 (filed March 31, 2020).
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As of March 16, 2020, the Exchange suspended open outcry trading to
help prevent the spread of COVID-19 \9\ and is currently operating in
an all-electronic configuration. In accordance with federal and state
health and safety guidelines, the Exchange intends to keep its trading
floor closed and continue to operate in an all-electronic configuration
until at least June 1, 2020. While an all-electronic trading
environment cannot fully replicate open outcry trading, the Exchange
continues to believes the recent amendments to Rule 5.24(e)(1) have
allowed all-electronic trading to occur more similarly to open outcry
trading.\10\ To permit this all-electronic trading environment to
continue in an interrupted manner given the continued closure of the
Exchange's trading floor, the Exchange proposed to extend the
effectiveness of the temporary Rules in Rule 5.24(e)(1) until June 30,
2020 (unless further extended).
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\9\ On March 11, 2020, the World Health Organization
characterized COVID-19 as a pandemic and to slow the spread of the
disease, federal and state officials implemented social-distancing
measures, placed significant limitations on large gatherings,
limited travel, and closed non-essential businesses.
\10\ The Exchange continues to consider other enhancements to
the all-electronic trading configuration that it believes may permit
this configuration to further replicate the open outcry trading
environment. The Exchange would submit separate rule filings for any
such proposed enhancements.
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The Exchange's Regulatory Division has continued, and will
continue, its standard routine surveillance reviews for electronic
trading, and has implemented, and will continue to apply, a regulatory
plan to surveil the rules in place in Rule 5.24(e)(1) when operating in
a screen-based only environment.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. In particular, the Exchange believes the proposed
rule change will remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general,
protect investors and the public interest by permitting the current
all-electronic trading environment to continue in an uninterrupted
manner while the trading floor continues to be inoperable. The Exchange
continues to believe the recent amendments to Rule 5.24(e)(1) have
allowed all-electronic trading to occur more similarly to open outcry
trading. The Exchange believes the proposed rule change is necessary
and appropriate to provide continued execution opportunities in an all-
electronic trading environment for orders that generally execute in
open outcry trading.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended as a competitive filing, but rather extends the
effectiveness of temporary rules as part of the Exchange's business
continuity plans, which are intended to allow the Exchange to continue
to maintain fair and orderly markets while the Exchange's trading floor
continues to be inoperable.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the 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 \14\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \16\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay to protect
investors by permitting temporary rules that have been in place since
the Exchange suspended open outcry trading on March 16, 2020 to remain
in effect in an uninterrupted manner while the Exchange's trading floor
remains inoperable. The Exchange believes extension of the temporary
rules in place while the Exchange's trading floor is inoperable is
reasonable given the uncertainty with respect to the ongoing COVID-19
pandemic. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest as it will allow the temporary rules to continue
uninterrupted, thereby avoiding investor confusion that could result
from an interruption in the effectiveness of the rules. Accordingly,
the Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may
[[Page 31010]]
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2020-047 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2020-047. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2020-047 and should be submitted on
or before June 11, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10931 Filed 5-20-20; 8:45 am]
BILLING CODE 8011-01-P