[Federal Register Volume 84, Number 204 (Tuesday, October 22, 2019)]
[Notices]
[Pages 56509-56511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22936]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87321; File No. SR-CBOE-2019-089]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Move Certain Rules in Chapter XXIX of the Currently Effective
Rulebook to Proposed Section E of Chapter 4 of the Shell Structure for
the Exchange's Rulebook That Will Become Effective Upon the Migration
of the Exchange's Trading Platform
October 16, 2019.
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 October 3, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
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.
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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 move certain Rules in Chapter XXIX, which governs Credit Option
contracts, of the currently effective Rulebook (``current Rulebook'')
to proposed Section E of Chapter 4 of the shell structure for the
Exchange's Rulebook that will become effective upon the migration of
the Exchange's trading platform to the same system used by the Cboe
Affiliated Exchanges (as defined below) (``shell Rulebook''). 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 (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
In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated
Exchanges''). The Cboe Affiliated Exchanges are working to align
certain system functionality, retaining only intended differences,
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its trading platform to the
same system used by the Cboe Affiliated Exchanges, which the Exchange
expects to complete on October 7, 2019. In connection with this
technology migration, the Exchange has a shell Rulebook that resides
alongside its current Rulebook, which shell Rulebook will contain the
Rules that will be in place upon completion of the Cboe Options
technology migration.
The Exchange proposes to relocate rules under current Chapter XXIX
which governs Credit Option contracts, to proposed Section E of Chapter
4 in the shell Rulebook. The Exchange notes that in addition to
relocating these current rules to proposed shell Section E of Chapter
4, the proposed rule change deletes the rules from the current
Rulebook. The proposed rule change relocates the rules as follows:
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Proposed rule Current rule
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Introductory paragraph under Section E Introduction.
heading.
4.40 Credit Default Definitions........ 29.1 Definitions.
4.41 Designation of Credit Default 29.2 Designation of Credit
Option Contracts. Default Option Contracts.
4.42 Designation and Terms of Credit 29.2A Designation and Terms of
Default Basket Option Contracts. Credit Default Basket Option
Contracts.
4.43 Withdrawal of Approval of 29.3 Withdrawal.
Underlying Reference Entity.
4.44 Adjustments....................... 29.4 Adjustments.
4.45 FLEX Trading...................... 29.18. FLEX Trading.
4.46 Trading Rotations................. 29.12 Trading Rotations.
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The proposed changes are of a non-substantive nature and will not
amend the relocated rules other than to update their numbers, conform
paragraph structure \3\ and number/lettering format to that of the
shell Rulebook, and make
[[Page 56510]]
cross-reference changes to shell rules. As indicated above, the
proposed rule change relocates current Rule 29.12 to proposed Rule
4.46. Current Rule 29.12, however, currently contains rule language
that is no longer applicable to the Exchange. It currently states that
in accordance with Rule 6.2 (Rule 5.31 in the shell Rulebook), at a
randomly selected time within a number of seconds after 8:30 a.m. (CT),
unless unusual circumstances exist, the System will initiate the
opening procedure and send a Rotation Notice. The Exchange notes that
this language referenced in current Rule 29.12 regarding the opening
process in Rule 6.2 (shell Rule 5.31) had prior been amended,\4\ and
Rule 29.12 was inadvertently not updated to reflect the amended opening
process. Therefore, the proposed rule change updates current 29.12
(proposed Rule 4.46) to simply reflect the existing opening process
language in shell Rule 5.31 (current Rule 6.2) by stating that in
accordance with Rule 5.31(d), at an Exchange-determined number of
seconds following 9:30 a.m., the System will initiate the opening
rotation.\5\ The proposed rule change also removes current Rule
29.14(d) which states that the rules of priority and order allocation
procedures set forth in (current) Rule 6.45 (shell Rules 5.32 and 5.85)
apply to Credit Options, as this is redundant of the shell Rules 5.32
and 5.85 themselves because they already govern the priority and order
allocation of all options trading on the Exchange, both electronically
(shell Rule 5.32) and in open outcry (shell Rule 5.85). Also, the
proposed change removes the remainder of the rule text under current
Rule 29.14, which states that Rule 29.14 supplements (current) Rules
6.41, 6.42, 6.44 and 6.45, because all provisions under current Rule
29.14 have already been relocated to other rules in the shell Rulebook
in anticipation of migration and would apply to Credit Options \6\ and,
therefore, current Rule 29.14 as a whole will no longer exist upon
migration.
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\3\ The Exchange notes that the paragraph structure for
definitions listed under rules in the shell Rulebook is in
alphabetized format. Therefore, the same structure is used under
proposed Rule 4.40.
\4\ See Securities Exchange Act Release No. 79520 (December 9,
2016), 81 FR 90896 (December 15, 2019) (Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, Relating To
Opening and Closing Rotations Under the HOSS System) (SR-CBOE-2016-
071).
\5\ The Exchange notes it does not currently list any Credit
Options for trading, so this change will have no impact on any
current trading.
\6\ See Securities and Exchange Act Release No. 86772 (August
27, 2019), 84 FR 46069 (September 3, 2019) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Rules
Related to How the System Handles Incoming Orders and Open Outcry
Trading in Connection With the Migration of the Exchange's Trading
Platform to the Same System Used by the Cboe Affiliated Exchanges)
(SR-CBOE-2019-042).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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As stated, the proposed rule change makes no substantive changes to
the rules. The proposed rule change is merely intended to relocate the
Exchange's rules to the shell Rulebook and update their numbers,
paragraph structure, including number and lettering format, and cross-
references (including updating certain rule text to accurately
reiterate rule language to which a cross-reference refers), and remove
a redundant provision already specifically covered under other shell
rules, to conform to the shell Rulebook as a whole in anticipation of
the technology migration on October 7, 2019. As such, the proposed rule
change 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 improving the way the Exchange's
Rulebook is organized, making it easier to read, and, particularly,
helping market participants better understand the rules of the
Exchange, which will also result in less burdensome and more efficient
regulatory compliance.
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 proposed rule change is not
intended as a competitive change, but rather, seeks to make non-
substantive rule changes in relocating the rules, updating cross-
references (and cross-referenced rule text) to shell rules, and
removing a redundant provision already specifically covered under other
rules, in anticipation of the October 7, 2019 technology migration. The
Exchange also does not believe that the proposed rule change will
impose any undue burden on competition because the relocated rule text
is exactly the same as the Exchange's current rules, all of which have
all been previously filed with the Commission.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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
Commission has waived that requirement in this case.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after
[[Page 56511]]
the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\
the Commission may 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 so that the proposed rule change may become operative
immediately. The Exchange notes that the proposed rule change is merely
relocating certain rules to its shell rulebook--which includes
corresponding updates to rule numbers, cross-references, and other
references--in order to conform these rules to the shell rulebook upon
the technology migration explained above. The Exchange believes that
the proposed rule change will make its rules easier to read and
understand for all investors. The Exchange also asserts that the
relocation of the rules explained above will not impose any significant
burden on competition as the substance of the rules remains unchanged.
The Commission agrees that allowing this proposed rule change to become
operative upon filing in order to facilitate the Exchange's technology
migration--without changing the substance of these Exchange Rules--is
consistent with the protection of investors and the public interest.
For this reason, the Commission hereby waives the 30-day operative
delay and designates the proposal operative upon filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission 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 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 shall 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-2019-089 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-2019-089. 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 offices 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-2019-089, and should be submitted
on or before November 12, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12), (59).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22936 Filed 10-21-19; 8:45 am]
BILLING CODE 8011-01-P