[Federal Register Volume 85, Number 135 (Tuesday, July 14, 2020)]
[Notices]
[Pages 42453-42455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15109]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89248; File No. SR-CBOE-2020-063]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 8.16 and Rule 9.2 to Temporarily Extend the Filing Deadline for
Certain Supervision-Related Reports
July 8, 2020.
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 July 1, 2020, Cboe Exchange, Inc. (``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 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 8.16 and Rule 9.2 to temporarily extend the filing
requirements for certain supervision-related reports, currently given
an extension through June 30, 2020, to July 31, 2020. 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
Given current market conditions, the Exchange proposes to provide
its Trading Permit Holders (``TPHs'') temporary relief from filing
certain supervision-related reports pursuant to Rule 8.16 (Supervision)
and Rule 9.2 (Supervision of Accounts).
The Exchange has been closely monitoring the current situation
regarding the novel coronavirus (``COVID-19'') pandemic. The Exchange
understands COVID-19 has placed stress on market participants'
information technology infrastructure and the required deployment of
significant resources, including to implement and continuously adapt
business continuity plans. 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, all of
which are largely still in place for the foreseeable future. Indeed, in
response to the pandemic, the Exchange has taken various actions to
allow it to maintain fair and orderly markets, including the closure of
its trading floor, which remained inoperable into June 2020, and is
currently operating in a modified manner due to the ongoing
pandemic.\5\ The Exchange also notes that in response to COVID-19, the
Financial Industry Reporting Authority (``FINRA'') recently reissued
temporary relief for member firms by, among other things, extending the
deadline for submitting their supervision-related reports (FINRA Rule
3120 Report and FINRA Rule 3130 certification) from their prior
extension deadlines of June 30, 2020 \6\ to July 31, 2020.\7\
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\5\ See Tradedesk Update No. C2020031204 (March 12, 2020) Novel
Coronavirus Update, Trading Floor Closure; and Tradedesk Update No.
C2020060300 (June 3, 2020) Cboe Options Trading Floor Re-Opening.
The trading floor is operating currently with a modified
configuration of trading crowds in order to implement social
distancing and other measures consistent with local and state health
and safety guidelines to help protect the safety and welfare of
individuals accessing the trading floor.
\6\ See FINRA Regulatory Notice 20-08, FAQs, Supervision
(updated May 19, 2020) available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq#supe; see also FINRA Regulatory
Notice 20-08 (March 9, 2020) available at https://www.finra.org/rules-guidance/notices/20-08.
\7\ See FINRA Regulatory Notice 20-08, FAQs, Supervision
(updated June 29, 2020) available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq#supe.
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By way of background, (1) Rule 8.16(g)(2) provides that by April 1
of each year each Trading Permit Holder shall submit to the Exchange
written report on the Trading Permit Holder's supervision and
compliance effort during the preceding year and on the adequacy of the
Trading Permit Holder's ongoing compliance processes and procedures;
(2) Rule 9.2(g) provides that by April 1 of each year each TPH
organization that conducts a non-Trading Permit Holder customer
business shall submit to the Exchange a written report on the TPH
organization's supervision and compliance effort during the preceding
year and on the adequacy of the TPH organization's ongoing compliance
processes and procedures; and (3) Rule 9.2(h) provides that by April 1
of each year, each TPH organization shall submit a copy of the report
that paragraph (g) (of Rule 9.2) requires the TPH organization to
prepare to its one or more control persons or, if the TPH organization
has no control person, to the audit committee of its board of directors
or its equivalent committee or group. Both Rules currently provide
relief to TPHs and their employees by extending these deadlines to June
30, 2020.\8\ However, as COVID-19 remains an ongoing pandemic, to meet
the current June 30 deadlines in Rules 8.16 and 9.2, TPH personnel
would have to divide their efforts and resources that are otherwise
necessary to address continued disruptions and stresses as a result of
the ongoing COVID-19 pandemic. Therefore, the Exchange proposes to
extend the filing deadline through July
[[Page 42454]]
31, 2020, thus allowing TPH personnel that are tasked with organizing,
compiling and filing such reports, but are also tasked with maintaining
critical operations and sustainable business continuity plans, and
otherwise adjusting the TPH's trading operations in line with evolving
market conditions and initiatives to address such conditions to focus
their attention on those immediate needs.
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\8\ See Securities Exchange Act Nos. 88978 (June 1, 2020), 85 FR
34688 (June 5, 2020) (SR-CBOE-2020-049); and 88528 (March 31, 2020),
85 FR 19196 (April 6, 2020) (SR-CBOE-2020-029).
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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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In particular, the Exchange believes that the proposed rule will
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities. The proposed rule change will
allow the Exchange to extend temporary relief to its TPHs by issuing
another extension of certain supervisory reporting deadlines from June
30, 2020 to July 31, 2020 in light of the ongoing COVID-19 crisis. The
Exchange understands this pandemic has caused, and continues to cause,
stress on market participants' information technology infrastructure
and the deployment of significant resources to address ongoing
disruptions and continued stresses. By further extending the deadlines
for filing certain supervision related reports in Rules 8.16 and 9.2,
the Exchange believes the proposed rule will allow TPH personnel, who
would normally be tasked with organizing and compiling such reports, to
focus their attention on maintaining critical operations and
sustainable business continuity plans, and otherwise adjusting their
trading operations in line with evolving market conditions and
initiatives in response to the ongoing COVID-19 pandemic. The Exchange
also believes the proposed rule change removes impediments to and
perfects the mechanism of a free and open market and a national market
system because, as noted above, FINRA has also further extended the
time for their members to file supervision-related reports from June
30, 2020 to July 31, 2020.\12\
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\12\ See supra note 7.
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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 to address competitive issues. The Exchange does not
believe the proposed rule would impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
Act, because the additional July 31, 2020 extension for supervision-
related reports in Rules 8.16 and 9.2 will apply equally to all TPHs.
The Exchange does not believe that the proposed rule change would
impose any burden on intermarket competition because it relates only to
the extension of the filing deadline for supervision-related reports.
Additionally, and as stated above, FINRA has recently notified its
members that the filing deadline for their supervision-related reports
has again been extended from June 30, 2020 to July 31, 2020.\13\
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\13\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (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)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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 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 requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Commission notes that the proposed rule change would allow the
Exchange, in light of the COVID-19 pandemic, to provide temporary
relief for TPHs by extending the deadline for supervision-related
reports in Rules 8.16 and 9.2 from June 30, 2020 to July 31, 2020. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
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 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.
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:
[[Page 42455]]
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-2020-063 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-2020-063. 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-2020-063 and should be submitted on
or before August 4, 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. 2020-15109 Filed 7-13-20; 8:45 am]
BILLING CODE 8011-01-P