[Federal Register Volume 86, Number 34 (Tuesday, February 23, 2021)]
[Notices]
[Pages 11020-11022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03546]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91144; File No. SR-CFE-2021-002]


Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice 
of a Filing of a Proposed Rule Change Regarding Rule Consolidation

February 17, 2021.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 3, 2021 Cboe 
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which Items have been 
prepared by CFE.\2\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. CFE also 
has filed this proposed rule change with the Commodity Futures Trading 
Commission (``CFTC''). CFE filed a written certification with the CFTC 
under Section 5c(c) of the Commodity Exchange Act (``CEA'') \3\ on 
January 28, 2021.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ The Commission notes that the Exchange originally filed its 
proposed rule change regarding rule consolidation on January 29, 
2021 (SR-CFE-2021-001). SR-CFE-2021-001 was subsequently withdrawn 
and replaced by this filing in order to correct certain 
typographical errors in the Exhibit 1 and proposed rule text.
    \3\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to streamline the manner in which CFE's rules 
require CFE Trading Privilege Holders (``TPHs'') to comply with CFTC 
regulations relating to minimum financial requirements, financial 
reporting requirements, and protection of customer funds. The scope of 
this filing is limited solely to the application of the proposed rule 
change to security futures that may be traded on CFE. Although no 
security futures are currently listed for trading on CFE, CFE may list 
security futures for trading in the future. The text of the proposed 
rule change is attached as Exhibit 4 to the filing but is not attached 
to the publication of this notice.

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

    In its filing with the Commission, CFE 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. CFE 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
    Chapter 5 (Obligations of Trading Privilege Holders) of the CFE 
Rulebook currently includes a lengthy Appendix that contains twenty CFE 
rules numbered Rules 518 through 537. Each of these rules provides that 
any TPH subject to an enumerated CFTC Regulation that violates the 
specified Regulation shall be deemed to have violated that CFE rule. 
The CFTC Regulations referenced in the Appendix relate to minimum 
financial standards for intermediaries, the segregation of customer and 
proprietary funds, the custody of customer funds, the investment 
standards for customer funds, intermediary default procedures, and 
related recordkeeping. The Appendix is lengthy because it includes 
twenty separate CFE rules. The Appendix is also lengthy because each of 
these CFE rules includes CFE rule language as well as a restatement of 
the provisions of the applicable CFTC Regulation that is referenced in 
the rule which follows after the CFE rule language.
    The proposed rule change streamlines the manner in which the 
requirements under the Appendix to Chapter 5 are presented in the CFE 
Rulebook while maintaining the same requirements within the Rulebook 
that are currently provided for under the Appendix. Specifically, the 
proposed rule change consolidates those requirements by enumerating all 
of them within current CFE Rule 518 (Compliance with Minimum Financial 
Requirements, Financial Reporting Requirements, and Requirements 
Relating to Protection of Customer Funds) instead of within an Appendix 
to Chapter 5. The proposed rule change also deletes the restatement of 
all of the provisions of the CFTC Regulations referenced in the 
Appendix while maintaining within Rule 518 reference to those same CFTC 
Regulations and to the subject matter of those regulations.
    The following table identifies for each of the current CFE rules 
that is proposed to be consolidated into Rule 518 the rule

[[Page 11021]]

number of the current rule, the subsection of amended Rule 518 that is 
proposed to address the subject matter of the current rule, and the 
CFTC regulation underlying the current rule. The table also includes a 
high level description of the subject matter of each of those rules as 
provided for under applicable CFTC regulation.
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    \4\ 17 CFR 1.10.
    \5\ 17 CFR 1.11.
    \6\ 17 CFR 1.12.
    \7\ 17 CFR 1.17.
    \8\ 17 CFR 1.18.
    \9\ 17 CFR 1.20.
    \10\ 17 CFR 1.21.
    \11\ 17 CFR 1.22.
    \12\ 17 CFR 1.23.
    \13\ 17 CFR 1.24.
    \14\ 17 CFR 1.25.
    \15\ 17 CFR 1.26.
    \16\ 17 CFR 1.27.
    \17\ 17 CFR 1.28.
    \18\ 17 CFR 1.29.
    \19\ 17 CFR 1.30.
    \20\ 17 CFR 1.31.
    \21\ 17 CFR 1.32.
    \22\ 17 CFR 1.36.

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      Current CFE rule               New CFE rule               CFTC regulation             Summary of rule
----------------------------------------------------------------------------------------------------------------
519........................  518(a).....................  \4\ 1.10..................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.10 to
                                                                                       comply with financial
                                                                                       reporting requirements,
                                                                                       including the requirement
                                                                                       to file CFTC Form 1-FR.
520........................  518(b).....................  \5\ 1.11..................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.11 to
                                                                                       comply with the
                                                                                       requirement that futures
                                                                                       commission merchants
                                                                                       (``FCMs'') establish,
                                                                                       maintain, and enforce a
                                                                                       system of risk management
                                                                                       policies and procedures.
521........................  518(c).....................  \6\ 1.12..................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.12 to
                                                                                       comply with the
                                                                                       requirement to notify the
                                                                                       CFTC if the TPH fails to
                                                                                       maintain an adjusted net
                                                                                       capital above certain
                                                                                       specified thresholds.
522........................  518(d).....................  \7\ 1.17..................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.17 to
                                                                                       comply with certain
                                                                                       minimum financial
                                                                                       requirements.
523........................  518(e).....................  \8\ 1.18..................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.18 to
                                                                                       comply with the
                                                                                       requirement to maintain
                                                                                       records for and relating
                                                                                       to financial reporting
                                                                                       and a monthly computation
                                                                                       regarding the TPH's
                                                                                       assets, liabilities, and
                                                                                       capital.
524........................  518(f).....................  \9\ 1.20..................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.20 to
                                                                                       comply with the
                                                                                       requirement to separately
                                                                                       account for all future
                                                                                       customer funds and
                                                                                       segregate those funds as
                                                                                       belonging to the TPH's
                                                                                       futures customers.
525........................  518(g).....................  \10\ 1.21.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.21 to
                                                                                       comply with the
                                                                                       requirement to treat all
                                                                                       money and equities
                                                                                       accruing to an FCM on
                                                                                       behalf of any futures
                                                                                       customer as accruing to
                                                                                       the futures customer.
526........................  518(h).....................  \11\ 1.22.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.22 to
                                                                                       comply with a prohibition
                                                                                       on using or permitting
                                                                                       the use of the customer
                                                                                       funds of one futures
                                                                                       customer to purchase,
                                                                                       margin, or settle the
                                                                                       trades of or to secure
                                                                                       credit of any person
                                                                                       other than that futures
                                                                                       customer.
527........................  518(i).....................  \12\ 1.23.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.23 to
                                                                                       comply with a prohibition
                                                                                       on the commingling of
                                                                                       futures customer funds
                                                                                       with the funds of an FCM.
528........................  518(j).....................  \13\ 1.24.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.24 to
                                                                                       comply with an exclusion
                                                                                       that money held in a
                                                                                       segregated account shall
                                                                                       not include money
                                                                                       invested in obligations
                                                                                       or stocks of any clearing
                                                                                       organization or contract
                                                                                       market.
529........................  518(k).....................  \14\ 1.25.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.25 to
                                                                                       comply with the
                                                                                       requirements and
                                                                                       restrictions regarding
                                                                                       the investments of
                                                                                       customer funds.
530........................  518(l).....................  \15\ 1.26.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.26 to
                                                                                       comply with the
                                                                                       requirement that each FCM
                                                                                       that invests customer
                                                                                       funds in instruments
                                                                                       described in CFTC
                                                                                       Regulation 1.25, except
                                                                                       for investments in money
                                                                                       market mutual funds,
                                                                                       shall separately account
                                                                                       for those instruments as
                                                                                       futures customer funds
                                                                                       and segregate those
                                                                                       instruments as funds
                                                                                       belonging to customers.
531........................  518(m).....................  \16\ 1.27.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.27 to
                                                                                       comply with the
                                                                                       requirement that each FCM
                                                                                       which invests customer
                                                                                       funds shall keep certain
                                                                                       records of the
                                                                                       investment.
532........................  518(n).....................  \17\ 1.28.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.28 to
                                                                                       comply with the
                                                                                       requirement that FCMs
                                                                                       that invest customer
                                                                                       funds in instruments
                                                                                       described in CFTC
                                                                                       Regulation 1.25 shall
                                                                                       include those instruments
                                                                                       in segregated account
                                                                                       records and reports at
                                                                                       values not exceeding
                                                                                       current market values.
533........................  518(o).....................  \18\ 1.29.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.29 to
                                                                                       comply with the provision
                                                                                       that an FCM may invest
                                                                                       customer funds and retain
                                                                                       as the TPH's own
                                                                                       incremental income or
                                                                                       interest resulting
                                                                                       therefrom and the
                                                                                       requirement that an FCM
                                                                                       shall bear sole
                                                                                       responsibility for any
                                                                                       losses resulting from the
                                                                                       investment of customer
                                                                                       funds in instruments
                                                                                       described in CFTC
                                                                                       Regulation 1.25.
534........................  518(p).....................  \19\ 1.30.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.30 to
                                                                                       comply with a prohibition
                                                                                       against an FCM lending
                                                                                       funds on an unsecured
                                                                                       basis to finance
                                                                                       customers' trading or
                                                                                       lending funds to
                                                                                       customers secured by the
                                                                                       customers' accounts.
535........................  518(q).....................  \20\ 1.31.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.31 to
                                                                                       comply with the
                                                                                       requirement to maintain
                                                                                       electronic records in
                                                                                       accordance with certain
                                                                                       provisions and to further
                                                                                       establish appropriate
                                                                                       systems and controls that
                                                                                       ensure the authority and
                                                                                       reliability of electronic
                                                                                       regulatory records.
536........................  518(r).....................  \21\ 1.32.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.32 to
                                                                                       comply with the
                                                                                       requirement each FCM
                                                                                       compute as of the close
                                                                                       of each business day the
                                                                                       total amount of futures
                                                                                       customer funds on deposit
                                                                                       in segregated accounts as
                                                                                       well as other specified
                                                                                       details.
537........................  518(s).....................  \22\ 1.36.................  Requires TPHs subject to
                                                                                       CFTC Regulation 1.36 to
                                                                                       comply with the
                                                                                       requirement that each FCM
                                                                                       maintain a record of all
                                                                                       securities and property
                                                                                       received from customers
                                                                                       in lieu of money to
                                                                                       margin, purchase,
                                                                                       guarantee, or secure the
                                                                                       transactions of those
                                                                                       customers.
----------------------------------------------------------------------------------------------------------------


[[Page 11022]]

    CFE believes that its proposed approach to amending the Appendix to 
Chapter 5 simplifies the CFE Rulebook by streamlining a lengthy portion 
of the Rulebook that contains twenty separate rules into one 
straightforward rule that reflects all of the same requirements that 
exist under the consolidated rules thereby making it easier for TPHs to 
reference these requirements within CFE's Rulebook because they will 
all be enumerated in a single rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\23\ in general, and furthers the 
objectives of Sections 6(b)(1) \24\ and 6(b)(5) \25\ in particular, in 
that it is designed:
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(1).
    \25\ 15 U.S.C. 78f(b)(5).
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    <bullet> To enable the Exchange to enforce compliance by its TPHs 
and persons associated with its TPHs with the provisions of the rules 
of the Exchange,
    <bullet> to prevent fraudulent and manipulative acts and practices,
    <bullet> to promote just and equitable principles of trade,
    <bullet> to remove impediments to and perfect the mechanism of a 
free and open market and a national market system,
    <bullet> and in general, to protect investors and the public 
interest.
    The proposed rule change retains within the CFE Rulebook rule 
provisions that address minimum financial requirements, financial 
reporting requirements, and protection of customer funds, including 
rules relating to appropriate minimum financial standards for 
intermediaries, the segregation of customer and proprietary funds, the 
custody of customer funds, the investment standards for customer funds, 
intermediary default procedures, and related recordkeeping as required 
by CFTC regulations, all in furtherance of TPH compliance with those 
rule provisions and their enforcement by the Exchange. In particular, 
the proposed rule change streamlines a lengthy portion of the Rulebook 
that contains twenty separate rules into one straightforward rule that 
reflects all of the same requirements that exist under the consolidated 
rules thereby making it easier for TPHs to reference those requirements 
within CFE's Rulebook because they will all be enumerated in a single 
rule. The Exchange believes that making it easier for TPHs to reference 
those requirements will contribute to furthering compliance with those 
requirements by TPHs.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CFE 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, in that the Exchange believes that the 
proposed rule change will contribute to furthering compliance by TPHs 
with CFTC regulations relating to minimum financial requirements, 
financial reporting requirements, and protection of customer funds. The 
Exchange believes that the proposed rule change is equitable and not 
unfairly discriminatory in that it would apply equally to all TPHs 
subject to the relevant CFTC regulations.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change will become operative on February 11, 
2021. At any time within 60 days of the date of effectiveness of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Act.\26\
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    \26\ 15 U.S.C. 78s(b)(1).
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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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2153544d440c424e4c4c444f5552615244420f464e57"><span class="__cf_email__" data-cfemail="3b494e575e16585456565e554f487b485e58155c544d">[email protected]</span></a>. Please include 
File Number SR-CFE-2021-002 on the subject line.

Paper Comments

    <bullet> 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-CFE-2021-002. 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-CFE-2021-002, and should be submitted on 
or before March 16, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(73).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03546 Filed 2-22-21; 8:45 am]
BILLING CODE 8011-01-P


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