[Federal Register Volume 87, Number 125 (Thursday, June 30, 2022)]
[Notices]
[Pages 39142-39145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13960]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95151; File No. SR-CBOE-2022-028]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Temporary Remote Inspection Relief for Trading Permit Holder's 
Office Inspections for Calendar Years 2020 and 2021 To Include Calendar 
Year 2022 Through December 31, 2022

June 24, 2022.
    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 June 9, 2022, 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 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 extend the temporary remote inspection relief for Trading Permit 
Holder's [sic] office inspections for calendar years 2020 and 2021 to 
include calendar year 2022 through December 31, 2022. 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
    The Exchange proposes to amend Rule 9.2, Supervision of Accounts, 
to extend the temporary remote inspection relief for Trading Permit 
Holders (``TPHs'') to complete their branch office inspections for the 
calendar years 2020 and 2021 to include calendar year 2022 through 
December 31, 2022.
    The COVID-19 pandemic has caused a host of operational disruptions 
to the securities industry and impacted Trading Permit Holders 
(``TPHs''), regulators, investors and other stakeholders. In response 
to the pandemic, the Exchange began providing temporary relief to TPHs 
from specified Exchange Rules and requirements, including Rule 9.2(d) 
(Annual Branch Inspections). In November 2020, the Exchange adopted a 
provision in Rule 8.16(f) (Office Inspections), which has expired by 
its terms, that extended the time by which TPHs must complete their 
calendar year 2020 inspection obligations under Rule 8.16(f) to March 
31, 2021, without an on-site visit to the office or location.\5\ The 
Exchange also adopted Rule 9.2(d)(5) to provide firms the option of 
satisfying their inspection obligations under Rule [sic] 8.16(f) and 
9.2(d) remotely for calendar years 2020 and 2021, subject to specified 
conditions,\6\ due to the logistical challenges of going on-site while 
public health and safety concerns related to COVID-19 persisted. In 
December 2021, due to the ongoing impact of COVID 19, the Exchange 
extended the temporary remote inspection relief in Rule 9.2(d)(5) for 
TPH's office inspections for calendar years 2020 and 2021 to include 
calendar year 2022 through June 30, 2022. The Exchange notes that these 
temporary rules, currently and as proposed herein, are substantively 
identical to the temporary inspection extension and remote relief rules 
filed by the Financial

[[Page 39143]]

Industry Regulatory Authority (``FINRA'').\7\
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    \5\ See Securities Exchange Act Release No. 90583 (December 7, 
2020), 85 FR 80207 (December 12, 2020) (SR-CBOE-2020-112).
    \6\ See id.
    \7\ See Securities and Exchange Act Release Nos. 89188 (June 30, 
2020), 85 FR 40713 (July 7, 2020) (SR-FINRA-2020-019); 90454 
(November 18, 2020), 85 FR 75097 (November 24, 2020) (Notice of 
Filing and Immediate Effectiveness of File No. SR-FINRA-2020-040); 
93002 (September 15, 2021), 86 FR 52508 (September 21, 2021) (File 
No. SR-FINRA-2021-023); and 94018 (January 20, 2022), 87 FR 4072 
(January 26, 2022) (SR-FINRA-2022-001).
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    While there are signs of improvement, much uncertainty remains. The 
emergence of the COVID 19 variants,\8\ dissimilar vaccination rates 
throughout the United States, and the uptick in transmissions in many 
locations indicate that COVID-19 remains an active and real public 
health concern.\9\ The Exchange understands that firms have delayed 
their return to office plans due to the continued pandemic and are 
considering implementing or have implemented hybrid work arrangements 
dependent on functions and regulatory requirements.\10\ To that end, in 
order to address ongoing industry-wide concerns regarding having to 
conduct in-person office inspections while safety concerns related to 
the pandemic persist and to align with pandemic-related regulatory 
relief provided by FINRA, which has already extended their 
substantively identical temporary remote inspection rules,\11\ the 
Exchange proposes to extend Rule 9.2(d)(5) through December 31, 2022. 
The proposed extension would provide clarity to firms on regulatory 
requirements and account for the time needed for many firms to 
carefully assess when and how to have their employees safely return to 
their offices in light of vaccination coverage in the U.S. and 
transmission levels of the virus, including any emergent variants 
throughout the country.
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    \8\ See The Centers for Disease Control and Prevention 
(``CDC''), What You Need to Know about Variants (stating, in part, 
that ``the Delta variant causes more infections and spreads faster 
than earlier forms of the virus that causes COVID19.''), https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html (updated 
April 26, 2022). See also CDC, The Possibility of COVID-19 Illness 
after Vaccination: Breakthrough Infections (stating, in part, that 
``COVID-19 vaccines are effective at preventing infection, serious 
illness, and death. Most people who get COVID-19 are unvaccinated. 
However, since vaccines are not 100% effective at preventing 
infection, some people who are fully vaccinated will still get 
COVID-19 . . . People who get vaccine breakthrough infections can be 
contagious.''), https://www.cdc.gov/coronavirus/2019-ncov/vaccines/effectiveness/why-measure-effectiveness/breakthrough-cases.html 
(updated December 17, 2022).
    \9\ See e.g., Press Briefing by White House COVID-19 Response 
Team and Public Health Officials (May 18, 2022), which discusses the 
sustained high number of infections driven by ``incredibly 
contagious subvariants'' and the limited funding in being able to 
provide a new generation of vaccines to every American in the fall/
winter of 2022; and see generally CDC, Unpacking Variants (updated 
April 22, 2022).
    \10\ The Exchange notes that a majority of its TPHs are FINRA 
member firms as well, and that through FINRA's ongoing monitoring 
the Exchange has learned that many of its TPHs have delayed plans to 
require a full return to the office and that most continue to 
operate in a remote or hybrid environment.
    \11\ See Release No. 94018 (January 20, 2022), 87 FR 4072 
(January 26, 2022) (File No. SR-FINRA-2022-001).
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    By extending Rule 9.2(d)(5) through December 31, 2022, the Exchange 
does not propose to amend the other conditions of the temporary rule. 
The proposed amendments to Rule 9.2(d)(5) simply provide that for 
calendar year 2022, a TPH has the option to conduct those inspections 
remotely through December 31, 2022. The current conditions of Rule 
9.2(d)(5) for firms that elect to conduct remote inspections would 
remain unchanged: such firms must amend or supplement their written 
supervisory procedures for remote inspections, use remote inspections 
as part of an effective supervisory system, and maintain the required 
documentation. The additional period of time would also enable the 
Exchange to further monitor the effectiveness of remote inspections and 
their impacts--positive or negative--on firms' overall supervisory 
systems in the evolving workplace. Notwithstanding the proposed 
temporary rule change, a TPH remains subject to the requirements of 
Rule 8.16(f) and Rule 9.2(d).
    The Exchange continues to believe this temporary remote inspection 
option is a reasonable alternative to provide to firms to fulfill their 
Rule 8.16(f) and 9.2(d) obligations during the pandemic and is designed 
to achieve the investor protection objectives of the inspection 
requirements under these unique circumstances. Firms should consider 
whether, under their particular operating conditions, reliance on 
remote inspections would be reasonable under the circumstances. For 
example, firms with offices that are open to the public or that are 
otherwise doing business as usual should consider whether some form of 
in-person inspections would be feasible and appropriately contribute to 
a supervisory system that is reasonably designed to achieve compliance 
with applicable securities laws and regulations, and with applicable 
Exchange Rules.
    The Exchange again notes that FINRA has already put in place the 
same extension period of their remote relief rule,\12\ which is 
substantively identical to Rule 9.2(d)(5).\13\
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    \12\ See supra note 11.
    \13\ See supra notes 5 and 7.
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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.\14\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \15\ 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) \16\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
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    In particular, the Exchange believes that, in recognition of the 
ongoing impact of COVID-19 on performing the on-site inspection 
component of Rules 8.16(f) and 9.2(d), the proposed rule change is 
intended to provide firms a temporary regulatory option to conduct 
inspections of offices and locations remotely during calendar year 
2022. This temporary remote relief rule and the proposed extension 
thereof does not relieve firms from meeting the core regulatory 
obligation to establish and maintain a system to supervise the 
activities of each associated person that is reasonably designed to 
achieve compliance with applicable securities laws and regulations, and 
with applicable Exchange Rules that directly serve investor protection. 
In a time when faced with ongoing challenges resulting from the COVID-
19 pandemic, the Exchange believes that the proposed rule change 
provides sensibly tailored relief that will afford firms the ability to 
assess when and how to implement their work re-entry plans as measured 
against the health and safety of their personnel, while continuing to 
serve and promote the protection of investors and the public interest.

[[Page 39144]]

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 Exchange does not 
believe the proposed temporary rule changes will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the Act, because the proposed extension of the temporary 
remote inspection relief rule will apply equally to all TPHs required 
to conduct office and location inspections in calendar year 2022 
through December 31, 2022. The Exchange further does not believe that 
the proposed extension to the temporary rule will impose any burden on 
intermarket competition because it relates only to the extension of the 
remote manner in which inspections for 2022 may be conducted. 
Additionally, and as stated above, FINRA has already extended its 
substantively identical temporary remote relief rule for its members in 
the same manner.

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 \17\ and Rule 19b-
4(f)(6) \18\ thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), 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 upon filing.
    The Exchange stated that despite signs of improvement, the 
emergence of the COVID-19 variants, dissimilar vaccination rates 
throughout the United States, and the uptick in transmissions in many 
locations indicate that COVID-19 remains an active and real public 
health concern. The Exchange also stated that extending the relief 
provided originally in SR-CBOE-2020-112 \19\ and SR-CBOE-2021-070 \20\ 
would continue to provide clarity to firms on regulatory requirements 
and account for the time needed for many firms to carefully assess when 
and how to have their employees safely return to their offices.
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    \19\ See supra note 5.
    \20\ See Securities Exchange Act Release No. 93721 (December 6, 
2021), 86 FR 70560 (December 10, 2021) (SR-CBOE-2020-070).
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    The proposed rule change would provide firms the option of 
satisfying their inspection obligations under Rule 8.16(f) and Rule 
9.2(d) remotely for calendar year 2022 through December 31, 2022, 
subject to specified conditions. These rules and the proposed extension 
thereof do not relieve firms from meeting their core regulatory 
obligation to establish and maintain a system to supervise the 
activities of each associated person that is reasonably designed to 
achieve compliance with applicable securities laws and regulations, and 
with applicable Exchange rules. Further, like SR-CBOE-2020-112 and SR-
FINRA-2021-070, the proposed rule change provides only temporary relief 
during a period in which firms' operations are impacted by COVID-19. As 
proposed, the changes would be in place through December 31, 2022. 
Importantly, extending the relief provided in the proposed rule change 
immediately upon filing and without a 30-day operative delay will allow 
firms to continue to complete their inspections in an orderly manner. 
For these reasons, waiver of the 30-day operative delay for the 
proposed rule change is consistent with the protection of investors and 
the public interest. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposed rule change operative 
upon filing.\21\
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    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change'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 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

    <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#0f7d7a636a226c6062626a617b7c4f7c6a6c21686079"><span class="__cf_email__" data-cfemail="6c1e190009410f0301010902181f2c1f090f420b031a">[email protected]</span></a>. Please include 
File Number SR-CBOE-2022-028 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-CBOE-2022-028. 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-2022-028 and 
should be submitted on or before July 21, 2022.


[[Page 39145]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13960 Filed 6-29-22; 8:45 am]
BILLING CODE 8011-01-P


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