[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Notices]
[Pages 42226-42229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15000]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95229; File No. SR-C2-2022-013]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 5.20 To Remove Certain References to the Market-Wide Circuit 
Breaker Program

July 8, 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 30, 2022, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') 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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') is filing with 
the Securities and Exchange Commission (the ``Commission'') a proposal 
to amend Rule 5.20 to remove certain references to the Market-Wide 
Circuit Breaker program. The text of the

[[Page 42227]]

proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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 Exchange Rule 5.20 to remove certain 
rule text that references the Market-Wide Circuit Breaker (``MWCB'') 
program for equity securities. The proposed changes are intended to 
clarify the Exchange's rules regarding trading halts in options due to 
a MWCB.
MWCB Program
    On March 16, 2022, the Commission approved a proposal by the New 
York Stock Exchange LLC (``NYSE'') to make permanent the MWCB 
program.\5\ The Commission approved a proposal filed by the Exchange on 
April 12, 2022, to adopt on a permanent basis the MWCB pilot 
program.\6\ The Exchange's affiliated equities exchanges similarly 
received approval to make permanent the MWCB pilot program on April 12, 
2022.\7\
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    \5\ See Securities Exchange Act Release No. 94441 (March 16, 
2022), 87 FR 16286 (March 22, 2022) (SR-NYSE-2021-40) (Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 1 To Adopt on a Permanent Basis the Pilot Program 
for Market-Wide Circuit Breakers in Rule 7.12).
    \6\ See Securities Exchange Act Release No. 94698 (April 12, 
2022), 87 FR 22981 (April 18, 2022) (SR-CBOE-2022-010) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Adopt on a Permanent Basis the Pilot Program for Market-Wide Circuit 
Breakers, Currently Codified in Rule 5.20.01).
    \7\ See Securities Exchange Act Release No. 94705 (April 12, 
2022), 87 FR 22977 (April 18, 2022) (SR-CboeBYX-2022-011) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Adopt on a Permanent Basis the Pilot Program for Market-Wide Circuit 
Breakers, Currently Codified in Rule 11.18); Securities Exchange Act 
Release No. 94702 (April 12, 2022), 87 FR 23003 (April 18, 2022) 
(SR-CboeBZX-2022-027) (Notice of Filing and Immediate Effectiveness 
of a Proposed Rule Change To Adopt on a Permanent Basis the Pilot 
Program for Market-Wide Circuit Breakers, Currently Codified in Rule 
11.18); Securities Exchange Act Release No. 94701 (April 12, 2022), 
87 FR 22963 (April 18, 2022) (SR-CboeEDGA-2022-008) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Adopt on a Permanent Basis the Pilot Program for Market-Wide Circuit 
Breakers, Currently Codified in Rule 11.16); Securities Exchange Act 
Release No. 94699 (April 12, 2022), 87 FR 22967 (April 18, 2022) 
(SR-CboeEDGX-2022-023) (Notice of Filing and Immediate Effectiveness 
of a Proposed Rule Change To Adopt on a Permanent Basis the Pilot 
Program for Market-Wide Circuit Breakers, Currently Codified in Rule 
11.16).
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    The Exchange's current rule regarding MWCB halts can be found in 
Rule 5.20.01,\8\ which states, ``[t]he Exchange will halt trading in 
all stock options whenever a market-wide trading halt commonly known as 
a circuit breaker is initiated in response to extraordinary market 
conditions.'' Rules 5.20.01(a) \9\ and 5.20.01(b) \10\ describe the 
applicable Market Declines and associated trading halts applicable to 
MWCB. The Exchange notes that the text in Rules 5.20.01(a) and 
5.20.01(b) is identical to the MWCB language found in the Exchange's 
affiliated equity exchanges' rules.\11\ Those rules are implemented 
exclusively by equities exchanges and the Exchange does not trade 
equity securities. The Exchange notes that its MWCB rules were based, 
in part, on the rules of the Exchange's affiliate, Cboe Exchange, Inc., 
which previously operated a stock trading facility but no longer 
supports this functionality. As the rules for Cboe Exchange, Inc. are 
being updated to remove references to the MWCB rules applicable to 
equity securities, the Exchange is also proposing to amend its rules to 
remove references to the MWCB rules applicable to equity securities. 
Rules 5.20.01(e)-(g) detail the MWCB testing requirements that were 
implemented as part of the adoption of the MWCB program on a permanent 
basis.\12\ The Exchange is now proposing to remove the language in 
current Rules 5.20.01(a), 5.20.01(b), 5.20.01(c), 5.20.01(e), 
5.20.01(f), and 5.20.01(g), as this language applies specifically to 
equity securities, which do not trade on the Exchange. Given that the 
introductory language in Rule 5.20.01 specifically states that stock 
options will be halted in the event of a market-wide circuit 
breaker,\13\ the MWCB rules applicable to equity securities (currently 
housed in Rules 5.20.01(a)-(c), (e)-(g)) are not necessary. The 
Exchange believes that by removing this language its rules regarding 
stock option halts due to market-wide circuit breakers will provide 
clarity for Trading Permit Holders \14\ and others who may rely on the 
rule.
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    \8\ See Exchange Rule 5.20.01.
    \9\ See Exchange Rule 5.20.01(a). A Market Decline means a 
decline in price of the S&P 500 Index between 9:30 a.m. and 4:00 
p.m. on a trading day as compared to the closing price of the S&P 
500 Index for the immediately preceding trading day. A Level 1 
Market Decline means a Market Decline of 7%, a Level 2 Market 
Decline means a Market Decline of 13%, and a Level 3 Market Decline 
means a Market Decline of 20%.
    \10\ See Exchange Rule 5.20.01(b) (``Halts in Trading''). The 
Exchange shall halt trading in all stock or stock options for 15 
minutes if a Level 1 or Level 2 Market Decline occurs after 9:30 
a.m. and before 3:26 p.m. (or 12:26 p.m. in the case of an early 
scheduled close). The Exchange will not halt trading if a Level 1 or 
Level 2 Market Decline occurs at 3:26 p.m. (12:26 p.m. on days with 
an early scheduled close) or later. The Exchange shall halt trading 
in all stocks and stock options until the next trading day if a 
Level 3 Market Decline occurs at any time during the trading day.
    \11\ See Cboe BYX Exchange Rules 11.18(a)(1)-(4) and 11.18(b); 
Cboe BZX Exchange Rules 11.18(a)(1)-(4) and 11.18(b); Cboe EDGA 
Exchange Rules 11.16(a)(1)-(4) and 11.16(b); Cboe EDGX Exchange 
Rules 11.16(a)(1)-(4) and 11.16(b).
    \12\ See Exchange Rule 5.20.01(e) (``Market-Wide Circuit Breaker 
Testing'').
    \13\ Supra note 8.
    \14\ A Trading Permit Holder means ``any individual, 
corporation, partnership, limited liability company or other entity 
authorized by the Rules that holds a Trading Permit.'' See Eleventh 
Amended and Restated Bylaws of Cboe Exchange, Inc. Section 1.1 
(``Definitions''). A Trading Permit ``means a license issued by the 
Exchange that grants the holder or the holder's nominee the right to 
access one or more facilities of the Exchange for the purpose of 
effecting transactions in securities traded on the Exchange without 
the services of another person acting as broker, and otherwise to 
access the facilities of the Exchange for purposes of trading or 
reporting transactions or transmitting orders or quotations in 
securities traded on the Exchange, or to engage in other activities 
that, under the Rules, may only be engaged in by Trading Permit 
Holders, provided that the holder or the holder's nominee, as 
applicable, satisfies any applicable qualification requirements to 
exercise those rights.'' See Exchange Rule 1.1 (``Definitions'').
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    As a result of the proposed changes described above, the remaining 
provisions of Rule 5.20.01 have been renumbered in order to provide 
additional clarity to Trading Permit Holders.
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.\15\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section

[[Page 42228]]

6(b)(5) \16\ 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) \17\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
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    In particular, the Exchange believes that removing the text in 
current Rules 5.20.01(a)-(c), (e)-(g) will promote just and equitable 
principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national market system, and protect 
investors and the public interest because the text being removed 
applies to equity securities, which do not currently trade on the 
Exchange. The language in Rules 5.20.01(a)-(c), (e)-(g) describes the 
applicable Market Declines, trading halts, reopening processes, and 
MWCB testing requirements that are identical to the corresponding MWCB 
rules in the Exchange's affiliated equities exchanges. Those rules are 
implemented exclusively by equities exchanges. As the Exchange does not 
trade equity securities, the Exchange believes it is confusing to have 
rule text that describes the MWCB program within its rules and believes 
that limiting the text in Rule 5.20.01 to describe that stock options 
will be halted in the event of a MWCB will eliminate potential 
confusion amongst Trading Permit Holders. The Exchange notes that 
competing exchanges have similar rule text regarding trading halts in 
options when a MWCB commences in equity securities.\18\
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    \18\ See NYSE Arca Options Rule 6.65-O(e), which states ``[t]he 
Exchange shall halt trading in all options whenever the equities 
markets initiate a market-wide trading halt commonly known as a 
circuit breaker in response to extraordinary market conditions.'' 
See also MIAX Options Exchange Rule 504.03, which states ``[t]he 
Exchange shall halt trading in all securities whenever a market-wide 
trading halt commonly known as a circuit breaker is initiated on the 
New York Stock Exchange in response to extraordinary market 
conditions.''
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    For the foregoing reasons, the Exchange believes that the proposed 
change is consistent with the Act.

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 change is not 
intended to address competition, but rather, makes clarifying changes 
to Rule 5.20.01 in order to benefit all Trading Permit Holders equally. 
The Exchange does not believe that removing the MWCB rule text that is 
applicable to equity securities would have any impact on competition as 
the revised rule text will look substantively similar to the rules of 
other competing options exchanges. The Exchange seeks to ensure 
consistency amongst exchanges with respect to this industry-wide 
program without implicating any competitive issues.

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)(iii) of the Act \19\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 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 Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange asked 
that the Commission waive the 30 day operative delay so that the 
proposal may become operative immediately upon filing. The proposed 
rule change simply removes rule text that does not apply to stock 
options exchanges and would clarify the MWCB halt process. Therefore, 
the Commission hereby waives the 30-day operative delay and designates 
the proposed rule change as operative upon filing.\23\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 under 
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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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#9be9eef7feb6f8f4f6f6fef5efe8dbe8fef8b5fcf4ed"><span class="__cf_email__" data-cfemail="dcaea9b0b9f1bfb3b1b1b9b2a8af9cafb9bff2bbb3aa">[email protected]</span></a>. Please include 
File Number SR-C2-2022-013 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-C2-2022-013. 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

[[Page 42229]]

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-C2-2022-013 
and should be submitted on or before August 4, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15000 Filed 7-13-22; 8:45 am]
BILLING CODE 8011-01-P


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