[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Notices]
[Pages 42237-42239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14999]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95228; File No. SR-CBOE-2022-035]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 5.22 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 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'') is 
filing with the Securities and Exchange Commission (the ``Commission'') 
a proposal to amend Rule 5.22 to remove certain references to the 
Market-Wide Circuit Breaker program. 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 Exchange Rule 5.22 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. In addition, the Exchange proposes to make certain non-
substantive changes to Rule 5.22 to delete references to individual 
stocks, which no longer trade on the Exchange.
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. 94706 (April 12, 
2022), 87 FR 22954 (April 18, 2022) (SR-CBOE-2022-018) (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 5.22).
    \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 5.22,\8\ which states, ``[t]he Exchange shall halt trading in all 
stocks and stock options whenever a market-wide trading halt known as a 
circuit breaker is initiated in response to extraordinary market 
conditions.'' Rules 5.22(a) \9\ and 5.22(b) \10\ describe the 
applicable Market

[[Page 42238]]

Declines and associated trading halts applicable to MWCB. The Exchange 
notes that the text in Rules 5.22(a) and 5.22(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. While the Exchange previously operated a stock trading 
facility, this functionality is no longer supported by the Exchange and 
as such, the Exchange is proposing to remove the MWCB rules associated 
with equity securities. Rules 5.22(f)-(h) 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 5.22(a), 5.22(b), 5.22(d), 
5.22(e), 5.22(f), 5.22(g), and 5.22(h), as this language applies 
specifically to equity securities, which do not trade on the Exchange. 
Given that the introductory language in Rule 5.22 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 5.22(a)-(b), (d)-(h)) 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 5.22 (``Market-wide Trading Halts due to 
Extraordinary Market Volatility'').
    \9\ See Exchange Rule 5.22(a) (``Definitions''). 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 5.22(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 5.22(f) (``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 5.22 have been renumbered. In addition, the Exchange 
has proposed a non-substantive change to current Rule 5.22(c) in order 
to remove outdated reopening procedures and reference current Rule 
5.31, which describes the reopening process for all halts.\15\ The 
Exchange notes that these changes are non-substantive and are being 
proposed to better organize the Exchange's rules regarding halts due to 
MWCB and provide a more accurate description of the Exchange's 
reopening process following a MWCB halt.
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    \15\ See Rule 5.31(g) (``Opening Auction Process Following 
Trading Halts'').
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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.\16\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
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    In particular, the Exchange believes that removing the text in 
current Rules 5.22(a)-(b), (d)-(h) 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 5.22(a)-(b), (d)-(h) 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 5.22 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.\19\ In addition, the 
Exchange believes that the proposed non-substantive change to remove 
the current, outdated rule text in Rule 5.22 regarding the reopening 
procedures for halts due to a MWCB promotes just and equitable 
principles of trade, removes impediments to and perfects the mechanism 
of a free and open market and a national market system, and protects 
investors and the public interest because it seeks to clarify that any 
reopening due to a MWCB halt will be conducted under the provisions of 
Rule 5.31. By providing a reference to Rule 5.31, the Exchange believes 
Trading Permit Holders will be directed to the most relevant reopening 
procedures and any potential confusion regarding the reopening process 
for halts due to MWCBs will be eliminated.
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    \19\ 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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    Similarly, the Exchange believes that removing language that 
references the trading of stocks on the Exchange 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 as it is inapplicable to the 
Exchange. Equity securities are not eligible for trading on the 
Exchange and the rules are applicable only to the securities which 
currently trade on the Exchange. Therefore, deletion of this language 
will eliminate any potential confusion from the Rules.
    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

[[Page 42239]]

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 5.22 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 \20\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 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) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ 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.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ 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) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 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#cfbdbaa3aae2aca0a2a2aaa1bbbc8fbcaaace1a8a0b9"><span class="__cf_email__" data-cfemail="552720393078363a3838303b2126152630367b323a23">[email protected]</span></a>. Please include 
File Number SR-CBOE-2022-035 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-2022-035. 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-2022-035 
and should be submitted on or before August 4, 2022.






    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14999 Filed 7-13-22; 8:45 am]
BILLING CODE 8011-01-P


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