[Federal Register Volume 86, Number 105 (Thursday, June 3, 2021)]
[Notices]
[Pages 29852-29856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92051; File No. SR-C2-2021-009]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Align 
the Exchange's Rulebook With the Rulebook of Its Affiliated Exchange, 
Cboe Options, Inc. (``Cboe Options'') and Make Other Formatting Changes

May 27, 2021.
    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 May 19, 2021, 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, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to 
align the Exchange's rulebook with the rulebook of its affiliated 
Exchange, Cboe Options, Inc. (``Cboe Options'') and make other 
formatting changes. 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://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 align the numbers of its rules in the 
Exchange's Rulebook with the numbers of the same (or substantially 
similar) rules within the rulebook of its affiliated exchange, Cboe 
Options.\3\ The Exchange believes aligning the numbers of its rules 
with those of the same (or substantially similar) rules of Cboe Options 
to the extent practicable \4\ will reduce potential confusion for 
market participants. The below table sets forth the rules in the 
Exchange's Rulebook, their current rule numbers, and the proposed rule 
numbers. As noted in the table below, the proposed rule change deletes 
certain reserved rule numbers and adds certain reserved rule numbers to 
maintain number alignment with Cboe Options rule numbers.
---------------------------------------------------------------------------

    \3\ In separate rule filings, the Exchange intends to similarly 
align the rule numbers of the Exchange's other affiliated options 
exchanges, Cboe BZX Exchange, Inc. and Cboe EDGX Exchange, Inc. with 
the rule numbers of Cboe Options and the Exchange.
    \4\ The Exchange notes that certain rules are applicable to it 
and not Cboe Options, and vice versa.

------------------------------------------------------------------------
                                                       Proposed new rule
            Rule name              Current rule No.           No.
------------------------------------------------------------------------
Definitions.....................  1.1...............  No change.
Exchange Determinations.........  1.2...............  1.5.
Time............................  1.3...............  1.6.
Trading Permit Holder Fees......  2.1...............  No change.
Exchange's Costs of Defending     2.2...............  2.5.
 Legal Proceedings.
Regulatory Revenues.............  2.3...............  2.2.
Reserved........................  N/A...............  2.4.
Trading Permits.................  3.1 \5\...........  No change.

[[Page 29853]]

 
Denial of and Conditions to       3.2...............  No change.
 Being a Permit Holder or an
 Associated Person.
Persons Associated with Trading   3.3...............  No change.
 Permit Holder.
Reserved........................  3.4...............  No change.
Trading Permit Holders and        3.5...............  No change.
 Persons Associated with a
 Trading Permit Holder Who Are
 or Become Subject to a
 Statutory Disqualification.
Dissolution and Liquidation of    3.6...............  No change.
 Trading Permit Holders.
Obligations of Terminating        3.7...............  No change.
 Trading Permit Holders.
Responsible Person..............  3.8...............  No change.
Integrated Billing System.......  3.9...............  2.3.
Letters of Guarantee and          3.10..............  3.61.
 Authorization.
C2 Pledge.......................  3.11..............  3.9.
Maintaining Current Address.....  3.12..............  3.10.
Educational Classes.............  3.13..............  3.11.
Effectiveness of a Trading        3.14..............  3.12.
 Permit Holder.
Reserved........................  N/A...............  3.52 [sic]-3.59.
Sponsored Users.................  3.15..............  3.60.
Affiliation Between the Exchange  3.16..............  3.62.
 and a Trading Permit Holder.
Cboe Trading as Outbound Router.  3.17..............  3.63.
Cboe Trading as Inbound Router..  3.18..............  3.64.
Reserved........................  3.19..............  Deleted.
Options Listing.................  Chapter 4           No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   4).
Business Conduct................  Chapter 5           Chapter 8
                                   (incorporates by    (incorporates by
                                   reference Cboe      reference Cboe
                                   Options Chapter     Options Chapter
                                   8).                 8).
Days and Hours of Business......  6.1...............  5.1.
Unit of Trading.................  6.2...............  5.2.
Meaning of Premium Bids and       6.3...............  5.3.
 Offers.
Minimum Increments for Bids and   6.4...............  5.4.
 Offers.
System Access and Connectivity..  6.8...............  5.5.
Entry and Cancellation of Orders  6.9...............  5.7.
Reserved........................  N/A...............  5.8.
Availability of Orders..........  6.10..............  5.6.
Opening Auction Process.........  6.11..............  5.31.
Order and Quote Book Processing,  6.12..............  5.32.
 Display, Priority, and
 Execution.
Complex Orders..................  6.13..............  5.33.
Order and Quote Price Protection  6.14..............  5.34.
 Mechanisms and Risk Controls.
Reserved........................  N/A...............  5.35.
Order Routing...................  6.15..............  5.36.
Binding Transactions............  6.26..............  5.11.
Reserved........................  N/A...............  6.1.
Reporting of Matched Trades to    6.27..............  6.4.
 Clearing Corporation.
Transaction Reports; Users'       6.28..............  6.2.
 Identities.
Reserved........................  N/A...............  6.3.
Nullification and Adjustment of   6.29..............  6.5.
 Options Transactions Including
 Obvious Errors.
Give Up of a Clearing Trading     6.30..............  5.10.
 Permit Holder.
Clearing Editor.................  6.31..............  6.6.
Trading Halts...................  6.32..............  5.20.
Authority to Take Action Under    6.33..............  5.23.
 Emergency Conditions.
Disaster Recovery...............  6.34..............  5.24.
Message Traffic Mitigation......  6.35..............  5.25.
Equity Market Plan to Address     6.39..............  5.21.
 Extraordinary Market Volatility.
Disclaimers and Limitations.....  6.42..............  1.10.
Limitation on the Liability of    6.43..............  1.11.
 Index Licensors for Options on
 Units.
Legal Proceedings Against the     6.44..............  1.13.\6\
 Exchange.
Limitation on Liability of        6.45..............  1.12.
 Reporting Authorities for
 Indexes Underlying Options.
Order Exposure Requirements.....  6.50..............  5.9.
Trading on Knowledge of Imminent  6.51..............  5.13.\7\
 Undisclosed Solicited
 Transaction.
Intermarket Linkage.............  Chapter 6, Section  Chapter 5, Section
                                   E (incorporates     E (incorporates
                                   Cboe Options        Cboe Options
                                   Chapter 5,          Chapter 5,
                                   Section by          Section by
                                   reference).         reference).
Exercises and Deliveries........  Chapter 6, Section  Chapter 6, Section
                                   F (incorporates     B (incorporates
                                   Cboe Options        Cboe Options
                                   Chapter 6,          Chapter 6,
                                   Section B by        Section B by
                                   reference).         reference).
Prohibition on Transactions Off   6.60..............  5.12.
 the Exchange.
Off-Floor Transfers of Positions  6.61..............  6.7.
Off-Floor RWA Transfers.........  6.62..............  6.8.
In-Kind Exchange of Options       6.63..............  6.9.
 Positions and ETF Shares and
 UIT Interests.

[[Page 29854]]

 
Regulatory Records, Reports, and  Chapter 7, Section  No change.
 Audits--General.                  A (incorporates
                                   by reference Cboe
                                   Options Chapter
                                   7, Section A).
Consolidated Audit Trail (CAT)..  Chapter 7, Section  No change.
                                   B (incorporates
                                   by reference Cboe
                                   Options Chapter
                                   7, Section B).
Initial Market-Maker              8.1...............  3.52.
 Registration.
Market-Maker Class Appointments.  8.2...............  5.50.
Market-Maker Class Appointment    8.3...............  5.50(d).
 Costs.
Good Standing for Market-Makers.  8.4...............  5.53.
Obligations of Market-Makers....  8.5...............  5.51.
Market-Maker Quotes.............  8.6...............  5.52.
Securities Accounts and Orders    8.7...............  7.6.
 of Market-Makers.
Financial Requirements and        8.8...............  Delete (Chapter 11
 Arrangement for Market-Makers.                        already
                                                       incorporates an
                                                       identical Cboe
                                                       Options Rule by
                                                       reference).\8\
Doing Business with the Public..  Chapter 9           No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   9).
Margin Requirements.............  Chapter 10          No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   10).
Net Capital Requirements........  Chapter 11          No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   11).
Summary Suspension..............  Chapter 12          No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   12).
Discipline......................  Chapter 13          No change.\9\
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   13).
Arbitration.....................  Chapter 14          No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   14).
Hearings and Review.............  Chapter 15          No change.
                                   (incorporates by
                                   reference Cboe
                                   Options Chapter
                                   15).
------------------------------------------------------------------------

    The proposed rule change also updates cross-references to reflect 
the proposed changes in the above table and updates chapter and section 
headings and to conform to those in the Cboe Options rulebook. The 
proposed rule change also corrects certain cross-references that are 
currently inaccurate, as follows:
---------------------------------------------------------------------------

    \5\ In separate rule filings, the Exchange intends to align the 
membership rules included in Chapter 3 of the Exchange's Rulebook 
with the membership rules included in Cboe Options' Rulebook.
    \6\ Proposed Rule 1.13 is the same as Cboe Options Rule 1.15. As 
Cboe Options Rules 1.13 and 1.14 are applicable to Cboe Options but 
not the Exchange, the Exchange expects Cboe Options to submit a 
separate filing to renumber Cboe Options Rule 1.15 to Rule 1.13, and 
then renumber current Cboe Options Rules 1.13 and 1.14 to Rules 1.14 
and 1.15, respectively.
    \7\ The Exchange notes current Rule 6.51 (proposed Rule 5.13) is 
the same as Cboe Options Rule 5.86(e). As Cboe Options Rule 5.86(e) 
is inapplicable to C2, the proposed rule change moves current Rule 
6.51 to Rule 5.13, which is a rule number not currently in the Cboe 
Options rulebook. The Exchange and Cboe Options will consider 
whether additional changes can be made to further align this and 
other rule numbers.
    \8\ Chapter 11 of the Exchange's Rulebook incorporates by 
reference Chapter 11 of the Cboe Options Rulebook, including Cboe 
Options Rule 11.6, which is virtually identical to current C2 Rule 
8.8. Therefore, current C2 Rule 8.8 is redundant.
    \9\ Currently, Chapter 13 of the Exchange Rulebook states that 
any references in Cboe Options Rule 13.15 to Rule 2.3 are deemed to 
refer to C2 Rule 3.9. Current Rule 3.9 and Cboe Options Rule 2.3 are 
identical, and with the proposed move of C2 Rule 3.9 to Rule 2.3, 
that sentence in Chapter 13 is no longer necessary. Therefore, the 
proposed rule change deletes that sentence from Chapter 13. 
Additionally, Rule 13.15(g)(19) currently includes a parenthetical 
reference to Rule 6.34(b), which is also referenced in the body of 
that rule. The other C2-specific provisions in Rule 13.15 do not 
include such parenthetical reference in the rule provision heading, 
so the proposed rule change deletes that reference for consistency 
throughout the rule.

------------------------------------------------------------------------
  Rule location of current       Current cross-       Revised/accurate
 inaccurate cross-reference         reference          cross-reference
------------------------------------------------------------------------
1.1 (definition of            6.80 (incorrect Cboe  5.65 (Cboe Options
 ``Protected Quotation'').     Options rule number   rule number
                               (which should be      incorporated by
                               Cboe Options Rule     reference into
                               5.65) incorporated    proposed C2 Chapter
                               by reference into     5, Section E).
                               current C2 Chapter
                               6, Section E).
1.1 (definition of ``System   Chapters 5 and 24     Chapter 4
 Securities'').                (should be Chapter    (incorporates by
                               4).                   reference Cboe
                                                     Options Chapter 4).
1.1 (definition of ``Unit'')  Rule 5.3,             Rule 4.3,
                               Interpretation and    Interpretation and
                               Policy .06            Policy .06) (Cboe
                               (incorrect Cboe       Options rule number
                               Options rule number   incorporated by
                               (which should be      reference into C2
                               Cboe Options Rule     Chapter 4).
                               4.3, Interpretation
                               and Policy .06)
                               incorporated by
                               reference into
                               current C2 Chapter
                               4).
6.42(f) (proposed Rule        Chapter 19 (should    Chapter 15 (which
 1.10(f)).                     be Chapter 15,        incorporates by
                               which incorporates    reference Cboe
                               by reference Cboe     Options Chapter
                               Options Chapter 15).  15).

[[Page 29855]]

 
6.43(a) (proposed Rule 1.11)  Rule 5.3.06           Rule 4.3,
                               (incorrect Cboe       Interpretation and
                               Options rule number   Policy .06) (Cboe
                               (which should be      Options rule number
                               Cboe Options Rule     incorporated by
                               4.3, Interpretation   reference into C2
                               and Policy .06)       Chapter 4).
                               incorporated by
                               reference into
                               current C2 Chapter
                               4).
3.1(f)......................  Chapter 17 (should    Chapter 13 (which
                               be Chapter 13,        incorporates by
                               which incorporates    reference Cboe
                               by reference Cboe     Options Chapter
                               Options Chapter 13).  13).
3.2(e)......................  Chapter 19 (should    Chapter 15 (which
                               be Chapter 15,        incorporates by
                               which incorporates    reference Cboe
                               by reference Cboe     Options Chapter
                               Options Chapter 15).  15).
3.6.........................  Chapter 16 (should    Chapter 12 (which
                               be Chapter 12,        incorporates by
                               which incorporates    reference Cboe
                               by reference Cboe     Options Chapter
                               Options Chapter 12).  12).
3.13 (proposed Rule 3.11)...  Rule 17.50            Rule 13.15 and
                               (incorrect Cboe       Chapter 13 (which
                               Options rule          incorporates by
                               number, which         reference Cboe
                               should be Cboe        Options Rule 13.15
                               Options Rule 13.15    and Chapter 13,
                               (incorporated by      respectively).
                               reference into C2
                               Chapter 13) and
                               Chapter 17 (should
                               be Chapter 13,
                               which incorporates
                               by reference Cboe
                               Options Chapter 13).
6.3(b) (proposed 5.3(b))....  5.7 (should be        5.2.
                               current Rule 6.2,
                               which is proposed
                               Rule 5.2).
6.10(c) (definition of        5.66 (incorrect Cboe  5.66 (Cboe Options
 ``Cancel Back'').             Options rule, which   rule incorporated
                               should be Cboe        by reference into
                               Options Rule 5.66     proposed C2 Chapter
                               (incorporated by      5, Section E).
                               reference into C2
                               Chapter 6, Section
                               E (proposed C2
                               Chapter 5, Section
                               E).
6.30(h) (proposed 5.10(h))..  8.1 (correct Cboe     8.1 (Cboe Options
                               Options rule          rule incorporated
                               number, but is        by reference into
                               incorporated by       proposed C2 Chapter
                               reference into        8).
                               current C2 Chapter
                               5 (proposed C2
                               Chapter 8)).
6.51 (proposed 5.13)........  8.1 (correct Cboe     8.1 (Cboe Options
                               Options rule          rule incorporated
                               number, but is        by reference into
                               incorporated by       proposed C2 Chapter
                               reference into        8).
                               current C2 Chapter
                               5 (proposed C2
                               Chapter 8)).
6.32, Interpretation and      6.1 (should be        5.31.
 Policy .02(c) (proposed       current 6.11
 5.20, Interpretation and      (proposed 5.31).
 Policy .02(c)).
6.61(a)(1) (proposed          8.5 and 8.14          8.5 and 8.14 (Cboe
 6.7(a)(1)).                   (correct Cboe         Options rules
                               Options rule          incorporated by
                               numbers, but is       reference into
                               incorporated by       proposed C2 Chapter
                               reference into        8).
                               current C2 Chapter
                               5 (proposed C2
                               Chapter 8)).
Chapter 7, Section B........  Section F of Cboe     Section B of Cboe
                               Options Chapter VI    Options Chapter 6
                               (should be Section    [sic].
                               B of Cboe Options
                               Chapter 6).
------------------------------------------------------------------------

    The proposed rule change makes no substantive changes to any rule 
text.
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.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change will 
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 by aligning the numbers and format of 
the Exchange's rules within its Rulebook with the rule numbers of the 
same rules in the rulebook of Cboe Options, which is affiliated with 
the Exchange.\13\ The Exchange believes consistent numbering (and 
chapter and section headings) among rulebooks of affiliated exchanges 
for rules (and chapter and section headings) that are the same (or 
substantially similar) may simplify the rulebooks of the Exchange and 
its affiliated exchanges as well as reduce confusion among participants 
of the Exchange that are also participants on Cboe Options. The 
Exchange believes this consistency will foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities.
---------------------------------------------------------------------------

    \13\ A significant portion of the Exchange's Rulebook 
incorporates by reference Cboe Options rules and is already aligned 
numerically with the Cboe Options rulebook. The proposed rule change 
aligns the numbers of all rules and chapters in the Exchange's 
Rulebook with those of the Cboe Options rulebook.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change has 
no competitive impact, as it merely changes the numbers of certain 
rules (and updates cross-references, as appropriate) and chapter and 
section heading names and font, but makes no substantive changes to any 
rule text.

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.

[[Page 29856]]

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \14\ and paragraph (f) of Rule 19b-4 \15\ 
thereunder. 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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#7a080f161f57191517171f140e093a091f19541d150c"><span class="__cf_email__" data-cfemail="5c2e293039713f3331313932282f1c2f393f723b332a">[email protected]</span></a>. Please include 
File Number SR-C2-2021-009 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-C2-2021-009. 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-C2-2021-009 and should be submitted on 
or before June 24, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11609 Filed 6-2-21; 8:45 am]
BILLING CODE 8011-01-P


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