Document ID: SEC-2020-0805-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-05-21T04:00Z

[Federal Register Volume 85, Number 99 (Thursday, May 21, 2020)]
[Notices]
[Pages 31008-31010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10931]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88886; File No. SR-CBOE-2020-047]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 5.24

May 15, 2020.
    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 15, 2020, Cboe Exchange, Inc. (the ``Exchange'') 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 amend Rule 5.24. The text of the proposed rule change is provided 
below.
(Additions are Italicized; Deletions are [Bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *

Rule 5.24. Disaster Recovery

    (a)-(d) No change.
    (e) Loss of Trading Floor. If the Exchange trading floor becomes 
inoperable, the Exchange will continue to operate in a screen-based 
only environment using a floorless configuration of the System that is 
operational while the trading floor facility is inoperable. The 
Exchange will operate using this configuration only until the 
Exchange's trading floor facility is operational. Open outcry trading 
will not be available in the event the trading floor becomes 
inoperable, except in accordance with paragraph (2) below and pursuant 
to Rule 5.26, as applicable.
    (1) Applicable Rules. In the event that the trading floor becomes 
inoperable, trading will be conducted pursuant to all applicable System 
Rules, except that open outcry Rules will not be in force, including 
but not limited to the Rules (or applicable portions of the Rules) in 
Chapter 5, Section G, and as follows (subparagraphs (A) through (E) 
will be effective until [May 15] June 30, 2020):
* * * * *
    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 5.24 regarding the Exchange's 
business continuity and disaster recovery plans. Rule 5.24 describes 
which Trading Permit Holders (``TPHs'') are required to connect to the 
Exchange's backup systems as well as certain actions the Exchange may 
take as part of its business continuity plans so that it may maintain 
fair and orderly markets if unusual circumstances occurred that could 
impact the Exchange's ability to conduct business. This includes what 
actions the Exchange would take if its trading floor became inoperable. 
Specifically, Rule 5.24(e) states if the Exchange trading floor becomes 
inoperable, the Exchange will continue to operate in a screen-based 
only environment using a floorless configuration of the System that is 
operational while the trading floor facility is inoperable. The 
Exchange would operate using that configuration only until the 
Exchange's trading floor facility became operational. Open outcry 
trading would not be available in the event the trading floor becomes 
inoperable.\5\
---------------------------------------------------------------------------

    \5\ Pursuant to Rule 5.26, the Exchange may enter into a back-up 
trading arrangement with another exchange, which could allow the 
Exchange to use the facilities of a back-up exchange to conduct 
trading of certain of its products. The Exchange currently has no 
back-up trading arrangement in place with another exchange.
---------------------------------------------------------------------------

    Rule 5.24(e)(1) currently states in the event that the trading 
floor becomes inoperable, trading will be conducted pursuant to all 
applicable System Rules, except that open outcry Rules would not be in 
force, including but not limited to the Rules (or applicable portions) 
in Chapter 5, Section G,\6\ and that all non-trading rules of the 
Exchange would continue to apply.\7\ The Exchange recently adopted 
several rule changes that would apply during a time in which the 
trading floor in inoperable, which are effective until May 15, 2020.\8\

[[Page 31009]]

The Exchange believes these rules were necessary to implement to 
maintain a fair and orderly market while the trading floor was not 
operable in order to create an all-electronic trading environment 
similar to the otherwise unavailable open outcry trading environment.
---------------------------------------------------------------------------

    \6\ Chapter 5, Section G of the Exchange's rulebook sets forth 
the rules and procedures for manual order handling and open outcry 
trading on the Exchange.
    \7\ The proposed rule change updates subparagraph numbering 
throughout Rule 5.24(e)(1) to conform to numbering used throughout 
the Rules.
    \8\ See Securities Exchange Act Release Nos. 88386 (March 13, 
2020), 85 FR 15823 (March 19, 2020) (SR-CBOE-2020-019); 88447 (March 
20, 2020) (SR-CBOE-2020-023); 88490 (SR-CBOE-2020-026) (filed March 
26, 2020); and SR-CBOE-2020-031 (filed March 31, 2020).
---------------------------------------------------------------------------

    As of March 16, 2020, the Exchange suspended open outcry trading to 
help prevent the spread of COVID-19 \9\ and is currently operating in 
an all-electronic configuration. In accordance with federal and state 
health and safety guidelines, the Exchange intends to keep its trading 
floor closed and continue to operate in an all-electronic configuration 
until at least June 1, 2020. While an all-electronic trading 
environment cannot fully replicate open outcry trading, the Exchange 
continues to believes the recent amendments to Rule 5.24(e)(1) have 
allowed all-electronic trading to occur more similarly to open outcry 
trading.\10\ To permit this all-electronic trading environment to 
continue in an interrupted manner given the continued closure of the 
Exchange's trading floor, the Exchange proposed to extend the 
effectiveness of the temporary Rules in Rule 5.24(e)(1) until June 30, 
2020 (unless further extended).
---------------------------------------------------------------------------

    \9\ On March 11, 2020, the World Health Organization 
characterized COVID-19 as a pandemic and to slow the spread of the 
disease, federal and state officials implemented social-distancing 
measures, placed significant limitations on large gatherings, 
limited travel, and closed non-essential businesses.
    \10\ The Exchange continues to consider other enhancements to 
the all-electronic trading configuration that it believes may permit 
this configuration to further replicate the open outcry trading 
environment. The Exchange would submit separate rule filings for any 
such proposed enhancements.
---------------------------------------------------------------------------

    The Exchange's Regulatory Division has continued, and will 
continue, its standard routine surveillance reviews for electronic 
trading, and has implemented, and will continue to apply, a regulatory 
plan to surveil the rules in place in Rule 5.24(e)(1) when operating in 
a screen-based only environment.
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.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. 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, 
protect investors and the public interest by permitting the current 
all-electronic trading environment to continue in an uninterrupted 
manner while the trading floor continues to be inoperable. The Exchange 
continues to believe the recent amendments to Rule 5.24(e)(1) have 
allowed all-electronic trading to occur more similarly to open outcry 
trading. The Exchange believes the proposed rule change is necessary 
and appropriate to provide continued execution opportunities in an all-
electronic trading environment for orders that generally execute in 
open outcry trading.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
---------------------------------------------------------------------------

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 is 
not intended as a competitive filing, but rather extends the 
effectiveness of temporary rules as part of the Exchange's business 
continuity plans, which are intended to allow the Exchange to continue 
to maintain fair and orderly markets while the Exchange's trading floor 
continues to be inoperable.

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 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 \14\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \16\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the 
Commission to 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 to protect 
investors by permitting temporary rules that have been in place since 
the Exchange suspended open outcry trading on March 16, 2020 to remain 
in effect in an uninterrupted manner while the Exchange's trading floor 
remains inoperable. The Exchange believes extension of the temporary 
rules in place while the Exchange's trading floor is inoperable is 
reasonable given the uncertainty with respect to the ongoing COVID-19 
pandemic. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest as it will allow the temporary rules to continue 
uninterrupted, thereby avoiding investor confusion that could result 
from an interruption in the effectiveness of the rules. Accordingly, 
the Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\18\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may

[[Page 31010]]

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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2020-047 on the subject line.

Paper Comments

     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-2020-047. 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-2020-047 and should be submitted on 
or before June 11, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10931 Filed 5-20-20; 8:45 am]
 BILLING CODE 8011-01-P