Document ID: SEC-2020-1812-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BYX Exchange, Inc.
Posted Date: 2020-11-13T05:00Z

[Federal Register Volume 85, Number 220 (Friday, November 13, 2020)]
[Notices]
[Pages 72724-72726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25056]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90364; File No. SR-CboeBYX-2020-031]

Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
14.10, Requirements for Securities Issued by the Exchange or its 
Affiliates

November 6, 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 October 28, 2020, Cboe BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 14.10 (Requirements for 
Securities Issued by the Exchange or its Affiliates) regarding the 
requirements for the listing of securities that are issued by the 
Exchange or any of its affiliates. The Exchange notes that the changes 
proposed herein are substantively identical to changes adopted on Cboe 
BZX Exchange, Inc. (``BZX'').\3\
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    \3\ See Securities Exchange Act Release No. 86623 (August 9, 
2019) 84 FR 41771 (August 15, 2019) (SR-CboeBZX-2019-073) (the ``BZX 
Filing'').
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    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/byx/), 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 14.10 (Requirements for 
Securities Issued by the Exchange or its Affiliates) regarding the 
requirements for the listing of securities that are issued by the 
Exchange or any of its affiliates. The Exchange notes that the changes 
proposed herein are substantively identical to changes adopted on Cboe 
BZX Exchange, Inc. (``BZX'').\4\
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    \4\ See Securities Exchange Act Release No. 86623 (August 9, 
2019) 84 FR 41771 (August 15, 2019) (SR-CboeBZX-2019-073) (the ``BZX 
Filing'').
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    Rule 14.10 sets forth certain monitoring requirements that must be 
met throughout the continued listing and trading of securities issued 
by the Exchange or its affiliates. More specifically, Rule 14.10(b) and 
(c) provide that:
     Throughout the continued listing and trading of an 
Affiliate Security \5\ on the Exchange, the Exchange shall prepare a 
quarterly report on the Affiliate Security for the Regulatory Oversight 
Committee (``ROC'') of the Exchange's Board of Directors that describes 
the Exchange's monitoring of the Affiliate Security's compliance with 
the Exchange's listing standards (the ``Quarterly Listing Report'');
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    \5\ As defined in Rule 14.10(a)(2), the term ``Affiliate 
Security'' means any security issued by a BYX Affiliate or any 
Exchange-listed option on any such security, with the exception of 
Portfolio Depository Receipts as defined in Rule 14.8(d) and 
Investment Company Units as defined in Rule 14.2.
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     once a year, an independent accounting firm shall review 
the listing standards for the Affiliate Security to ensure that the 
issuer is in compliance with the listing requirements (``Annual 
Report''), and a copy of the Annual Report shall be forwarded promptly 
to the ROC; and
     throughout the trading of an Affiliate Security on the 
Exchange, the Exchange shall prepare a quarterly report on the 
Affiliate Security for the Regulatory Oversight Committee of the 
Exchange's Board of Directors that describes the Exchange's monitoring 
of the trading of the Affiliate Security, including summaries of all 
related surveillance alerts, complaints, regulatory referrals, trades 
cancelled or adjusted pursuant to Exchange Rules, investigations, 
examinations, formal and informal disciplinary actions, exception 
reports and trading data used to ensure the Affiliate Security's 
compliance with the Exchange's listing and trading rules (the 
``Quarterly Trading Report'' and, collectively with the Quarterly 
Listing Report, the ``Quarterly Reports'').

Rule 14.10(d) requires that a copy of all Quarterly Reports and Annual 
Reports will be forwarded promptly to the Commission.
    The Exchange proposes to amend Rule 14.10(d) to remove the 
requirement that copies of the Quarterly Reports and Annual Reports be 
forwarded to the Commission and instead providing that the Exchange 
will forward a copy of the Quarterly Reports and/or Annual Reports to 
the Commission upon request.

[[Page 72725]]

    Finally, the Exchange is proposing to make clear that the 
requirements under Rule 14.10(b)(1),\6\ (2),\7\ (3),\8\ and (4) \9\ do 
not apply to Affiliate Securities that are Exchange-listed options. The 
Exchange is proposing this change because there is no issuer for 
options as the term is used in Rule 14.10(b) and each of the 
requirements under Rule 14.10(b) is implicitly related to equity 
securities and not to options on such equity securities. The Exchange 
is not proposing to make any changes to the requirement for all 
Affiliate Securities (including options) under Rule 14.10(c) that 
``[t]hroughout the trading of an Affiliate Security on the Exchange, 
the Exchange shall prepare a quarterly report on the Affiliate Security 
for the Regulatory Oversight Committee of the Exchange's Board of 
Directors that describes the Exchange's monitoring of the trading of 
the Affiliate Security, including summaries of all related surveillance 
alerts, complaints, regulatory referrals, trades cancelled or adjusted 
pursuant to Exchange Rules, investigations, examinations, formal and 
informal disciplinary actions, exception reports and trading data used 
to ensure the Affiliate Security's compliance with the Exchange's 
listing and trading rules.'' As such, the Exchange will continue to 
prepare reports on all Affiliate Securities (including those that are 
Exchange-listed options) as required under Rule 14.10(c).
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    \6\ Rule 14.10(b)(1) requires that prior to the initial listing 
of an Affiliate Security on the Exchange, Exchange personnel shall 
determine that such security satisfies the Exchange's rules for 
listing, and such finding must be approved by the Regulatory 
Oversight Committee of the Exchange's Board of Directors.
    \7\ Rule 14.10(b)(2) requires that throughout the continued 
listing of an Affiliate Security on the Exchange, the Exchange shall 
prepare a quarterly report on the Affiliate Security for the 
Regulatory Oversight Committee of the Exchange's Board of Directors 
that describes the Exchange's monitoring of the Affiliate Security's 
compliance with the Exchange's listing standards, including: The 
Affiliate Security's compliance with the Exchange's minimum share 
price requirement; and the Affiliate Security's compliance with each 
of the quantitative continued listing requirements.
    \8\ Rule 14.10(b)(3) requires that once a year, an independent 
accounting firm shall review the listing standards for the Affiliate 
Security to ensure that the issuer is in compliance with the listing 
requirements and a copy of the report shall be forwarded promptly to 
the Regulatory Oversight Committee of the Exchange's Board of 
Directors.
    \9\ Rule 14.10(b)(4) requires that in the event that the 
Exchange determines that the BYX Affiliate is not in compliance with 
any of the Exchange's listing standards, the Exchange shall notify 
the issuer of such non-compliance promptly and request a plan of 
compliance. The Exchange shall file a report with the Commission 
within five business days of providing such notice to the issuer of 
its non-compliance. The report shall identify the date of the non-
compliance, type of non-compliance, and any other material 
information conveyed to the issuer in the notice of non-compliance. 
Within five business days of receipt of a plan of compliance from 
the issuer, the Exchange shall notify the Commission of such 
receipt, whether the plan of compliance was accepted by the Exchange 
or what other action was taken with respect to the plan and the time 
period provided to regain compliance with the Exchange's listing 
standards, if any.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \10\ in general and Section 6(b)(5) of the Act \11\ in 
particular in that it is 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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, 
because the proposed changes would reduce the paperwork received by the 
Commission and ease the burden of submitting the Quarterly Reports and 
Annual Reports, without changing the information available to the 
Commission. In discussions with the Commission Staff regarding Rule 
14.10, it was determined that the Exchange no longer needed to provide 
copies of the Quarterly Reports and Annual Reports to the Commission. 
The Quarterly Reports and Annual Reports would continue to be available 
to the Commission, as they are subject to Section 17 of the Act \12\ 
and Rule 17a-1 thereunder,\13\ pursuant to which the Exchange is 
required to keep and preserve copies of the Quarterly Reports and 
Annual Reports, and to promptly furnish to the Commission copies of 
such Reports upon request of any representative of the Commission.
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    \12\ 15 U.S.C. 78q.
    \13\ 17 CFR 240.17a-1.
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    Finally, the Exchange believes that the clarifying change to 
exclude options on Affiliate Securities from the requirements of Rule 
14.10(b) would promote just and equitable principles of trade and 
remove impediments to a free and open market by making clear that 
certain obligations that implicitly did not apply to options on 
Affiliate Securities do not, in fact, apply. As noted above, the 
Exchange will continue to prepare reports on all Affiliate Securities 
that include summaries of all related surveillance alerts, complaints, 
regulatory referrals, trades cancelled or adjusted pursuant to Exchange 
Rules, investigations, examinations, formal and informal disciplinary 
actions, exception reports and trading data used to ensure the 
Affiliate Security's compliance with the Exchange's listing and trading 
rules (including those that are Exchange-listed options) as required 
under Rule 14.10(c).

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 believes that 
the proposed changes to eliminate the requirement that the Exchange 
submit copies of the Quarterly Reports and Annual Reports to the 
Commission and excluding options on Affiliate Securities from the 
requirements of Rule 14.10(b) will have no impact on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written 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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \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.

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[[Page 72726]]

    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ 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 to allow the 
Exchange to make the proposed changes to its rules without unnecessary 
delay in order to be consistent with those already in place on BZX, its 
affiliate. The Commission notes that the proposed rule change is based 
on and substantively identical to the rules of BZX.\18\ For this 
reason, the Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission waives the 30-day operative delay 
and designates the proposal operative upon filing.\19\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ See supra note 3.
    \19\ 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.

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-CboeBYX-2020-031 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-CboeBYX-2020-031. 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-CboeBYX-2020-031 and should be submitted 
on or before December 4, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25056 Filed 11-12-20; 8:45 am]
BILLING CODE 8011-01-P