Document ID: SEC-2021-0539-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe C2 Exchange, Inc.
Posted Date: 2021-04-20T04:00Z

[Federal Register Volume 86, Number 74 (Tuesday, April 20, 2021)]
[Notices]
[Pages 20564-20567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08038]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91560; File No. SR-C2-2021-006]

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Eliminate Existing Rule 3.30 (Qualification and Registration) and 
Incorporate by Reference Cboe Exchange, Inc. Chapter 3, Section B, in 
Its Entirety

April 14, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on April 9, 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 and II below, which Items have been substantially 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

    The Exchange proposes to eliminate existing Rule 3.30 and 
incorporate by reference Cboe Exchange, Inc. (``Cboe Options'') Chapter 
3, Section B, in its

[[Page 20565]]

entirety. 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 previously adopted C2 Rule 3.30 (Qualification and 
Registration), which provides for registration requirements to ensure 
that associated persons of Trading Permit Holder (``TPH'') 
organizations attain and maintain specified levels of competence and 
knowledge pertinent to their functions. In general, the current rules: 
(1) Require that persons engaged in a TPH organization's securities 
business who are to function as representatives or principals register 
with the Exchange in the category of registration appropriate to their 
functions by passing one or more qualification examinations \5\ and (2) 
exempt specified associated persons from the registration 
requirements.\6\ The Exchange believes that current C2 Rule 3.30 is 
substantively identical to corresponding Rule 3.30 on its affiliate 
exchange, Cboe Options.\7\ The Exchange notes that, other than Cboe 
Options Rule 3.30, the C2 rulebook incorporates by reference the 
remaining rules contained in Cboe Options Chapter 3, Section B, as such 
rules may be in effect from time to time.\8\ However, the Exchange's 
rulebook is clear that Cboe Options Rule 3.30, which is contained in 
Cboe Options Chapter 3, Section B, does not apply to C2.
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    \5\ See C2 Options Rule 3.30(a)(1).
    \6\ See C2 Options Rule 3.30(a)(2).
    \7\ See Cboe Options Rule 3.30 (Qualification and Registration 
of Trading Permit Holders and Associated Persons).
    \8\ See Exchange Act Release No. 91203 (February 24, 2021), 86 
FR 12251 (March 2, 2021). As a condition of the exemption approved 
by the Commission pursuant to Section 36 of the Act, the Exchange 
agreed to provide written notice to its members whenever Cboe Option 
proposes a change to its Chapter 3, Section B rules. The Exchange 
provides such notice via a posting on the same website location 
where the Exchange posts its own rule filings pursuant to Rule 19b-4 
within the timeframe required by such rule. Such notice alerts 
Exchange members to the proposed Cboe Options rule change and gives 
them an opportunity to comment on the proposal. The Exchange 
similarly informs its members in writing when the Commission 
approves any such proposed change.
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    The Exchange no longer wishes to maintain an exception of Cboe 
Options Rule 3.30 to the incorporation by reference of Chapter 3, 
Section B as it does not believe it is necessary and may cause 
potential confusion. Additionally, Cboe Options has filed a proposed 
rule change to amend its registration rules, including Cboe Options 
Rule 3.30. The pending rule filing also proposes to adopt new rules 
under Cboe Options Chapter 3, Section B, related to registration 
requirements.\9\ As most of Cboe Options Chapter 3, Section B is 
incorporated by reference into the Exchange's rulebook, the proposed 
new Cboe Options rules (and amendments to existing Cboe Options rules 
contained in Chapter 3, Section B other than Cboe Options Rule 3.30) 
would automatically apply to C2 upon that rule filing becoming 
operative. Since the Exchange does not incorporate by reference Cboe 
Options Rule 3.30 however, the proposed amendments to Cboe Options Rule 
3.30 would not automatically apply to C2, even though Cboe Options Rule 
3.30, as amended, would relate to, and even cross-reference, the 
proposed new Cboe Options rules that would apply to C2.\10\ As such, 
the Exchange now proposes to eliminate the language that states Cboe 
Options Rule 3.30 does not apply to C2 and remove C2 Rule 3.30, which 
is identical to Cboe Options Rule 3.30, thereby incorporating by 
reference Cboe Options Rule 3.30 (which becomes incorporated by 
reference under the umbrella of the overall incorporation by reference 
of Cboe Options Chapter 3, Section B). The Exchange believes Cboe 
Options Rule 3.30 is within the same category of exchange rules 
otherwise incorporated into C2 Chapter 3, Section B by reference to 
Cboe Options Chapter 3, Section B (i.e. rules related to TPH 
Registration). Further, the incorporation by reference of Cboe Options 
Rule 3.30 into the Exchange's Chapter 3, Section B title is regulatory 
in nature.\11\ The Exchange believes incorporating by reference the 
entire Cboe Options Chapter 3, Section B rules maintains consistency 
between C2 and Cboe Options rules, and helps ensure identical 
regulation of the Exchange's TPHs that are also Cboe Options TPHs and 
also ensures that C2-only TPHs are subject to consistent regulation as 
Cboe Options TPHs.
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    \9\ See SR-CBOE-2021-022.
    \10\ Id.
    \11\ Cboe Options Chapter 3, Section B rules are categories of 
rules that are not trading rules. See 17 CFR 200.30-3(a)(76) 
(contemplating such requests). In addition, several other Self-
Regulatory Organizations (``SROs'') incorporate by reference similar 
regulatory rules of other SROs. See, e.g., Exchange Act Release Nos. 
57478 (March 12, 2008), 73 FR 14521 (March 18, 2008), 53128 (January 
13, 2006), 71 FR 3550 (January 23, 2006); 49260 (February 17, 2004), 
69 FR 8500 (February 24, 2004).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\12\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \13\ 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) \14\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In particular, the proposed rule change does not make any 
substantive change to any of C2's rules. The proposed rule change is 
merely intended to incorporate by reference the entirety of Cboe 
Options Chapter 3, Section B rules in the C2 rulebook, instead of 
excluding a single Cboe Options Rule from incorporation (i.e., Cboe 
Options Rule 3.30) which currently is substantively identical to the 
corresponding C2 Rule (i.e., C2 Rule 3.30). Indeed, the proposed rule 
change makes no substantive changes to the C2 rulebook: It does not 
alter any of the

[[Page 20566]]

current rules incorporated by reference, and it incorporates by 
reference a rule (i.e., Cboe Options 3.30), which is substantively 
identical to an existing rule (i.e., C2 Rule 3.30), which would be 
removed. As such, the same rules currently applicable to C2 TPHs 
effectively will apply to TPHs upon effectiveness of this rule filing 
in the same manner, whether those rules are incorporated by reference 
to Cboe Options rules or included in C2's rules.
    The Exchange also believes the proposed rule change is designed to 
promote 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, in general protects investors and the public 
interest, by consolidating all of its rules related to TPH registration 
into a single rule set. Incorporating by reference Cboe Options Rule 
3.30 into the Exchange's Chapter 3, Section B title will provide an 
easy reference for Exchange TPHs seeking to comply with registration 
and qualification requirements of both Cboe Options and C2. The 
Exchange believes the proposed change makes the Exchange's rulebook 
easier to read and follow, thus allowing market participants to better 
understand the rules of the Exchange, which will also result in less 
burdensome and more efficient regulatory compliance for market 
participants that are TPHs of both Cboe Options and C2. Also, as 
discussed, TPHs will be required to continue to comply with the 
substance of Cboe Options Rule 3.30, since the substance of Cboe 
Options Rule 3.30 is substantively identical.
    Lastly, the Exchange believes that in light of the proposed rule 
changes to corresponding Cboe Options rules discussed above, 
incorporating by reference Cboe Options Rule 3.30 will promote 
efficient use of the Commission's and the Exchange's resources by 
avoiding duplicative rule filings that would otherwise be needed based 
on simultaneous changes to identical rule text sought by more than one 
SRO (i.e., Cboe Options and C2).

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. Particularly, the proposal 
is not intended to address any competitive issue. Rather, the Exchange 
is effectively incorporating by reference a Cboe Options rule (i.e., 
Cboe Options Rule 3.30) to replace a current substantively identical 
Exchange rule (i.e., C2 Rule 3.30) that is within the same category of 
exchange rules otherwise incorporated into C2 Chapter 3, Section B by 
reference (i.e., Cboe Options Chapter 3, Section B, which contains 
rules related to TPH Registration). The Exchange is not amending the 
substance of its registration rules with this proposed rule change and 
therefore no TPH is impacted.

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 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 \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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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    The Exchange requested that the Commission waive the 30-day 
operative delay period after which a proposed rule change under Rule 
19b-4(f)(6) becomes effective so that the Exchange can immediately 
update its rulebook to further align with the Cboe Options rulebook. 
This further alignment of rulebooks will help avoid any potential 
confusion that may be created by, as discussed above, all Cboe Options 
rules in Chapter 3, Section B currently being incorporated by reference 
in the C2 rulebook with the exception of Cboe Options Rule 3.30. 
Additionally, and as also discussed above, Cboe Options has filed a 
separate proposed rule change to amend certain registration rules, 
including Cboe Options Rule 3.30.\17\ As a result, waiving the 30-day 
operative delay period for this proposed rule change will allow the 
separate proposed rule changes to amend the Cboe Options rulebook to 
automatically apply to the C2 rulebook. This, in turn, will not only 
maintain consistency between the C2 and Cboe Options rulebooks, but it 
will also avoid the need for duplicative proposed rule change filings 
by two separate, but related, SROs that are based on simultaneous 
changes to otherwise identical rule text. For these reasons, the 
Commission believes that waiver of the 30-day operative delay for this 
proposal is consistent with the protection of investors and the public 
interest. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\18\
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    \17\ See SR-CBOE-2021-022.
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change'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 to 
determine whether the proposed rule 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-C2-2021-006 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-C2-2021-006. 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

[[Page 20567]]

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 
such 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-C2-2021-006 
and should be submitted on or before May 11, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08038 Filed 4-19-21; 8:45 am]
BILLING CODE 8011-01-P