Document ID: SEC-2019-1315-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-09-16T04:00Z

[Federal Register Volume 84, Number 179 (Monday, September 16, 2019)]
[Notices]
[Pages 48687-48690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19904]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86920; File No. SR-CBOE-2019-056]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Cboe Trade Match System

September 10, 2019.
    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 September 5, 2019, 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, 
II, and III 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'') proposes 
to update the Exchange's Rules regarding the Cboe Trade Match System 
(``CTM'') and move those Rules from the currently effective Rulebook 
(``current Rulebook'') to the shell structure for the Exchange's 
Rulebook that will become effective upon the migration of the 
Exchange's trading platform to the same system used by the Cboe 
Affiliated Exchanges (as defined below) (``shell Rulebook''). The text 
of the proposed rule change is provided in Exhibit 5.

[[Page 48688]]

    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
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc. 
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also 
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe 
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or 
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX 
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with 
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated 
Exchanges''). Cboe Options intends to migrate its trading platform to 
the same system used by the Cboe Affiliated Exchanges, which the 
Exchange expects to complete on October 7, 2019. In connection with 
this technology migration, the Exchange has a shell Rulebook that 
resides alongside its current Rulebook, which shell Rulebook will 
contain the Rules that will be in place upon completion of the Cboe 
Options technology migration.
    The Exchange proposes to harmonize current Rule 6.67 in connection 
with the Cboe Trade Match System (``CTM''), which allows authorized 
Trading Permit Holders (``TPHs'') to add and/or update trade records, 
to C2 Rule 6.31, which provides for the ``Clearing Editor'' and is 
functionally equivalent to CTM. The Exchange now proposes Rule 6.6 in 
the shell Rulebook, which will govern the Exchange's Clearing Editor 
upon migration, and to delete Rule 6.67 from the current Rulebook, also 
upon migration. The Exchange proposes to amend the rule to conform to 
the Clearing Editor functionality and rule language of that of C2 to 
the extent necessary to retain intended differences unique to Cboe 
Options market-model, functionality, and/or rule text, which are 
identified below. The Exchange also proposes to make non-substantive 
changes by updating cross-references to rules in the shell Rulebook and 
rules not yet in the shell Rulebook but that in the Exchange intends to 
move to the shell Rulebook and, as a result of consolidating and 
conforming the proposed rule to the corresponding C2 rule, make non-
substantive changes that simplify and update the rule text to read in 
plain English and reformat the paragraph lettering and/or numbering.
    Specifically, the Clearing Editor under proposed Rule 6.6, like 
CTM, allows TPHs to update executed trades on their trading date and 
revise them for clearing. Proposed Rule 6.6(a) is substantively the 
same as the current general language under Rule 6.67 and is consistent 
with corresponding C2 Rule 6.31(a). The Exchange maintains that along 
with using Clearing Editor to correct certain bona fide errors, TPHs 
may use it to update information entered pursuant to Rule 6.1 in the 
shell Rulebook (current Rule 6.51).\5\ The proposed rule maintains this 
difference between it and C2 Rule 6.31 as it relates to the 
systemization or report of an order executed in open outcry which is 
unique to Cboe Options. Proposed Rule 6.6(b) is also substantially 
similar to current 6.67(a). The proposed rule change makes minor 
updates to conform the rule to corresponding C2 Rule 6.31(b), including 
allowing a TPH to change the account and subaccount field, as opposed 
to only the market-maker account and subaccount currently allowed, and 
updating the term origin code to capacity code which is both consistent 
with the current C2 term, as well as currently defined in the shell 
Rulebook and to be used in the Exchange Rules upon migration.\6\ The 
proposed rule retains language that provides that a change to capacity 
code may not be made from a customer code to any other code. The 
proposed rule maintains this difference between it and the 
corresponding C2 Rule because Cboe Options will continue to provide for 
customer priority upon migration,\7\ unlike C2 which does not account 
for customer priority. The proposed rule change deletes current Rule 
6.67(b), which lists fields TPHs may change only if they provide notice 
to the Exchange. Upon migration, Clearing Editor will not permit TPHs 
to change these fields, which is consistent with C2 Rule 6.31. If a TPH 
must change the series, quantity, buy or sell, or premium price, it 
must contact the Exchange pursuant to Rule 6.5 in the shell Rulebook 
(current Rule 6.25) regarding obvious errors. In light of the proposed 
deletion of Rule 6.67(b), the proposed rules change also removes the 
provision under Rule 6.67 which states that the Exchange will announce 
documentation requirements related to changes made through the use of 
CTM via a Regulatory Circular. This provision is currently in place in 
order for a TPH to provide to the Exchange notice and document of the 
any changes made pursuant to pursuant to Rule 6.67(b). Because the 
proposed rule change removes Rule 6.67(b), this provision is no longer 
applicable.\8\ The proposed rule change also does not make any 
substantive changes to current paragraph (c) regarding changes made 
related to give ups, but merely moves the provision to proposed 
paragraph (c) and updates the language to be consistent with C2 Rule 
6.31(c). The Exchange notes that the term ``Designated Give Up'' is 
also consistent with current Rule 6.21 (shell Rulebook Rule 5.10), 
which was recently amended to reflect such term. Finally, the proposed 
rule change moves current Rule 6.67.01 to proposed Rule 6.6.01 and 
makes only minor updates to the language to conform to C2 Rule 6.31.01. 
It does not make any substantive changes to this rule.
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    \5\ The Exchange notes that in anticipation of migration it 
intends to move Rule 6.51 to Rule 6.1 without making substantive 
changes to the rule.
    \6\ See Rule 1.1 in the shell Rulebook.
    \7\ See Rule 5.32 in the shell Rulebook.
    \8\ The Exchange notes that change made in the Clearing Editor 
will continue to be documented in the Exchange's audit trail.
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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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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,

[[Page 48689]]

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) \11\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    The proposed rule change is intended to align the Exchange's 
current CTM rule and system functionality with one of the Cboe 
Affiliated Exchanges, C2, in order to provide a consistent technology 
offering across the affiliated exchanges upon the technology migration 
on October 7, 2019. A consistent technology offering, in turn, will 
simplify the technology implementation, changes and maintenance by TPHs 
of the Exchange that are also participants on C2. The proposed rule 
change does not propose to implement new or unique functionality that 
has not been previously filed with the Commission, found to be 
consistent with the Act, or is not available on Cboe Affiliated 
Exchanges. As a result of a consistent Clearing Editor rule and system 
functionality between the Exchange and C2, the proposed rule change 
will foster cooperation and coordination with persons engaged in 
facilitating transactions in securities and remove impediment to and 
perfect the mechanism of a free and open market and national market 
system by simplifying the regulatory requirements and increasing the 
understanding of the Exchange's operations for TPHs that are also 
participants on C2. The Exchange notes that the proposed rule only 
makes the above-mentioned minor updates in order to conform to the 
corresponding C2 rule; including allowing a TPH to change the account 
and subaccount field (as opposed to only the market-maker account and 
subaccount currently allowed), updating the term origin code to 
capacity code (which is both consistent with the C2 rule and the 
definition in the shell Rulebook), and removing the provision that only 
allows TPHs to change certain fields if they provide notice to the 
Exchange. The Exchange believes that these updates will provide 
harmonization between the functionality and rules across the affiliated 
exchanges, and, in turn, foster greater uniformity and less burdensome 
and more efficient regulatory compliance. As stated above, the proposed 
rule is different only to the extent that it maintains intended 
differences unique to Cboe Options market-model, functionality, and/or 
rule text, thereby protecting investors by providing rules that clearly 
and properly reflect nuances between the Exchange and C2. The Exchange 
also notes that the proposed rule is substantially the same as the 
current rule. The proposed rule change makes other various non-
substantive changes to the rule, largely in part to make it consistent 
with C2's rule. The proposed non-substantive changes will protect 
investors and benefit market participants by simplifying the rules, 
using plain English throughout the rules, and updating cross-references 
and paragraph lettering/numbering.

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 reiterates that 
the proposed rule change is being proposed in the context of a 
technology migration of the Cboe Affiliated Exchanges. As stated, the 
proposed changes to the rules that reflect functionality that will be 
in place come October 7, 2019 provide clear rules that accurately 
reflect post-migration functionality upon the completion of migration. 
The Exchange believes the proposed rule change will benefit Exchange 
participants in that it will provide a consistent technology offering 
for TPHs by the Cboe Affiliated Exchanges. The Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition because the proposed Clearing Editor will be available to 
all TPHs, both on the floor and electronically, to update executed 
trades on their trading date and revise them for clearing in the same 
manner. The Exchange also does not believe that the proposed rule 
change will impose any burden on intermarket competition because the 
basis for the proposed rule change are the rules of C2, which have 
previously been filed with the Commission.

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) of the Act \12\ and 
Rule 19b-4(f)(6) \13\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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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

     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-2019-056 on the subject line.

Paper Comments

     Send paper comments in triplicate to the Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-CBOE-2019-056. 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

[[Page 48690]]

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-2019-056 and should be submitted on 
or before October 7, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19904 Filed 9-13-19; 8:45 am]
 BILLING CODE 8011-01-P