Document ID: SEC-2021-1729-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-12-10T05:00Z

[Federal Register Volume 86, Number 235 (Friday, December 10, 2021)]
[Notices]
[Pages 70560-70562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26713]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93721; File No. SR-CBOE-2021-070]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Temporary Remote Inspection Relief for Trading Permit Holder's 
Office Inspections for Calendar Years 2020 and 2021 To Include Calendar 
Year 2022 Through June 30, 2022

December 6, 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 November 24, 2021, 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

    The Exchange proposes a rule change to extend the temporary remote 
inspection relief for Trading Permit Holder's office inspections for 
calendar years 2020 and 2021 to include calendar year 2022 through June 
30, 2022.
    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 COVID-19 pandemic has caused a host of operational disruptions 
to the securities industry and impacted Trading Permit Holders 
(``TPHs''), regulators, investors and other stakeholders. In response 
to the pandemic, the Exchange began providing temporary relief to TPHs 
from specified Exchange Rules and requirements, including Rule 9.2(d) 
(Annual Branch Inspections). In November 2020, the Exchange adopted a 
provision in Rule 8.16(f) (Office Inspections), which has expired by 
its terms, that extended the time by which TPHs must complete their 
calendar year 2020 inspection obligations under Rule 8.16(f) to March 
31, 2021, but with the expectation that firms would conduct their 
inspections on-site.\5\ The Exchange also adopted Rule 9.2(d)(5), which 
automatically sunsets on December 31, 2021, to provide firms the option 
of satisfying their inspection obligations under Rule 8.16(f) and 
9.2(d) remotely for calendar years 2020 and 2021, subject to specified 
conditions,\6\ due to the logistical challenges of going on-site while 
public health and safety concerns related to COVID-19 persisted. The 
Exchange notes that these temporary rules are substantively identical 
to the temporary inspection extension and remote relief rules filed by 
the Financial Industry Regulatory Authority (``FINRA'') in 2020.\7\
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    \5\ See Securities Exchange Act Release No. 90583 (December 7, 
2020), 85 FR 80207 (December 12, 2020) (SR-CBOE-2020-112).
    \6\ See id.
    \7\ See Securities and Exchange Act Release Nos. 89188 (June 30, 
2020), 85 FR 40713 (July 7, 2020) (SR-FINRA-2020-019); and 90454 
(November 18, 2020), 85 FR 75097 (November 24, 2020) (Notice of 
Filing and Immediate Effectiveness of File No. SR-FINRA-2020-040).
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    While there are signs of improvement, much uncertainty remains. The 
emergence of the Delta variant,\8\ dissimilar vaccination rates 
throughout the United States, and the uptick in transmissions in many 
locations indicate that COVID-19 remains an active and real public 
health concern.\9\

[[Page 70561]]

The Exchange understands that firms have delayed their return to office 
plans due to the continued pandemic and are considering implementing or 
have implemented hybrid work arrangements dependent on functions and 
regulatory requirements.\10\ To that end, in order to address ongoing 
industry-wide concerns regarding having to conduct in-person office 
inspections while safety concerns related to the pandemic persist and 
to align with pandemic-related regulatory relief provided by FINRA, 
which recently extended their substantively identical temporary remote 
inspection rules,\11\ the Exchange proposes to extend Rule 9.2(d)(5) 
through June 30, 2022. The proposed extension would provide clarity to 
firms on regulatory requirements and account for the time needed for 
many firms to carefully assess when and how to have their employees 
safely return to their offices in light of vaccination coverage in the 
U.S. and transmission levels of the virus, including any emergent 
variants throughout the country.
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    \8\ See The Centers for Disease Control and Prevention 
(``CDC''), What You Need to Know about Variants (stating, in part, 
that ``the Delta variant causes more infections and spreads faster 
than earlier forms of the virus that causes COVID19.''), https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html (updated 
September 3, 2021). See also CDC, The Possibility of COVID-19 
Illness after Vaccination: Breakthrough Infections (stating, in 
part, that ``COVID-19 vaccines are effective at preventing 
infection, serious illness, and death. Most people who get COVID-19 
are unvaccinated. However, since vaccines are not 100% effective at 
preventing infection, some people who are fully vaccinated will 
still get COVID-19 . . . People who get vaccine breakthrough 
infections can be contagious.''), https://www.cdc.gov/coronavirus/2019-ncov/vaccines/effectiveness/why-measure-effectiveness/breakthrough-cases.html (updated August 23, 2021).
    \9\ For example, President Joe Biden on July 29, 2021, announced 
several measures to increase the number of people vaccinated against 
COVID-19 and to slow the spread of the Delta variant, including 
strengthening safety protocols for federal government employees and 
contractors. See https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/29/factsheet-president-biden-to-announce-new-actions-to-get-more-americansvaccinated-and-slow-the-spread-of-the-delta-variant/. More recently, President Joe Biden on 
August 31, 2021, briefed the press on, among other things, the 
government's response to the COVID-19 surge, noting the government's 
continuing efforts to help states with Delta variant outbreaks. See 
https://www.whitehouse.gov/briefing-room/press-briefings/2021/08/31/pressbriefing-by-white-house-covid-19-response-team-and-public-health-officials-53/.
    \10\ The Exchange notes that a majority of its TPHs are FINRA 
member firms as well, and that through FINRA's ongoing monitoring 
the Exchange has learned that many of its TPHs have delayed plans to 
require a full return to the office and that most continue to 
operate in a remote or hybrid environment.
    \11\ See Release No. 34-93002 (September 15, 2021), 86 FR 52508 
(September 21, 2021) (File No. SR-FINRA-2021-023).
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    By extending Rule 9.2(d)(5) to cover part of calendar year 2022 
inspection obligations through June 30, 2022 only, the Exchange does 
not propose to amend the other conditions of the temporary rule. The 
proposed amendments to Rule 9.2(d)(5) simply provide that for calendar 
year 2022, a TPH has the option to conduct those inspections remotely 
through June 30, 2022. The current conditions of Rule 9.2(d)(5) for 
firms that elect to conduct remote inspections would remain unchanged: 
Such firms must amend or supplement their written supervisory 
procedures for remote inspections, use remote inspections as part of an 
effective supervisory system, and maintain the required documentation. 
The additional period of time would also enable the Exchange to further 
monitor the effectiveness of remote inspections and their impacts--
positive or negative--on firms' overall supervisory systems in the 
evolving workplace.
    The Exchange continues to believe this temporary remote inspection 
option is a reasonable alternative to provide to firms to fulfill their 
Rule 8.16(f) and 9.2(d) obligations during the pandemic and is designed 
to achieve the investor protection objectives of the inspection 
requirements under these unique circumstances. Firms should consider 
whether, under their particular operating conditions, reliance on 
remote inspections would be reasonable under the circumstances. For 
example, firms with offices that are open to the public or that are 
otherwise doing business as usual should consider whether some form of 
in-person inspections would be feasible and appropriately contribute to 
a supervisory system that is reasonably designed to achieve compliance 
with applicable securities laws and regulations, and with applicable 
Exchange Rules.
    The Exchange again notes that FINRA recently filed for the same 
extension period of their remote relief rule,\12\ which is 
substantively identical to Rule 9.2(d)(5).\13\ Like FINRA, the Exchange 
proposes to make the proposed rule change operative on January 1, 2022.
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    \12\ See supra note 11.
    \13\ See supra notes 5 and 7.
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1. 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.\14\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \15\ 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) \16\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
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    In particular, the Exchange believes that, in recognition of the 
ongoing impact of COVID 19 on performing the on-site inspection 
component of Rules 8.16(f) and 9.2(d), the proposed rule change is 
intended to provide firms a temporary regulatory option to conduct 
inspections of offices and locations remotely during the first half of 
calendar year 2022. This temporary remote relief rule and the proposed 
extension thereof does not relieve firms from meeting the core 
regulatory obligation to establish and maintain a system to supervise 
the activities of each associated person that is reasonably designed to 
achieve compliance with applicable securities laws and regulations, and 
with applicable Exchange Rules that directly serve investor protection. 
In a time when faced with ongoing challenges resulting from the COVID-
19 pandemic, the Exchange believes that the proposed rule change 
provides sensibly tailored relief that will afford firms the ability to 
assess when and how to implement their work re-entry plans as measured 
against the health and safety of their personnel, while continuing to 
serve and promote the protection of investors and the public interest.

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 does not 
believe the proposed temporary rule changes will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the Act, because the proposed extension of the temporary 
remote inspection relief rule will apply equally to all TPHs required 
to conduct office and location inspections in calendar year 2022 
through June 30, 2022. The Exchange further does not believe that the 
proposed extension to the temporary rule will impose any burden on 
intermarket competition because it relates only to the extension of the 
remote manner in which inspections for 2022 may be conducted. 
Additionally, and as stated above, FINRA has recently submitted a 
filing to extend its substantively identical temporary remote relief 
rule for its members in the same manner.

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 70562]]

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

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. 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 \17\ 
and Rule 19b-4(f)(6) \18\ thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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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 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 [email protected]. Please include 
File Number SR-CBOE-2021-070 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-2021-070. 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-2021-070 and should be submitted on 
or before January 3, 2022.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26713 Filed 12-9-21; 8:45 am]
BILLING CODE 8011-01-P