Document ID: SEC-2022-1309-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2022-09-30T04:00Z

[Federal Register Volume 87, Number 189 (Friday, September 30, 2022)]
[Notices]
[Pages 59474-59476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21196]

[[Page 59474]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95910; File No. SR-CBOE-2022-047]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 6.6 Concerning the Clearing Editor

September 26, 2022.
    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 15, 2022, 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, 
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.
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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 amend Rule 6.6. The text of the proposed rule change is provided 
below.

(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *

Rule 6.6. Clearing Editor

    (a) No change.
    (b) Trading Permit Holders may change the following fields through 
the Clearing Editor: (1) Executing Firm and Contra Firm; (2) Executing 
Broker and Contra Broker; (3) CMTA; (4) Account and Sub Account; (5) 
Client Order ID; (6) Position Effect (open/close); (7) Capacity (if the 
change is from a customer Capacity code of (C) to any other Capacity 
code, it must be accompanied by a Reason Code and notice of such change 
will automatically be sent to the Exchange with the submission of the 
change through the Clearing Editor); (8) Strategy ID; (9) Frequent 
Trader ID; (10) Compression Trade ID; [or] (11) ORS ID; or (12) the 
MPID for the stock component of a stock-option order the Exchange 
electronically communicated to a designated broker-dealer (as defined 
in Rule 5.33(l)), if such broker-dealer systematically supports the 
change.
* * * * *
    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 proposed rule change amends Rule 6.6(b). Specifically, the 
proposed rule change adds a field to the list of specific fields in 
Rule 6.6(b) that Trading Permit Holders (``TPHs'') may change through 
the Clearing Editor. The Clearing Editor allows a TPH to update certain 
information with respect to an executed trade on its trading date for 
clearing. The Clearing Editor may be used to update certain information 
entered pursuant to Rule 6.1 \5\ or to correct certain bona fide 
errors.\6\ Rule 6.6(b) provides the list of fields that a TPH may edit 
through Clearing Editor. Specifically, Rule 6.6(b) provides that TPHs 
may change the fields in Clearing Editor in connection with orders 
executed electronically and in open outcry. Such fields may include: 
(1) Executing Firm and Contra Firm; (2) Executing Broker and Contra 
Broker; (3) CMTA; (4) Account and Sub Account; (5) Client Order ID; (6) 
Position Effect (open/close); (7) Capacity (if the change is from a 
customer Capacity code of (C) to any other Capacity code, it must be 
accompanied by a Reason Code \7\ and notice of such change will 
automatically be sent to the Exchange with the submission of the change 
through the Clearing Editor); (8) Strategy ID; (9) Frequent Trader ID; 
(10) Compression Trade ID; or (11) ORS ID.\8\
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    \5\ Rule 6.1 describes how TPHs must report transactions to the 
Exchange (including what information must be included in those 
reports).
    \6\ See Rule 6.6(a).
    \7\ Reason Codes include: Input Error, Unmatched Trade, Unknown, 
Manual Add, Other Text Required, Trade Nullification, Trade 
Adjustment, Error Account, and System Issue.
    \8\ Rule 6.6(d) provides that, in addition to the fields listed 
in paragraph (b), TPHs may change the following fields through the 
Clearing Editor: (1) Series; (2) Quantity; (3) Buy or Sell; or (4) 
Price. However, each of these changes must be accompanied by a 
Reason Code, and notification of these changes will automatically be 
sent to the Exchange with the submission of the changes through 
Clearing Editor.
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    The proposed rule change amends this provision to add the market 
participant identifier (``MPID'') for the stock component of a stock-
option order the Exchange electronically communicated to a designated 
broker-dealer (as defined in Rule 5.33(l) \9\), if such broker-dealer 
systematically supports the change \10\ as a field that TPHs may change 
through the Clearing Editor without including a Reason Code. Like the 
other fields listed in Rule 6.6(b) that do not require a Reason Code or 
trigger notification to the Exchange, a TPH's MPID for a stock leg does 
not affect the terms of execution for that stock leg or what is 
reported to the tape, and instead relates only to noncritical 
backoffice information. TPHs may currently update this information by 
reaching out to its designated broker-dealer, which then contacts the 
Exchange to manually update the information. The proposed rule change 
streamlines the process for TPHs so they may update it directly and 
more efficiently using Clearing Editor. The Exchange notes that such 
changes, like all other changes entered into Clearing

[[Page 59475]]

Editor, would be captured in the Exchange's audit trail.
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    \9\ Rule 5.33(l) states that when a TPH submits to the System a 
stock-option order, it must designate a specific broker-dealer with 
which it has entered into a brokerage agreement (as described in 
Rule 5.33, Interpretation and Policy .03 [sic]) to which the 
Exchange will electronically communicate the stock component of the 
stock-option order on behalf of the TPH.
    \10\ Currently, one designated broker-dealer to which the 
Exchange electronically communicates stock legs of stock-option 
orders on behalf of TPHs has updated its system and worked with the 
Exchange to permit TPHs to update stock leg MPIDs in the Exchange's 
Clearing Editor. To the extent any other designated broker-dealers 
desire to permit their customers to update the MPIDs for stock legs 
using Clearing Editor, those broker-dealers could similarly approach 
the Exchange and complete the appropriate system work to permit 
these modifications. As otherwise noted in this filing, TPHs may 
reach out to a designated broker-dealer and request that broker-
dealer update the MPID for the stock leg.
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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.\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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    In particular, the Exchange believes that the proposed rule change 
will foster cooperation and coordination with persons engaged in 
clearing and processing information with respect to securities and will 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, as it will streamline the process 
TPHs may use to update an additional piece of noncritical backoffice 
information for purposes of post-trade allocation. As described above, 
TPHs may currently update the MPIDs associated with stock legs that the 
Exchange electronically communicates to designated broker-dealers for 
execution upon entry of a stock-option order using a more onerous, 
manual process involving multiple parties. The proposed rule change 
will permit TPHs to update this information directly in Clearing Editor 
if their designated broker-dealer has updated its system to permit the 
change, which will reduce their burden when making this post-trade 
allocation update.
    The Exchange further believes the proposed rule change is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers, because it provides the opportunity for any 
designated broker-dealer to work with the Exchange and update its 
system to permit that broker-dealer's TPH customers to update the stock 
leg MPID of stock components of stock-option orders the Exchange 
electronically communicated to that broker-dealer on behalf of those 
customers. The Exchange notes that TPHs whose designated broker-dealer 
does not systematically support changing the MPID for such stock 
components through Clearing Editor may still contact that broker-dealer 
and request the broker-dealer change that MPID.

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 rule change would impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
Act, because it would allow all TPHs on behalf of which the Exchange 
electronically communicates stock legs of stock-option orders to 
broker-dealers that systematically support the ability to amend MPIDs 
through Clearing Editor to amend such MPIDs in such a manner. The 
proposed rule change is intended to reduce the burden on TPHs to make 
such changes, as the current process is more onerous, indirect, and 
time-consuming process. The Exchange further believes the proposed rule 
change will not impose any burden on intramarket competition that is 
not necessary or appropriate in furtherance of the Act, because it 
provides the opportunity for any designated broker-dealer to work with 
the Exchange and update its system to permit that broker-dealer's TPH 
customers to update the stock leg MPID of stock components of stock-
option orders the Exchange electronically communicated to that broker-
dealer on behalf of those customers. The Exchange notes that TPHs whose 
designated broker-dealer does not systematically support changing the 
MPID for such stock components through Clearing Editor may still 
contact that broker-dealer and request the broker-dealer change that 
MPID.
    The Exchange does not believe that the proposed rule change would 
impose any burden on intermarket competition, as it does not address 
competitive issues or impact how stock-option orders trade. Instead, 
the proposed rule change relates solely to correction of one additional 
piece of information post-trade.

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 \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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    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. The 
Exchange explains that the proposal does not raise any novel issues 
because ``TPHs may already update their MPIDs for stock legs that the 
Exchange electronically routes for execution--the proposed rule change 
merely permits them to do so using Clearing Editor as opposed to a more 
onerous, multi-party, manual process.'' In other words, the Exchange 
explains that the proposal merely makes electronic through the Clearing 
Editor something that TPHs currently can do through other less 
efficient means.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because the proposed rule change does not raise any novel issues and 
only provides a simplified way for TPHs to use the clearing editor to 
change the MPID associated with the stock

[[Page 59476]]

component of a stock-option order in certain cases. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal as operative upon filing.\18\
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    \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).
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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 under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please include 
File Number SR-CBOE-2022-047 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-2022-047. 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-2022-047 and should be submitted on 
or before October 21, 2022.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21196 Filed 9-29-22; 8:45 am]
BILLING CODE 8011-01-P