Document ID: SEC-2019-0595-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-05-02T04:00Z

[Federal Register Volume 84, Number 85 (Thursday, May 2, 2019)]
[Notices]
[Pages 18901-18903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08919]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85732; File No. SR-CBOE-2019-024]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 6.49A To Eliminate the Exchange's On-Floor Position Transfer 
Procedure

April 26, 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 April 16, 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 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) 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).
    \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 6.49A to eliminate the Exchange's on-floor position 
transfer procedure. 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://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 Exchange proposes to amend Rule 6.49A to delete the provisions 
related to on-floor position transfers and amend the provision 
regarding presidential exemptions. Rule 6.49A specifies the 
circumstances under which Trading Permit Holders may effect transfers 
of positions, both on and off the trading floor, notwithstanding the 
prohibition in Rule 6.49(a).\5\ Rule 6.49A(a)(2) permits certain 
position transfers to occur on the floor of the exchange or on another 
options exchange. The procedures for such on-

[[Page 18902]]

floor position transfers are set forth in Rule 6.49A(b) and (c), as 
well as Interpretations and Policies .01 through .03. The Exchange no 
longer wants to make available on-floor transfers of positions, so the 
proposed rule change deletes paragraphs (a)(2), (b), and (c), and 
Interpretations and Policies .01 through .03 \6\ from Rule 6.49A.\7\ 
The on-floor position transfer procedure is administratively burdensome 
on the Exchange, and is currently used by Trading Permit Holders on a 
limited basis. As the Exchange noted when the rule was adopted, the 
Exchange's ``on-floor'' procedure was intended to help ensure that 
Trading Permit Holders with a need to transfer positions in bulk as 
part of a sale or disposition of all or substantially all of a Trading 
Permit Holder's assets or options positions were able to get the best 
possible price for the positions while also ensuring that other Trading 
Permit Holders have an adequate opportunity to make bids and offers on 
the positions that are being transferred.\8\ In addition, the Exchange 
noted the ``on-floor'' position transfer procedure could be used by 
Market-Makers that, for reasons other than a forced liquidation, such 
as an extended vacation, wished to liquidate their entire, or nearly 
their entire, open positions in a single set of transactions, subject 
to certain restrictions.\9\
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    \5\ Rule 6.49 generally requires transactions of option 
contracts listed on the Exchange for a premium in excess of $1.00 to 
be effected on the floor of the Exchange or on another exchange.
    \6\ The Exchange proposes to move the provision in 
Interpretation and Policy .03 that states the on-floor transfer 
procedure is not to be used repeatedly or routinely in circumvention 
of the normal auction market process to proposed paragraph (g), as 
that provision applies to both the current on-floor and off-floor 
position transfer procedures.
    \7\ The proposed rule change makes conforming changes to the 
paragraph lettering and numbering in current subparagraph (a)(1) 
(proposed subparagraph (a)). Because, as proposed, Rule 6.49A will 
only relate to off-floor transfers, the proposed rule change renames 
Rule 6.49A and adds a heading to proposed paragraph (a).
    \8\ See Exchange Act Release No. 36647 (December 28, 1995), 61 
FR 566 (January 8, 1996) (Order Approving and Notice of Filing and 
Order Granting Accelerated Approval of Amendments No. 1 and 2 to a 
Proposed Rule Change Relating to the Transfer of Positions on the 
Floor of the Exchange in Cases of Dissolution and other Situations) 
(SR-CBOE-95-36).
    \9\ Id. Among other restrictions, repeated and frequent use of 
the on-floor procedure in Rule 6.49A by a TPH is not permitted.
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    For example, the Exchange's on-floor transfer of positions rule was 
also intended to address the common situation in which a Designated 
Primary Market-Maker (``DPM'') sold its business or in which a Market-
Maker, for reasons other than a forced liquidation, such as an extended 
vacation, wished to liquidate its entire, or nearly entire, position in 
a single set of transactions.\10\ Currently, because DPMs have been 
largely consolidated in the hands of firms rather than individuals, 
such transfers are, for the most part unnecessary; if an individual 
takes an extended vacation, another member of the firm handles the 
firm's book. Accordingly, the Exchange believes that the on-floor 
transfer of positions procedure no longer serves the uses for which is 
was originally adopted. The Exchange also notes that at least one other 
options exchange with a trading floor and a transfer of positions rule 
does not offer an on-floor transfer procedure.\11\
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    \10\ Id.
    \11\ See, e.g., Nasdaq OMX PHLX LLC (``Phlx'') 1058.
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    Current paragraph (d) (proposed paragraph (b)) contains exemptions 
to Rule 6.49A(a) that are approved by the Exchange's president.\12\ The 
proposed rule change permits the President or a designee to grant an 
exemption to the Rule 6.49(a) prohibition if, in his or her judgment, 
allowing the off-floor transfer is necessary or appropriate for the 
maintenance of a fair and orderly market and the protection of 
investors and is in the public interest, including due to unusual or 
extraordinary circumstances such as the market value of the Person's 
positions will be comprised by having to comply with the requirement to 
trade on the Exchange pursuant to the normal auction process or, when 
in the judgment of President or his or her designee, market conditions 
make trading on the Exchange impractical. The proposed rule change 
updates language consistent with the change to only permit off-floor 
transfers. Additionally, the additional circumstances in which the 
President or a designee may grant an exemption are similar to those 
that the President or a designee may consider when taking action under 
emergency conditions pursuant to Rule 6.17.
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    \12\ Similar to the rules of other exchanges, the proposed rule 
change also lets a designee of the Exchange president grant an 
exemption. See, e.g., Arca Rule 6.78-O(f).
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    The proposed rule change makes no changes to permissible off-floor 
position transfers.
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.\13\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \14\ 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) \15\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
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    The Exchange believes that the proposed rule change to eliminate 
the on-floor position transfer procedure promotes just and equitable 
principles of trade, helps remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
promotes efficient administration of the Exchange, as it eliminates a 
complex procedure that is of limited use to Trading Permit Holders 
today but still imposes an administrative burden on the Exchange. The 
proposed rule change removes impediments to and perfects the mechanism 
of a free and open market, because it is similar to rules of other 
options exchanges. The Exchange also notes that at least one other 
options exchange with a trading floor and a transfer of positions rule 
does not offer an on-floor transfer procedure,\16\ and at least one 
other options exchange lets a designee of the Exchange president grant 
an exemption.\17\ Additionally, the additional circumstances in which 
the President or a designee may grant an exemption are similar to those 
that the President or a designee may consider when taking action under 
emergency conditions pursuant to Rule 6.17, and thus the proposed rule 
change does not significantly expand the Exchange's President's 
authority to take action when necessary or appropriate for the 
maintenance of a fair and orderly market and to protect investors.
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    \16\ See, e.g., Nasdaq OMX PHLX LLC (``Phlx'') 1058.
    \17\ See, e.g., NYSE Arca, Inc. (``Arca'') Rule 6.78-O(f).
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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

[[Page 18903]]

Exchange does not believe the proposed rule change will impose any 
burden on intramarket competition, as the current on-floor position 
transfer procedure is of limited use to Trading Permit Holders today 
but still imposes an administrative burden on the Exchange. The 
proposed elimination of the on-floor position transfer promotes 
efficient administration of the Exchange, as it eliminates this complex 
procedure that is limited in application. Market participants will 
still be able to effect transactions on the Exchange pursuant to the 
normal auction process if an off-floor transfer is not permissible.
    The Exchange does not believe the proposed rule change will impose 
any burden on intermarket competition. As discussed above, at least one 
other options exchange with a trading floor and a transfer of positions 
rule does not offer an on-floor transfer procedure,\18\ and at least 
one other options exchange lets a designee of the Exchange president 
grant an exemption.\19\ Additionally, the additional circumstances in 
which the President or a designee may grant an exemption are similar to 
those that the President or a designee may consider when taking action 
under emergency conditions pursuant to Rule 6.17, and thus the proposed 
rule change does not significantly expand the Exchange's President's 
authority to take action when necessary or appropriate for the 
maintenance of a fair and orderly market and to protect investors.
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    \18\ See, e.g., Nasdaq OMX PHLX LLC (``Phlx'') 1058.
    \19\ See, e.g., NYSE Arca, Inc. (``Arca'') Rule 6.78-O(f).
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\ 
Because the 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, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\22\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 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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    At any time within 60 days of the filing of such 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) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2019-024 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-2019-024. 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-2019-024 and should be submitted on 
or before May 23, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-08919 Filed 5-1-19; 8:45 am]
 BILLING CODE 8011-01-P