Document ID: SEC-2023-0457-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Futures Exchange, LLC
Posted Date: 2023-04-28T04:00Z

[Federal Register Volume 88, Number 82 (Friday, April 28, 2023)]
[Notices]
[Pages 26371-26373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08978]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97358; File No. SR-CFE-2023-002]

Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice 
of a Filing of a Proposed Rule Change Regarding Reporting Requirements 
for Exchange of Contract for Related Position Transactions and Block 
Trades

April 24, 2023.
    Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 14, 2023 Cboe 
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which Items have been 
prepared by CFE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. CFE also 
has filed this proposed rule change with the Commodity Futures Trading 
Commission (``CFTC''). CFE filed a written certification with the CFTC 
under section 5c(c) of the Commodity Exchange Act (``CEA'') \2\ on 
April 14, 2023.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to streamline the process to report an 
Exchange of Contract for Related Position (``ECRP'') transaction \3\ or 
Block Trade \4\ when both parties to the transaction are utilizing the 
same Authorized Reporter to report the transaction to the Exchange. The 
scope of this filing is limited solely to the application of the 
proposed rule change to security futures that may be traded on CFE. 
Although no security futures are currently listed for trading on CFE, 
CFE may list security futures for trading in the future. The text of 
the proposed rule change is attached as Exhibit 4 to the filing but is 
not attached to the publication of this notice.
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    \3\ An ECRP transaction consists of a transaction in a Contract 
listed on CFE and a transaction in a related position that is 
negotiated off of CFE's trading facility and is then reported to CFE 
which meets the parameters for an ECRP transaction under CFE's 
rules. The related position must have a high degree of price 
correlation to the underlying of the Contract transaction so that 
the Contract transaction would serve as an appropriate hedge for the 
related position. In every ECRP transaction, one party is the buyer 
of (or the holder of the long market exposure associated with) the 
related position and the seller of the corresponding Contract and 
the other party is the seller of (or the holder of the short market 
exposure associated with) the related position and the buyer of the 
corresponding Contract.
    \4\ A Block Trade is a large transaction in a Contract listed on 
CFE that is negotiated off of CFE's trading facility and is then 
reported to CFE which meets the parameters for a Block Trade under 
CFE's rules.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CFE 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. CFE 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, Proposed Rule Change

1. Purpose
    CFE Rule 414 (Exchange of Contract for Related Position) includes 
provisions that govern the execution of ECRP transactions in CFE 
products, and CFE Rule 415 (Block Trades) includes provisions that 
govern the execution of Block Trades in CFE products. Rule 414(i) and 
Rule 415(f) require each CFE Trading Privilege Holder (``TPH'') that 
desires to execute ECRP transactions and Block Trades in CFE products 
to designate at least one Authorized Reporter that is pre-authorized by 
a CFE Clearing Member to report ECRP

[[Page 26372]]

transactions and Block Trades to the Exchange on behalf of the TPH.
    Rule 414(l) and Rule 415(i) describe the process that Authorized 
Reporters must use to notify the Exchange of ECRP transactions and 
Block Trades. The current notification process includes three steps. 
First, the Authorized Reporter that is the initiator of a notification 
of an ECRP transaction or Block Trade enters information regarding the 
transaction into the CFE System. Second, the Authorized Reporter that 
is the initiator of the notification of the ECRP transaction or Block 
Trade provides a reference ID generated for the transaction by the CFE 
System to the Authorized Reporter for the contra side of the 
transaction. Third, the Authorized Reporter for the contra side of the 
ECRP transaction or Block Trade accepts the notification to the 
Exchange of the transaction as entered by the initiating Authorized 
Reporter and enters contra side information for the transaction.
    As a result, an Authorized Reporter that is reporting an ECRP 
transaction or Block Trade to the Exchange on behalf of both parties to 
the transaction must go through these three steps in order to report 
the transaction to the Exchange. In practice, this means that the 
Authorized Reporter must enter information for one side of the 
transaction on one screen within a Block/ECRP reporting tool that is a 
component of the CFE System, receive an email with a reference ID for 
the transaction generated by the CFE System, and then use the reference 
ID to separately enter information for the other side of the 
transaction on another screen within the Block/ECRP reporting tool.
    CFE is proposing to amend Rule 414(l) and Rule 415(i) to allow an 
Authorized Reporter that is reporting an ECRP transaction or Block 
Trade to the Exchange on behalf of both parties to the transaction to 
report the transaction in one step. In practice, this would mean that 
the Authorized Reporter may enter at one time all of the required 
information for both sides of the transaction on one screen within the 
Block/ECRP reporting tool. The Authorized Reporter would no longer need 
to receive an email with a reference ID for the transaction or to go to 
another screen within the Block/ECRP reporting tool to enter the 
information for the contra side of the transaction. The proposed rule 
change does not change the information that is required to be reported 
to the Exchange relating to ECRP transactions and Block Trades.
    The proposed rule change revises Rule 414 and Rule 415 in the 
following manner in order to allow an Authorized Reporter that is 
reporting an ECRP transaction or Block Trade to the Exchange on behalf 
of both parties to the transaction to do so in one step.
    The proposed rule change proposes to split both Rule 414(l) and 
Rule 415(i) into two primary subsections. The first subsection in both 
proposed new Rule 414(l)(i) and proposed new Rule 415(i)(i) describes 
the current reporting process that would continue to apply when the 
parties to an ECRP transaction or Block Trade are using different 
Authorized Reporters to report the transaction to the Exchange. The 
second subsection in both proposed new Rule 414(l)(ii) and proposed new 
Rule 415(i)(ii) provides that if the parties to an ECRP transaction or 
Block Trade are each utilizing the same Authorized Reporter to notify 
the Exchange of the terms of the transaction, the Authorized Reporter 
is able to enter all of the required information regarding both sides 
of the transaction into the CFE System and to fully report the 
transaction to the Exchange.
    Similarly, the proposed rule change proposes to revise Rule 414(m) 
and Rule 415(j) to provide for two alternative ways in which an ECRP 
transaction or Block Trade would be deemed to have been fully reported 
to the Exchange for timing purposes in connection with measuring 
adherence to permissible reporting period and reporting deadline 
provisions within Rule 414 and Rule 415. Proposed New Rule 414(m)(i) 
and proposed new Rule 415(j)(i) retain the current provision that an 
ECRP transaction or Block Trade shall be deemed to have been fully 
reported to the Exchange when the full report of the transaction has 
been received by the CFE System matching engine following notification 
to the CFE System of required information relating to the transaction 
by the initiating Authorized Reporter and acceptance and notification 
to the CFE System of required information relating to the transaction 
by the contra side Authorized Reporter. Proposed new Rule 414(m)(ii) 
and proposed new Rule 415(j)(ii) provide that an ECRP transaction or 
Block Trade shall be deemed to have been fully reported to the Exchange 
when the full report of the transaction has been received by the CFE 
System matching engine following notification to the CFE System of 
required information relating to the transaction by a single Authorized 
Reporter for both parties to the transaction.
    The proposed rule change also includes some non-substantive 
proposed wording and organizational changes to Rule 414(l), Rule 
414(m), Rule 415(i), and Rule 415(j). For example, the Exchange 
proposes to include revised lead-in language in Rule 414(l) and Rule 
415(i) indicating that the CFE System includes a mechanism, in a form 
and manner provided by the Exchange, for Authorized Reporters to enter 
required information regarding an ECRP transaction or Block Trade, as 
applicable. As proposed to be revised, Rules 414(l) and Rule 415(i) 
then include in separate subsections, as further described above, the 
reporting provisions relating to the scenario in which both parties to 
an ECRP transaction or Block Trade, as applicable, are utilizing the 
same Authorized Reporter and the reporting provisions relating to the 
scenario in which the parties to an ECRP transaction or Block Trade are 
not utilizing the same Authorized Reporter. As another example, the 
Exchange proposes to change the organization of Rule 414(l) and Rule 
415(i) by breaking out the provisions into additional subparagraphs 
with new numbering and lettering for those subparagraphs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\5\ in general, and furthers the 
objectives of sections 6(b)(1) \6\ and 6(b)(5) \7\ in particular, in 
that it is designed:
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(1).
    \7\ 15 U.S.C. 78f(b)(5).
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     to contribute to the ability of the Exchange to enforce 
compliance by its TPHs and persons associated with its TPHs with the 
provisions of the rules of the Exchange,
     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.
    The Exchange believes that the proposed rule change contributes to 
the Exchange's ability to enforce compliance by its TPHs and persons 
associated with its TPHs with the

[[Page 26373]]

provisions of the rules of the Exchange and to carry out the Exchange's 
responsibilities as a self-regulatory organization in that the proposed 
rule change facilitates the collection of trade information that the 
Exchange may utilize in reviewing whether ECRP transactions and Block 
Trades comply with Exchange rules.
    Additionally, the proposed rule change proposes to make clear to 
TPHs the reporting process for the submission of required information 
regarding an ECRP transaction or Block Trade when an Authorized 
Reporter is reporting the transaction to the Exchange on behalf of both 
parties to the transaction by describing that process in CFE's rules. 
The proposed rule change also contributes to facilitating compliance 
with CFE rules by making it easier for Authorized Reporters to provide 
information to the Exchange regarding ECRP transactions and Block 
Trades when an Authorized Reporter is reporting both sides of the 
transaction. Similarly, the proposed rule change improves the 
functioning of the reporting mechanism for ECRP transactions and Block 
Trades and thus CFE's market by making the process to report these 
types of transactions more efficient where the Authorized Reporter is 
reporting both sides of the transaction. The proposed rule change does 
not substantively change the existing reporting requirements for ECRP 
transactions or Block Trades and instead serves to simplify the 
reporting process in the scenario in which both parties to an ECRP 
transaction or Block Trade, as applicable, are utilizing the same 
Authorized Reporter.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CFE does not believe that the proposed rule changes will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. Specifically, the Exchange believes that the 
proposed rule change will not burden intra-market competition because 
the proposed rule amendments will apply equally to all TPHs. The 
Exchange also believes that the proposed rule change will not burden 
inter-market competition because the proposed rule change contributes 
to the Exchange's ability to enforce compliance with its rules and to 
carry out its responsibilities as a self-regulatory organization by 
contributing to the Exchange's ability to obtain trade information that 
it may utilize in reviewing whether ECRP transactions and Block Trades 
comply with Rule 414 and 415.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The proposed rule change will become operative on April 28, 2023. 
At any time within 60 days of the date of effectiveness of the proposed 
rule change, the Commission, after consultation with the CFTC, may 
summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
section 19(b)(1) of the Act.\8\
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    \8\ 15 U.S.C. 78s(b)(1).
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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-CFE-2023-002 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-CFE-2023-002. 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. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-CFE-2023-002, and should be submitted on 
or before May 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(73).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-08978 Filed 4-27-23; 8:45 am]
BILLING CODE 8011-01-P