Document ID: SEC-2021-1068-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-08-10T04:00Z

[Federal Register Volume 86, Number 151 (Tuesday, August 10, 2021)]
[Notices]
[Pages 43701-43704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16966]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92562; File No. SR-CBOE-2021-043]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rules 3.31, 3.33 and 3.34

August 4, 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 July 22, 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 and II 
below, which Items have been substantially prepared by the

[[Page 43702]]

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 to amend Rules 3.31, 3.34 and 3.33. The text 
of the proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is 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 certain registration rules including 
(i) Rule 3.31 to update an incorrect cross-reference, (ii) Rule 3.33 to 
update a Regulatory Element Program reference and (iii) Rule 3.34 to 
provide the option of filing an initial or a transfer electronic Form 
U4 filing and any amendments to the disclosure information on Form U4 
based on a manually or an electronically signed copy of the form, each 
as described below.
Proposed Rule Change to Rule 3.31
    Rule 3.31 (Registration Categories) currently sets forth 
registration requirements for principal and representative registration 
categories. In particular, Rule 3.31(a)(2) provides that each principal 
as defined in paragraph (a)(1) (of Rule 3.31) is required to register 
with the Exchange as a General Securities Principal, subject to certain 
exceptions. More specifically, Rule 3.31(a)(2) provides that if a 
principal's activities include the functions of a Compliance Officer, a 
Financial and Operations Principal, a Securities Trader Principal, a 
Securities Trader Compliance Officer, or a Registered Options Principal 
``as specified in paragraphs (a)(3) through (a)(6) of . . . Rule 
[3.31],'' then the principal must appropriately register in one or more 
of these categories. The Exchange notes however that the aforementioned 
categories are described under paragraphs (a)(3) through (a)(7) \5\ 
(instead of through (a)(6)) and that the Exchange inadvertently omitted 
to cross-reference subparagraph (a)(7). Accordingly, the Exchange 
proposes to update the reference to (a)(6) to (a)(7) in the rule text 
to accurately reflect the corresponding subparagraphs to the 
registration categories listed under Rule 3.31(a)(2)(A)(i).
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    \5\ See Rule 3.31(a)(7), which describes the requirements to 
register as a Registered Options Principal.
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Proposed Rule Change to Rule 3.33
    Existing Rule 3.33 (Continuing Education for Registered Persons) 
includes Regulatory Elements for Exchange registered persons. The 
Regulatory Elements are Continuing Education (``CE'') programs 
administered by the Financial Industry Regulatory Industry, Inc. 
(``FINRA'') and consist of periodic computer-based training on 
regulatory, compliance, ethical, and supervisory subjects, and sales 
practice standards. Pursuant to current Rule 3.33(a)(3), the Exchange 
offers the following Regulatory Elements for Exchange registered 
persons: The S201 for registered principals and supervisors; the S106 
for persons registered only as Investment Company and Variable 
Contracts Representatives; and the S101 for all other registered 
persons. The Exchange proposes to amend Rule 3.33(a)(3), to be 
consistent with FINRA's most current CE programs. Specifically, the 
Exchange proposes to remove the language in Rule 3.33(a)(3) that 
provides that the S106 Regulatory Element CE Program is offered for 
persons registered only as Investment Company and Variable Contracts 
Representatives. In December 2018, the content from S106 became part of 
the S101 Regulatory Element CE Program and was retired as a stand-alone 
program.\6\ As a result, persons registered only as Investment Company 
and Variable Contracts Representatives who complete the S106 CE 
Program, pursuant to Rule 3.33(a)(3), are now required to complete the 
S101 CE Program, as is currently the case for all other registered 
persons. Therefore, the Exchange proposes to update Rule 3.33(a)(3) to 
reflect this CE Program change by removing the language in Rule 
3.33(a)(3) that provides that the S106 is offered for persons 
registered only as Investment Company and Variable Contracts 
Representatives while maintaining the existing language that provides 
that the S101 is offered for all other registered persons.
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    \6\ See FINRA Information Notice, Administrative Changes to the 
Continuing Education Regulatory Element Programs (December 2, 2018), 
available at: https://www.finra.org/rules-guidance/notices/information-notice-100218.
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Proposed Rule Change to Rule 3.34
    Paragraph (c) of Rule 3.34 (Electronic Filing Requirements for 
Uniform Forms), currently sets forth Form U4 filing requirements. 
Specifically, Rule 3.34(c) provides that initial and transfer 
electronic Form U4 filings and any amendments to the disclosure 
information on Form U4 must be based on a manually signed Form U4 
provided to the Trading Permit Holder (``TPH'') or applicant for 
membership by the person on whose behalf the Form U4 is being filed, 
consistent with FINRA Rule 1010(c). However, FINRA recently amended 
their Rule 1010(c) to permit firms to choose to rely on electronic 
signatures to satisfy the signature requirements when filing Form 
U4.\7\ The Exchange proposes to amend Rule 3.34 to similarly allow 
firms to rely on electronic signatures when filing Form U4, consistent 
with FINRA Rule 1010(c).
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    \7\ See Securities Exchange Release No. 91262 (March 5, 2021), 
86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
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    Specifically, the Exchange proposes to amend Exchange Rule 3.34, 
similar to the amendments made by FINRA, to provide firms the option of 
filing an initial or a transfer Form U4 based on a manually or an 
electronically signed copy of the form provided to the TPH, or 
applicant for membership, by the individual on whose behalf the form is 
being filed. As such, the proposed rule change removes the term 
``manual'' from manual signature and the term ``manually'' from 
manually signed in Rule 3.34(c) and in Interpretation and Policy .03 to 
Rule 3.34.\8\ The proposed

[[Page 43703]]

rule change provides TPHs, and applicants for membership, with an 
opportunity to better manage operational challenges. Particularly, the 
COVID-19 pandemic amplified the need to better manage operational 
challenges like those that arose during the pandemic \9\ and that may 
continue to arise in the future. The proposed rule change would not 
require the use of a particular type of technology to obtain a valid 
electronic signature from the associated person. The Exchange believes 
that some firms may be unable to obtain the manual signature of 
applicants for registration resulting in a significant operational 
backlog. By permitting these firms to rely on electronic signatures to 
satisfy the signature requirements of Exchange Rule 3.34, the proposed 
rule change may reduce or eliminate this backlog. For purposes of the 
proposed rule change, a valid electronic signature would be any 
electronic mark that clearly identifies the signatory and is otherwise 
in compliance with the Electronic Signatures in Global and National 
Commerce Act (``E-Sign Act'') and the guidance issued by the Commission 
relating to the E-Sign Act.\10\
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    \8\ The proposed rule change also makes minor, nonsubstantive 
formatting changes, including: Adding a period at the end of the 
heading for Rule 3.34(c), which is uniform with subparagraph 
headings throughout the Rulebook; and adding the phrase ``of this 
Rule'' following references to subparagraph (c)(3) to provide for 
additional clarity regarding rule references.
    \9\ See SR-FINRA-2021-003, 86 FR at 13937 (noting the same in 
connection with the FINRA filing).
    \10\ See accord Securities Exchange Act Release No. 85282 (March 
11, 2019), 84 FR 9573 (March 15, 2019) (Order Approving File No. SR-
FINRA-2018-040) (discussing valid electronic signatures under 
existing guidance).
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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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the proposed rule change 
promotes just and equitable principles of trade and removes impediments 
to and perfects the mechanisms of a free and open market and a national 
market system and, in general, protects investors and the public 
interest, by amending an incorrect cross-reference in Rule 3.31 and a 
reference to an obsolete CE Program to reflect the current CE Programs 
administered by FINRA. Moreover, the proposed rule change updates the 
Exchange Rules to be consistent with current CE Program requirements 
and is designed to protect investors by ensuring accuracy and clarity 
relating to cross references in its rules and regarding CE for TPHs in 
Rule 3.33. Furthermore, the proposed rule change provides firms with 
the flexibility to rely on electronic signatures to satisfy the 
signature requirements of Rule 3.34. Specifically, the Exchange 
proposes to amend Exchange Rule 3.34, similar to the amendments made by 
FINRA, to provide the option of filing an initial or a transfer Form U4 
based on a manually or an electronically signed copy of the form 
provided to the TPH, or applicant for membership, by the individual on 
whose behalf the form is being filed. Considering the technological 
advancements that provide for enhanced authentication and security of 
electronic signatures, the Exchange believes that it is appropriate to 
amend Rule 3.34 to provide such flexibility. The proposed rule change 
also addresses the ongoing public health risks stemming from the 
outbreak of COVID-19 and the operational challenges that firms continue 
to face as a result of pandemic repercussions.\13\ By permitting these 
firms to rely on electronic signatures to satisfy the signature 
requirements of Rule 3.34, the proposed rule change may reduce or 
eliminate an operational backlog due to the difficulty firms may have 
faced in obtaining the manual signature of applicants for registration 
as a result of the impact of the pandemic on daily work environments.
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    \13\ See supra note 9.
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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 Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act as the proposed rule changes to 
update an incorrect cross-reference and delete an obsolete CE Program 
reference are merely clarifying in nature and are not meant to address 
any competitive issue. The proposed change relating to manual 
signatures is, in all material respects, substantively identical to 
recent rule changes adopted by FINRA. The Exchange believes the 
proposed change will reduce a regulatory burden for TPHs by allowing 
them to rely on Form U4 copies with an electronic signature. All TPHs 
will have the option to rely on such forms with an electronic signature 
(or continue to rely on forms with a manual signature). Also, all 
persons registered only as Investment Company and Variable Contracts 
Representatives Regulatory Element are already required to complete the 
S101 CE Program, as FINRA replaced S106 with S101 in 2018; the proposed 
rule change just updates the Regulatory Element number in the Rules 
accordingly.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed rule changes are based upon the same changes recently made to 
FINRA Rule 1010(c) and consistent with the current Regulatory Element 
CE Programs administered by FINRA, as well as updates an incorrect 
cross-reference in the rules.

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) \15\ thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The

[[Page 43704]]

Exchange has asked the Commission to waive the 30-day operative delay 
so that the proposed rule change may become operative immediately upon 
filing. As noted by the Exchange, correcting the cross-reference in 
Rule 3.31(a)(2)(A)(i) and updating the reference to an obsolete CE 
Program in Rule 3.33(a)(3) would immediately alleviate potential 
confusion in connection with the Exchange's publicly available 
rulebook. The Exchange also states that the proposed rule changes will 
help ensure accuracy and clarity relating to cross references in its 
rules and regarding CE for TPHs. Additionally, the Exchange notes that 
the proposed rule change to Exchange Rule 3.34 is based on a similar 
rule change by FINRA that has already taken effect. Finally, as the 
Exchange notes above in regard to its proposed rule change allowing 
electronic signatures to satisfy the signature requirements of Rule 
3.34, the COVID-19 pandemic amplified the need to better manage 
operational challenges like those that arose during the pandemic \16\ 
and that may continue to arise in the future.
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    \16\ See supra note 9 (where FINRA noted the same). In that 
filing, FINRA also requested and the Commission granted a waiver of 
the 30-day operative delay. See SR-FINRA-2021-003, 86 FR at 13938-9.
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    For these reasons, the Commission believes that waiver of the 30-
day operative delay is consistent with the protection of investors and 
the public interest. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposal operative upon 
filing.\17\
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    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change'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 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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2021-043 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-2021-043. 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 such 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 submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-CBOE-2021-043 and should be submitted on or before 
August 31, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-16966 Filed 8-9-21; 8:45 am]
BILLING CODE 8011-01-P