Document ID: SEC-2019-1547-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-10-22T04:00Z

[Federal Register Volume 84, Number 204 (Tuesday, October 22, 2019)]
[Notices]
[Pages 56509-56511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22936]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87321; File No. SR-CBOE-2019-089]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Move Certain Rules in Chapter XXIX of the Currently Effective 
Rulebook to Proposed Section E of Chapter 4 of the Shell Structure for 
the Exchange's Rulebook That Will Become Effective Upon the Migration 
of the Exchange's Trading Platform

October 16, 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 October 3, 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, 
II, and III below, which Items have been prepared by the Exchange. 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.
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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 move certain Rules in Chapter XXIX, which governs Credit Option 
contracts, of the currently effective Rulebook (``current Rulebook'') 
to proposed Section E of Chapter 4 of the shell structure for the 
Exchange's Rulebook that will become effective upon the migration of 
the Exchange's trading platform to the same system used by the Cboe 
Affiliated Exchanges (as defined below) (``shell Rulebook''). 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
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc. 
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also 
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe 
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or 
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX 
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with 
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated 
Exchanges''). The Cboe Affiliated Exchanges are working to align 
certain system functionality, retaining only intended differences, 
between the Cboe Affiliated Exchanges, in the context of a technology 
migration. Cboe Options intends to migrate its trading platform to the 
same system used by the Cboe Affiliated Exchanges, which the Exchange 
expects to complete on October 7, 2019. In connection with this 
technology migration, the Exchange has a shell Rulebook that resides 
alongside its current Rulebook, which shell Rulebook will contain the 
Rules that will be in place upon completion of the Cboe Options 
technology migration.
    The Exchange proposes to relocate rules under current Chapter XXIX 
which governs Credit Option contracts, to proposed Section E of Chapter 
4 in the shell Rulebook. The Exchange notes that in addition to 
relocating these current rules to proposed shell Section E of Chapter 
4, the proposed rule change deletes the rules from the current 
Rulebook. The proposed rule change relocates the rules as follows:

------------------------------------------------------------------------
             Proposed rule                         Current rule
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Introductory paragraph under Section E   Introduction.
 heading.
4.40 Credit Default Definitions........  29.1 Definitions.
4.41 Designation of Credit Default       29.2 Designation of Credit
 Option Contracts.                        Default Option Contracts.
4.42 Designation and Terms of Credit     29.2A Designation and Terms of
 Default Basket Option Contracts.         Credit Default Basket Option
                                          Contracts.
4.43 Withdrawal of Approval of           29.3 Withdrawal.
 Underlying Reference Entity.
4.44 Adjustments.......................  29.4 Adjustments.
4.45 FLEX Trading......................  29.18. FLEX Trading.
4.46 Trading Rotations.................  29.12 Trading Rotations.
------------------------------------------------------------------------

    The proposed changes are of a non-substantive nature and will not 
amend the relocated rules other than to update their numbers, conform 
paragraph structure \3\ and number/lettering format to that of the 
shell Rulebook, and make

[[Page 56510]]

cross-reference changes to shell rules. As indicated above, the 
proposed rule change relocates current Rule 29.12 to proposed Rule 
4.46. Current Rule 29.12, however, currently contains rule language 
that is no longer applicable to the Exchange. It currently states that 
in accordance with Rule 6.2 (Rule 5.31 in the shell Rulebook), at a 
randomly selected time within a number of seconds after 8:30 a.m. (CT), 
unless unusual circumstances exist, the System will initiate the 
opening procedure and send a Rotation Notice. The Exchange notes that 
this language referenced in current Rule 29.12 regarding the opening 
process in Rule 6.2 (shell Rule 5.31) had prior been amended,\4\ and 
Rule 29.12 was inadvertently not updated to reflect the amended opening 
process. Therefore, the proposed rule change updates current 29.12 
(proposed Rule 4.46) to simply reflect the existing opening process 
language in shell Rule 5.31 (current Rule 6.2) by stating that in 
accordance with Rule 5.31(d), at an Exchange-determined number of 
seconds following 9:30 a.m., the System will initiate the opening 
rotation.\5\ The proposed rule change also removes current Rule 
29.14(d) which states that the rules of priority and order allocation 
procedures set forth in (current) Rule 6.45 (shell Rules 5.32 and 5.85) 
apply to Credit Options, as this is redundant of the shell Rules 5.32 
and 5.85 themselves because they already govern the priority and order 
allocation of all options trading on the Exchange, both electronically 
(shell Rule 5.32) and in open outcry (shell Rule 5.85). Also, the 
proposed change removes the remainder of the rule text under current 
Rule 29.14, which states that Rule 29.14 supplements (current) Rules 
6.41, 6.42, 6.44 and 6.45, because all provisions under current Rule 
29.14 have already been relocated to other rules in the shell Rulebook 
in anticipation of migration and would apply to Credit Options \6\ and, 
therefore, current Rule 29.14 as a whole will no longer exist upon 
migration.
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    \3\ The Exchange notes that the paragraph structure for 
definitions listed under rules in the shell Rulebook is in 
alphabetized format. Therefore, the same structure is used under 
proposed Rule 4.40.
    \4\ See Securities Exchange Act Release No. 79520 (December 9, 
2016), 81 FR 90896 (December 15, 2019) (Notice of Filing of 
Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, Relating To 
Opening and Closing Rotations Under the HOSS System) (SR-CBOE-2016-
071).
    \5\ The Exchange notes it does not currently list any Credit 
Options for trading, so this change will have no impact on any 
current trading.
    \6\ See Securities and Exchange Act Release No. 86772 (August 
27, 2019), 84 FR 46069 (September 3, 2019) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Rules 
Related to How the System Handles Incoming Orders and Open Outcry 
Trading in Connection With the Migration of the Exchange's Trading 
Platform to the Same System Used by the Cboe Affiliated Exchanges) 
(SR-CBOE-2019-042).
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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.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    As stated, the proposed rule change makes no substantive changes to 
the rules. The proposed rule change is merely intended to relocate the 
Exchange's rules to the shell Rulebook and update their numbers, 
paragraph structure, including number and lettering format, and cross-
references (including updating certain rule text to accurately 
reiterate rule language to which a cross-reference refers), and remove 
a redundant provision already specifically covered under other shell 
rules, to conform to the shell Rulebook as a whole in anticipation of 
the technology migration on October 7, 2019. As such, the proposed rule 
change is designed to promote just and equitable principles of trade, 
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, by improving the way the Exchange's 
Rulebook is organized, making it easier to read, and, particularly, 
helping market participants better understand the rules of the 
Exchange, which will also result in less burdensome and more efficient 
regulatory compliance.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
intended as a competitive change, but rather, seeks to make non-
substantive rule changes in relocating the rules, updating cross-
references (and cross-referenced rule text) to shell rules, and 
removing a redundant provision already specifically covered under other 
rules, in anticipation of the October 7, 2019 technology migration. The 
Exchange also does not believe that the proposed rule change will 
impose any undue burden on competition because the relocated rule text 
is exactly the same as the Exchange's current rules, all of which have 
all been previously filed with the Commission.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 
Commission has waived that requirement in this case.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after

[[Page 56511]]

the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ 
the Commission may 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 so that the proposed rule change may become operative 
immediately. The Exchange notes that the proposed rule change is merely 
relocating certain rules to its shell rulebook--which includes 
corresponding updates to rule numbers, cross-references, and other 
references--in order to conform these rules to the shell rulebook upon 
the technology migration explained above. The Exchange believes that 
the proposed rule change will make its rules easier to read and 
understand for all investors. The Exchange also asserts that the 
relocation of the rules explained above will not impose any significant 
burden on competition as the substance of the rules remains unchanged. 
The Commission agrees that allowing this proposed rule change to become 
operative upon filing in order to facilitate the Exchange's technology 
migration--without changing the substance of these Exchange Rules--is 
consistent with the protection of investors and the public interest. 
For this reason, the Commission hereby waives the 30-day operative 
delay and designates the proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission 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 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-2019-089 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-2019-089. 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 offices 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-2019-089, and should be submitted 
on or before November 12, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12), (59).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22936 Filed 10-21-19; 8:45 am]
 BILLING CODE 8011-01-P