Document ID: SEC-2019-0955-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe C2 Exchange, Inc.
Posted Date: 2019-07-05T04:00Z

[Federal Register Volume 84, Number 129 (Friday, July 5, 2019)]
[Notices]
[Pages 32225-32227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14280]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86234; File No. SR-C2-2019-017]

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Trigger for Its Opening Rotation Process for Equity Options

June 28, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 24, 2019, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 
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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to 
amend the trigger for its opening rotation process for equity options.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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
    On April 24, 2019, the Exchange filed a rule filing, SR-C2-2019-
009, which, among other things, amended its opening auction process.\5\ 
Specifically, the filing amended the events that will trigger the 
opening rotation for equity options pursuant to Rule 6.11(d). As of 
June 17, 2019, Rule 6.11(d) provides that after a time period (which 
the Exchange determines for all classes) following the System's 
observation after 9:30 a.m. of the first disseminated transaction price 
for the security underlying an equity the System will initiate the 
opening rotation for the series in that class.\6\
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    \5\ See Securities Exchange Act Release No. 85788 (May 6, 2019), 
84 FR 20673 (May 10, 2019) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend the Exchange's 
Opening Process and Add a Global Trading Hours Session for DJX 
Options) (SR-C2-2019-009). The rule filing was part of Feature Pack 
7, implemented on June 17, 2019, in connection with the migration of 
Cboe Exchange, Inc. (``Cboe Options'') technology to the same 
trading platform used by the Exchange, Cboe EDGX Exchange, Inc. 
(``EDGX Options''), and Cboe BZX Exchange, Inc. (``BZX Options'') in 
the fourth quarter of 2019.
    \6\ The Exchange circulated an Exchange notice in advance of the 
implementation of the rule changes pursuant to SR-C2-2019-009 
describing such rule changes. See Exchange Notice No. C2019050201 
(May 2, 2019). The Exchange also circulated an Exchange notice as a 
reminder of the upcoming rule changes under SR-C2-2019-009. See 
Exchange Notice No. C2019061200 (June 12, 2019).
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    Prior to June 17, 2019, the System would initiate its opening 
rotation for a series following the first transaction in the security 
underlying an equity option disseminated by the primary market after 
9:30. The Exchange now seeks to amend the opening rotation trigger for 
equity options to revert back to the trigger used prior to the 
implementation of SR-C2-2019-009. The Exchange understands its opening 
rotation trigger event is not consistent with general practice in the 
industry, which is to trigger an opening rotation based on disseminated 
transactions from the primary market rather than any market. The 
Exchange notes that the proposed change to reflect the prior opening 
trigger event is the same as the rule language that existed before the 
SR-C2-2019-009 amendments, previously filed with the Commission, 
modified only to conform to other rule text under Rule 6.11(d) amended 
by SR-C2-2019-009 that the Exchange does not intend to alter.
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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    The Exchange believes that the proposed rule change will serve to 
remove impediments to and perfect the mechanism of a free and open 
market and national market system because it will realign the trigger 
for its opening rotation for equity options with the trigger used by 
most other options exchanges.\10\ The proposed change will

[[Page 32226]]

benefit investors, as it will create consistency throughout the 
industry and will implement an opening rotation trigger that was 
previously in place under the Exchange Rules and thus, previously filed 
with the Commission and already familiar to market participants.
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    \10\ See Rules of Nasdaq BX, Chapter VI, Sec. 8(b); and Nasdaq 
Stock Market Options Rules, Chapter VI, Sec. 8(b). See also http://www.nasdaqtrader.com/Content/BXOptions/BXOptions_FAQs.pdf; and 
http://www.nasdaqtrader.com/content/ProductsServices/Trading/OptionsMarket/options_market_faqs.pdf.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed 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 in furtherance of the purposes of the 
Act, because the proposed opening trigger will apply in the same manner 
to all equity options. The proposed rule change impacts a System 
process that occurs prior to the opening of trading, and merely 
modifies when the System will initiate an opening rotation. The 
remainder of the opening auction process will occur as it does today. 
The Exchange also does not believe that the proposed change will impose 
any burden on intermarket competition that is not necessary in 
furtherance of the purposes of the Act, because use of the first 
disseminated transaction price from the primary market as a trigger for 
the opening rotation is consistent with the rules of other options 
exchanges \11\ and with the Exchange Rules in place prior to June 17, 
2019.
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    \11\ Id.
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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 comments on the 
proposed rule change.

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

    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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    \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 a self-regulatory organization to give the Commission 
written notice of its intent to file 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.[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT]
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of 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.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay. The Exchange has asked the Commission to waive the 30-day 
operative delay. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because the proposed rule change will implement 
functionality relating to the opening rotation trigger for equity 
options that was previously in place on C2. As such, waiver of the 30-
day operative delay is consistent with the protection of investors and 
the public interest as the proposed rule change will implement an 
opening rotation trigger that was previously in place under an Exchange 
Rule that is already familiar to market participants. Thus, as 
represented by the Exchange, the proposed rule change does not 
introduce any new or novel issues. For this reason, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal as operative upon filing.\16\
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    \16\ 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 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-C2-2019-017 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-C2-2019-017. 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-C2-2019-017 and should be submitted on 
or before July 26, 2019.

[[Page 32227]]

    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).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14280 Filed 7-3-19; 8:45 am]
BILLING CODE 8011-01-P?>