Document ID: SEC-2020-0693-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-04-30T04:00Z

[Federal Register Volume 85, Number 84 (Thursday, April 30, 2020)]
[Notices]
[Pages 24045-24048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09126]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88741; File No. SR-CBOE-2020-040]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Add a 
New Version of the Silexx Platform

April 24, 2020.
    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 20, 2020, 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)(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 Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to add a new version of the Silexx platform. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add a new version of the Silexx platform 
(``Cboe Silexx'').\5\ By way of background, Silexx is a User-optional 
order entry and management trading platform. The current versions of 
the Silexx platform, other than Silexx FLEX, are designed so that a 
User may enter orders into the platform to send to the executing 
broker, including Trading Permit Holders (``TPHs''), of its choice with 
connectivity to the platform. The executing broker can then send orders 
to Cboe Options (if the broker-dealer is a TPH) or other U.S. exchanges 
(and trading centers) in accordance with the User's instructions. Users 
cannot directly route orders through any of the current versions of 
Silexx, other than Silexx FLEX, to an exchange or trading center nor is 
the platform integrated into or directly connected to Cboe Option's 
System. The Exchange recently made available an additional version of 
the Silexx platform, Silexx FLEX, which supports the trading of FLEX 
Options and allows authorized Users with direct access to the 
Exchange.\6\
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    \5\ The Exchange originally filed this proposed rule change on 
April 15, 2020 (SR-CBOE-2020-038). On April 20, 2020, the Exchange 
withdrew that filing and replaced it with this filing.
    \6\ See Securities Exchange Act Release No. 87028 (September 19, 
2019) 84 FR 50529 (September 25, 2019) (SR-CBOE-2019-061).
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    In addition to supporting the trading of FLEX Options,\7\ the 
proposed new version, Cboe Silexx, will also support the trading of 
non-FLEX options and allow for direct access to the Exchange. 
Additionally, functionality that will be available on Cboe Silexx, 
which was previously adopted by the Exchange and is already available 
on other versions of Silexx, include real-time data, alerts, trade 
reports, views of exchange books, management of the customer's orders 
and positions, simple and complex order tickets, basic risk features, 
and availability of clearing fields in order tickets.\8\ The Exchange 
notes that Cboe Silexx is essentially the same platform, with the same 
applicable functionality as Silexx FLEX, except that it additionally 
supports direct access for non-FLEX trading. As is the case with Silexx 
FLEX, only authorized Users and associated persons of Users may

[[Page 24046]]

establish connectivity to and directly access the Exchange, pursuant to 
Rule 5.5, however, a User that is not authorized for direct access will 
be able to send orders through the Exchange's broker community who will 
have access to Cboe Silexx and can submit orders directly on the User's 
behalf.\9\ The Exchange notes there will be a verification process for 
Users that wish to access Cboe Silexx to ensure that each User is 
authorized for direct Exchange access. Each verified User will require 
a username and password to authenticate their access. The Exchange 
notes that those authorized to directly access the Exchange must uphold 
supervisory duties over those associated with it to ensure that only 
authorized Users access the platform. Other than the above noted 
differences, the new Cboe Silexx platform will function in the same 
manner as the Silexx versions currently available to Users: It will be 
completely voluntary; orders entered through the platform will receive 
no preferential treatment as compared to orders electronically sent to 
Cboe Options in any other manner; orders entered through the platform 
will be subject to current trading rules in the same manner as all 
other orders sent to the Exchange, which is the same as orders that are 
sent through the Exchange's System today; the Exchange's System will 
not distinguish between orders sent from Silexx and orders sent in any 
other manner; and Silexx \10\ will provide technical support, 
maintenance and user training for the new platform version upon the 
same terms and conditions for all Users.\11\ The Exchange notes that it 
currently offers a similar front-end order entry system, the PULSe 
workstation, which also permits connectivity to Cboe Options. The 
Exchange notes that no changes are being made to the other current 
Silexx platform versions.
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    \7\ Only Users authorized for direct access and who are approved 
to trade FLEX Options may trade FLEX Options via Cboe Silexx.
    \8\ See Securities Exchange Act Release No. 82088 (November 15, 
2017) 82 FR 55449 (November 21, 2017) (SR-CBOE-2017-068).
    \9\ The Exchange notes that Users may also send orders through a 
Cboe Silexx certified broker, once brokers begin electing to become 
certified. The Exchange has implemented a certification process 
which is open to any broker that supports trading and will allow 
Users without direct access to submit through an electronic broker 
certified with Silexx. The Exchange currently conducts similar 
certifications for any broker that wishes to connect to Cboe, and 
for other platform offerings (e.g. PULSe).
    \10\ Silexx is the wholly owned subsidiary of Cboe Options' 
parent company, Cboe Global Markets, Inc., which purchased Silexx in 
2017.
    \11\ See Securities Exchange Act Release No. 82088 (November 15, 
2017), 82 FR 55443 (November 21, 2017) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Describe 
Functionality of and Adopt Fees for a New Front-End Order Entry and 
Management Platform) (SR-CBOE-2017-068).
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    The Exchange lastly noted that at this time, it does not propose to 
assess a fee in connection with the Cboe Silexx platform.\12\
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    \12\ The Exchange will submit a separate rule filing to address 
any fees it may wish to adopt in the future.
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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.\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. Additionally, the Exchange also believes the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\16\ 
which requires that Exchange rules provide for the equitable allocation 
of reasonable dues, fees, and other charges among its Trading Permit 
Holders and other persons using its facilities.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that offering the Cboe Silexx platform to 
market participants protects investors and is in the public interest 
because it will allow the Exchange to directly offer Users an order 
entry and management tool for both non-FLEX and FLEX trading in 
addition to the technology products it currently offers, such as the 
other versions of the Silexx platform and the PULSe workstation. 
Indeed, as noted above, the Cboe Silexx is essentially the same 
platform as Silexx FLEX in particular, but merely allows for non-FLEX 
trading in addition to supporting FLEX trading. In addition, firms can 
create their own proprietary front-end order entry technology or obtain 
systems with such functionality from third-party vendors.\17\ The 
Exchange believes providing an alternative tool for trading, may 
encourage more Users to submit orders in both FLEX and non-FLEX options 
(including into price improvement auctions), which may lead to 
additional execution opportunities for market participants and 
liquidity in the market, which ultimately benefits investors.
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    \17\ Market participants are free to do so by accessing the 
Exchange's specs via the publicly accessible Application Programming 
Interface and using such information in order to support trading 
within their own technology, software, and front-end systems.
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    The Exchange believes the proposed rule change does not 
discriminate among market participants because use of the Cboe Silexx 
platform is completely voluntary. Users can choose to route orders, 
including to Cboe Options, and directly submit orders to Cboe Options, 
without the use of the platform. The Exchange is making the platform 
available as a convenience to market participants, who will continue to 
have the option to use any order entry and management system available 
in the marketplace to send orders to the Exchange and other exchanges; 
the platform is merely an alternative that will be offered by the 
Exchange. Cboe Silexx is not an exclusive means available to market 
participants to send orders to Cboe Options or other markets. Any 
orders sent through the platform to Cboe Options for execution will 
receive no preferential treatment. Additionally, Cboe Silexx will be 
available to all market participants, and the Exchange will license the 
platform to market participants pursuant to the same terms and 
conditions.
    The Exchange believes Cboe Silexx removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system because users have discretion to determine to which broker-
dealer they will route orders from the platform. Non-broker-dealer 
users may separately enter into an agreement with a broker-dealer (the 
Exchange will have no involvement with the entry into such agreements), 
which can provide for routing to U.S. options and stock exchanges (and 
trading centers). Only Trading Permit Holders will continue to be 
permitted to directly submit orders using Cboe Silexx to Cboe Options, 
and only members of other U.S. exchanges will be able to enter orders 
for execution at those exchanges that they receive from the platform. 
The Exchange also notes that broker-dealers must continue to ensure 
that orders they receive from the platform will be subject to 
applicable pre-trade risk control

[[Page 24047]]

requirements of the broker-dealer that directly submits the orders to 
an exchange in accordance with Rule 15c3-5 under the Act.\18\
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    \18\ See 17 CFR 240.15c3-5.
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    The Exchange believes that its reasonable to not assess a monthly 
Login ID fee for Cboe Silexx as market participants won't be subject to 
a fee for this product. Additionally, the Exchange notes Silexx FLEX is 
also currently provided at no cost.\19\ The Exchange believes not 
assessing a fee at this time also serves as an incentive to market 
participants to start using the Silexx platform as a trading tool on 
their trading desks. The proposal is equitable and not unfairly 
discriminatory as it applies to all market participants.
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    \19\ See Cboe Silexx Fees Schedule.
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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 proposed change will not 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
Exchange will make the Cboe Silexx version of the platform available to 
all market participants and at no additional cost. Indeed, all market 
participants may use Cboe Silexx, both those with direct access and 
those without, by sending orders through the Exchange's broker 
community who will be able to submit orders directly though Cboe 
Silexx.
    As described in detail above, the use of the platform will be 
completely voluntary and market participants will continue to have the 
flexibility to use any entry and management tool that is proprietary or 
from third-party vendors, and/or market participants may choose any 
executing brokers to enter their orders. The proposed platform is not 
an exclusive means of trading, and if market participants believe that 
other products, vendors, front-end builds, etc. available in the 
marketplace are more beneficial than the Cboe Silexx platform, they may 
simply use those products instead. Use of such functionality is 
completely voluntary. Also, the Exchange notes that use of the platform 
will not provide market participants with any additional access to the 
Exchange than that which is available through the use of any other 
front-end order entry system supporting trading. Orders executed 
through the platform will not receive preferential treatment and the 
Exchange's System will not distinguish between orders sent from Cboe 
Silexx and orders sent in any other manner. The Exchange notes that 
similar platforms, such as other Silexx versions and PULSe 
workstations, are currently offered today.
    The Exchange does not believe that the proposed change will impose 
any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because Cboe 
Options will be offering a type of product that is widely available 
throughout the industry, including from some exchanges. As noted above, 
market participants can also develop their own proprietary products 
with the same functionality. Additionally, ISE currently offers a 
similar front-end order entry application (PrecICE). The offering of 
Cboe Silexx to market participants to enter and manage orders for 
routing or submitting to U.S. exchanges will be an addition to the 
Exchange's current suite of technology products it offers, including 
other current Silexx platforms. As such, market participants will be 
able to choose to execute, or continue to execute, orders through any 
of these means.

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 \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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, 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. Cboe 
Options asserts that the proposed rule change doesn't present novel or 
unique issues because the proposed Cboe Silexx platform is similar to 
technology already available on the Exchange.\24\ The Exchange notes 
that the proposed Cboe Silexx platform is an extension of the Silexx 
FLEX platform, with the main substantive difference being that it 
permits entry of non-FLEX orders, as discussed above. The Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. The Commission 
hereby waives the operative delay and designates the proposed rule 
change operative upon filing.\25\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ See supra note 6.
    \25\ 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 will 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-2020-040 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.

[[Page 24048]]

All submissions should refer to File Number SR-CBOE-2020-040. 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-2020-040 and should be submitted on 
or before May 21, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09126 Filed 4-29-20; 8:45 am]
 BILLING CODE 8011-01-P