Notice2021-19857
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.52 in Connection With the Minimum Initial Quote Size Requirement for Market-Makers
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 15, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 176 (Wednesday, September 15, 2021)</title>
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[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51406-51408]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-19857]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92912; File No. SR-CBOE-2021-051]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 5.52 in Connection With the Minimum Initial Quote Size Requirement
for Market-Makers
September 9, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 2, 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 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 \4\ and Rule
19b-4(f)(6) thereunder.\5\ 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 15 U.S.C. 78s(b)(3)(A)(iii).
\5\ 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 amend Rule 5.52 in connection with the minimum initial quote size
requirement for Market-Makers. 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/
[[Page 51407]]
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 Rule 5.52(b) to systematically
reject Market-Maker quotes that do not meet the minimum initial quote
size requirement determined by the Exchange.
Rule 5.52 governs Market-Maker quoting obligations on the Exchange.
Specifically, Rule 5.52(b) provides that a Market-Maker's bid (offer)
\6\ for a series must be accompanied by the minimum number of contracts
determined by the Exchange on a class-by-class basis, the minimum of
which will be one contract at the price of the bid (offer) the Market-
Maker is willing to buy (sell). The proposed rule change updates Rule
5.52(b) to provide that the System rejects a Market-Maker's bid (offer)
that does not meet the minimum initial quote size determined by the
Exchange for that class. Currently, the Exchange's Regulatory Division
conducts surveillances to review for and enforce Market-Maker
compliance with the minimum initial quote size requirements.\7\ By
allowing the System to automatically reject Market-Maker quotes that do
not meet the applicable minimum initial quote requirements for that
class, the proposed rule change is designed to reduce a regulatory
surveillance burden on the Exchange in having to manually surveil for
and enforce Market-Maker compliance with the minimum initial quote size
requirements, thereby allowing the Exchange to reallocate regulatory
resources to other regulatory processes. The proposed rule change will
also serve as an additional risk control for Market-Makers quoting on
the Exchange by reducing the compliance risk associated with
inadvertently submitting a bid (offer) that does not meet the minimum
initial quote size requirement for that class. The Exchange notes, too,
that other Exchange Rules provide for systematically enforced
compliance with certain trading rules and requirements, including order
size requirements.\8\
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\6\ Pursuant to Rule 5.52, a Market Maker's quotes must be firm,
two-sided bids (offers) that meet the applicable minimum initial
quote size requirement.
\7\ Currently, the Exchange has an initial minimum quote size in
place for SPX during Regular Trading Hours (``RTH''). See Regulatory
Circular 20-025, Reinstatement of Minimum Intraday Electronic Quote
Size in SPX (April 2, 2020) available at <a href="https://cdn.cboe.com/resources/regulation/circulars/regulatory/RC20-025-Reinstatement-of-Minimum-Intraday-Electronic-Quote-Size-in-SPX.pdf">https://cdn.cboe.com/resources/regulation/circulars/regulatory/RC20-025-Reinstatement-of-Minimum-Intraday-Electronic-Quote-Size-in-SPX.pdf</a>. The minimum size
for all other classes is the default size of one contract.
\8\ See e.g., Rule 5.66(a), which provides that Trading Permit
Holders shall not effect Trade-Throughs, however, Rule 5.32(c)
provides that the System cancels or rejects an order that would
trade through a Protected Quotation (if not otherwise eligible for
routing or the price-adjust process); and Rule 5.34(c)(3), which
provides that the System cancels or rejects an incoming order or
quote with a size that exceeds the maximum contract size (which the
Exchange determines).
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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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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The Exchange believes that, by having the System automatically
reject Market-Maker quotes that do not meet the applicable minimum
initial quote size requirement in a class, the proposed rule change
will remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, will protect
investors. In particular, the Exchange believes that the proposed rule
change will reduce a surveillance burden on the Exchange in having to
manually surveil for and enforce Market-Maker compliance with the
minimum initial quote size requirements, thereby allowing the Exchange
to reallocate regulatory resources into other regulatory functions.
Additionally, the proposed rule change will benefit market participants
by serving as an additional risk control for Market-Makers quoting on
the Exchange and reducing the compliance risk associated with
inadvertently submitting a bid (offer) that does not meet the minimum
initial quote size requirement in that class. The proposed rule change
does not present any new or novel issues or System functionality as
other Exchange Rules provide for systematically enforced compliance
with certain trading rules and requirements, including order size
requirements.\12\
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\12\ See supra note 7.
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The Exchange also believes the proposed rule change is consistent
with Section 6(b)(1) of the Act,\13\ which provides that the Exchange
be organized and have the capacity to be able to carry out the purposes
of the Act and to enforce compliance by the Exchange's Trading Permit
Holders and persons associated with its Trading Permit Holders with the
Act, the rules and regulations thereunder, and the rules of the
Exchange, as the System will automatically enforce the minimum initial
quote size requirement for Market-Makers.
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\13\ 15 U.S.C. 78f(b)(1).
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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 is competitive in nature, but
rather is designed to enhance the Exchange's enforcement of Exchange
Rules. The proposed rule change is not adding or amending a Market-
Maker quoting obligation; rather, it is merely automating surveillance
of an existing obligation. The Exchange does not believe that the
proposed rule change will impose any burden on
[[Page 51408]]
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because it will apply equally to
all Market-Maker quotes that do not meet the applicable minimum initial
quote size requirement for a class. 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 it is related to compliance with quoting
requirements that are applicable only to Market-Makers on the Exchange.
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) thereunder.\15\ 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.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d8aaadb4bdf5bbb7b5b5bdb6acab98abbdbbf6bfb7ae"><span class="__cf_email__" data-cfemail="87f5f2ebe2aae4e8eaeae2e9f3f4c7f4e2e4a9e0e8f1">[email protected]</span></a>. Please include
File Number SR-CBOE-2021-051 on the subject line.
Paper Comments
<bullet> 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-2021-051. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-051, and should be submitted
on or before October 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19857 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P
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