Notice2022-21196
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 6.6 Concerning the Clearing Editor
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 30, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 189 (Friday, September 30, 2022)</title>
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[Federal Register Volume 87, Number 189 (Friday, September 30, 2022)]
[Notices]
[Pages 59474-59476]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-21196]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95910; File No. SR-CBOE-2022-047]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 6.6 Concerning the Clearing Editor
September 26, 2022.
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 September 15, 2022, 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 amend Rule 6.6. The text of the proposed rule change is provided
below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 6.6. Clearing Editor
(a) No change.
(b) Trading Permit Holders may change the following fields through
the Clearing Editor: (1) Executing Firm and Contra Firm; (2) Executing
Broker and Contra Broker; (3) CMTA; (4) Account and Sub Account; (5)
Client Order ID; (6) Position Effect (open/close); (7) Capacity (if the
change is from a customer Capacity code of (C) to any other Capacity
code, it must be accompanied by a Reason Code and notice of such change
will automatically be sent to the Exchange with the submission of the
change through the Clearing Editor); (8) Strategy ID; (9) Frequent
Trader ID; (10) Compression Trade ID; [or] (11) ORS ID; or (12) the
MPID for the stock component of a stock-option order the Exchange
electronically communicated to a designated broker-dealer (as defined
in Rule 5.33(l)), if such broker-dealer systematically supports the
change.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</a>), 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 proposed rule change amends Rule 6.6(b). Specifically, the
proposed rule change adds a field to the list of specific fields in
Rule 6.6(b) that Trading Permit Holders (``TPHs'') may change through
the Clearing Editor. The Clearing Editor allows a TPH to update certain
information with respect to an executed trade on its trading date for
clearing. The Clearing Editor may be used to update certain information
entered pursuant to Rule 6.1 \5\ or to correct certain bona fide
errors.\6\ Rule 6.6(b) provides the list of fields that a TPH may edit
through Clearing Editor. Specifically, Rule 6.6(b) provides that TPHs
may change the fields in Clearing Editor in connection with orders
executed electronically and in open outcry. Such fields may include:
(1) Executing Firm and Contra Firm; (2) Executing Broker and Contra
Broker; (3) CMTA; (4) Account and Sub Account; (5) Client Order ID; (6)
Position Effect (open/close); (7) Capacity (if the change is from a
customer Capacity code of (C) to any other Capacity code, it must be
accompanied by a Reason Code \7\ and notice of such change will
automatically be sent to the Exchange with the submission of the change
through the Clearing Editor); (8) Strategy ID; (9) Frequent Trader ID;
(10) Compression Trade ID; or (11) ORS ID.\8\
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\5\ Rule 6.1 describes how TPHs must report transactions to the
Exchange (including what information must be included in those
reports).
\6\ See Rule 6.6(a).
\7\ Reason Codes include: Input Error, Unmatched Trade, Unknown,
Manual Add, Other Text Required, Trade Nullification, Trade
Adjustment, Error Account, and System Issue.
\8\ Rule 6.6(d) provides that, in addition to the fields listed
in paragraph (b), TPHs may change the following fields through the
Clearing Editor: (1) Series; (2) Quantity; (3) Buy or Sell; or (4)
Price. However, each of these changes must be accompanied by a
Reason Code, and notification of these changes will automatically be
sent to the Exchange with the submission of the changes through
Clearing Editor.
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The proposed rule change amends this provision to add the market
participant identifier (``MPID'') for the stock component of a stock-
option order the Exchange electronically communicated to a designated
broker-dealer (as defined in Rule 5.33(l) \9\), if such broker-dealer
systematically supports the change \10\ as a field that TPHs may change
through the Clearing Editor without including a Reason Code. Like the
other fields listed in Rule 6.6(b) that do not require a Reason Code or
trigger notification to the Exchange, a TPH's MPID for a stock leg does
not affect the terms of execution for that stock leg or what is
reported to the tape, and instead relates only to noncritical
backoffice information. TPHs may currently update this information by
reaching out to its designated broker-dealer, which then contacts the
Exchange to manually update the information. The proposed rule change
streamlines the process for TPHs so they may update it directly and
more efficiently using Clearing Editor. The Exchange notes that such
changes, like all other changes entered into Clearing
[[Page 59475]]
Editor, would be captured in the Exchange's audit trail.
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\9\ Rule 5.33(l) states that when a TPH submits to the System a
stock-option order, it must designate a specific broker-dealer with
which it has entered into a brokerage agreement (as described in
Rule 5.33, Interpretation and Policy .03 [sic]) to which the
Exchange will electronically communicate the stock component of the
stock-option order on behalf of the TPH.
\10\ Currently, one designated broker-dealer to which the
Exchange electronically communicates stock legs of stock-option
orders on behalf of TPHs has updated its system and worked with the
Exchange to permit TPHs to update stock leg MPIDs in the Exchange's
Clearing Editor. To the extent any other designated broker-dealers
desire to permit their customers to update the MPIDs for stock legs
using Clearing Editor, those broker-dealers could similarly approach
the Exchange and complete the appropriate system work to permit
these modifications. As otherwise noted in this filing, TPHs may
reach out to a designated broker-dealer and request that broker-
dealer update the MPID for the stock leg.
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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. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
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In particular, the Exchange believes that the proposed rule change
will foster cooperation and coordination with persons engaged in
clearing and processing information with respect to securities and will
remove impediments to and perfect the mechanism of a free and open
market and a national market system, as it will streamline the process
TPHs may use to update an additional piece of noncritical backoffice
information for purposes of post-trade allocation. As described above,
TPHs may currently update the MPIDs associated with stock legs that the
Exchange electronically communicates to designated broker-dealers for
execution upon entry of a stock-option order using a more onerous,
manual process involving multiple parties. The proposed rule change
will permit TPHs to update this information directly in Clearing Editor
if their designated broker-dealer has updated its system to permit the
change, which will reduce their burden when making this post-trade
allocation update.
The Exchange further believes the proposed rule change is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers, because it provides the opportunity for any
designated broker-dealer to work with the Exchange and update its
system to permit that broker-dealer's TPH customers to update the stock
leg MPID of stock components of stock-option orders the Exchange
electronically communicated to that broker-dealer on behalf of those
customers. The Exchange notes that TPHs whose designated broker-dealer
does not systematically support changing the MPID for such stock
components through Clearing Editor may still contact that broker-dealer
and request the broker-dealer change that MPID.
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 the proposed rule change would impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
Act, because it would allow all TPHs on behalf of which the Exchange
electronically communicates stock legs of stock-option orders to
broker-dealers that systematically support the ability to amend MPIDs
through Clearing Editor to amend such MPIDs in such a manner. The
proposed rule change is intended to reduce the burden on TPHs to make
such changes, as the current process is more onerous, indirect, and
time-consuming process. The Exchange further believes the proposed rule
change will not impose any burden on intramarket competition that is
not necessary or appropriate in furtherance of the Act, because it
provides the opportunity for any designated broker-dealer to work with
the Exchange and update its system to permit that broker-dealer's TPH
customers to update the stock leg MPID of stock components of stock-
option orders the Exchange electronically communicated to that broker-
dealer on behalf of those customers. The Exchange notes that TPHs whose
designated broker-dealer does not systematically support changing the
MPID for such stock components through Clearing Editor may still
contact that broker-dealer and request the broker-dealer change that
MPID.
The Exchange does not believe that the proposed rule change would
impose any burden on intermarket competition, as it does not address
competitive issues or impact how stock-option orders trade. Instead,
the proposed rule change relates solely to correction of one additional
piece of information post-trade.
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\
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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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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \16\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ 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 asked the Commission to waive the 30-day operative delay. The
Exchange explains that the proposal does not raise any novel issues
because ``TPHs may already update their MPIDs for stock legs that the
Exchange electronically routes for execution--the proposed rule change
merely permits them to do so using Clearing Editor as opposed to a more
onerous, multi-party, manual process.'' In other words, the Exchange
explains that the proposal merely makes electronic through the Clearing
Editor something that TPHs currently can do through other less
efficient means.
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the 30-day operative delay
is consistent with the protection of investors and the public interest
because the proposed rule change does not raise any novel issues and
only provides a simplified way for TPHs to use the clearing editor to
change the MPID associated with the stock
[[Page 59476]]
component of a stock-option order in certain cases. Therefore, the
Commission hereby waives the operative delay and designates the
proposal as operative upon filing.\18\
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\18\ 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 under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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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#354740595018565a5858505b4146754650561b525a43"><span class="__cf_email__" data-cfemail="a5d7d0c9c088c6cac8c8c0cbd1d6e5d6c0c68bc2cad3">[email protected]</span></a>. Please include
File Number SR-CBOE-2022-047 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-2022-047. 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-2022-047 and should be submitted on
or before October 21, 2022.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21196 Filed 9-29-22; 8:45 am]
BILLING CODE 8011-01-P
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