Notice2024-07225
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 2.8 Regarding Voluntary Termination of Rights as an Exchange Member
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
April 5, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 67 (Friday, April 5, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 67 (Friday, April 5, 2024)]
[Notices]
[Pages 24051-24054]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07225]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99877; File No. SR-CboeEDGX-2024-018]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 2.8 Regarding Voluntary Termination of Rights as an Exchange
Member
April 1, 2024.
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 March 19, 2024, Cboe EDGX Exchange, Inc. (``Exchange'') filed with
the Securities and Exchange Commission (``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 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend Rule 2.8, related to the voluntary termination of rights as an
Exchange Member (``Member'').\5\ The text of the proposed rule change
is provided below.
---------------------------------------------------------------------------
\5\ See Exchange Rule 1.5(n). The term ``Member'' is defined as
``any registered broker or dealer that has been admitted to
membership in the Exchange.''
---------------------------------------------------------------------------
(Additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe EDGX Exchange, Inc.
* * * * *
Rule 2.8. Voluntary Termination of Rights as a Member
A Member may voluntarily terminate its rights as a Member only by a
written resignation addressed to the Exchange's Secretary or another
officer designated by the Exchange. [Such resignation shall not take
effect until 30 days after all of the following conditions have been
satisfied: (i) receipt of such written resignation; (ii) all
indebtedness due the Exchange shall have been paid in full; (iii) any
Exchange investigation or
[[Page 24052]]
disciplinary action brought against the Member has reached a final
disposition; and (iv) any examination of such Member in process is
completed and all exceptions noted have been reasonably resolved;
provided, however, that the Board may declare a resignation effective
at any time] Each terminating Member must promptly (a) make any
outstanding filings required under the Rules, and (b) pay any
outstanding fees, assessments, charges, fines, or other amounts due to
the Exchange, the Commission, or the Securities Investor Protection
Corporation.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/options/regulation/rule_filings/edgx/">http://markets.cboe.com/us/options/regulation/rule_filings/edgx/</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 Exchange proposes amendments to Rule 2.8 (Voluntary Termination
of Rights as a Member). Rule 2.8 sets forth the requirements for a
Member's voluntary termination of its rights as a Member. Currently,
Rule 2.8 provides that a Member's voluntary termination of its rights
as a Member shall not take effect until 30 days after all of the
following conditions have been satisfied: (i) receipt of such written
resignation; (ii) all indebtedness due the Exchange shall have been
paid in full; (iii) any Exchange investigation or disciplinary action
brought against the Member has reached a final disposition; and (iv)
any examination of such Member in process is completed and all
exceptions noted have been reasonably resolved. The Rule further
provides that the Board may declare a resignation effective at any
time.
The Exchange proposes to amend Rule 2.8 to remove conditions set
forth in Rule 2.8(iii) and (iv), requiring that any Exchange
investigation or disciplinary action brought against the Member has
reached a final disposition and that any examination of such Member in
process is completed and all exceptions noted have been reasonably
resolved. The Exchange further proposes to amend Rule 2.8 to align the
voluntary termination rules with that of its affiliates, Cboe Exchange,
Inc. (``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2'').
Specifically, Cboe Options Rule 3.16 and C2 Rule 3.7 require a
terminating Trading Permit Holder to promptly make any outstanding
filings required under the respective Rules and pay any outstanding
fees, assessments, charges, fines, or other amounts due to each
Exchange, the Commission, or the Securities Investor Protection
Corporation. The Exchange notes that its affiliates do not maintain a
30-day notice period for terminating members, and now proposes to
remove the requirement from the Exchange's Rules. Under Rule 2.8, as
amended, the Exchange would require receipt of written resignation,
completion of any outstanding filings required under the Rules, and
payment of any outstanding fees, assessments, charges, fines, or other
amounts due to the Exchange, the Commission, or the Securities Investor
Protection Corporation, in order for a Member's voluntary termination
of its Member rights to take place.
The Exchange notes that, under Rule 8.1(b), any Member or person
associated with a Member shall continue to be subject to the
disciplinary jurisdiction of the Exchange following the termination of
such person's membership or association with a Member with respect to
matters that occurred prior to such termination, provided that written
notice of the commencement of an inquiry into such matters is given by
the Exchange to such former Member or former associated person within
one year of receipt by the Exchange of the latest written notice of the
termination of such person's status as a Member or person associated
with a Member.\6\ Thus, notwithstanding the proposed amendments to Rule
2.8, the Exchange continues to, under Rule 8.1, maintain disciplinary
jurisdiction for matters relevant to any in-process examinations or
investigations or disciplinary actions brought against a Member that
voluntary terminates its membership rights under Rule 2.8, as amended,
so long as the Exchange provides written notice to the former Member
(or associated person) within one year of receipt of written notice of
termination.\7\
---------------------------------------------------------------------------
\6\ The notice requirement does not apply to a person who at any
time after a termination again subjects himself or herself to the
disciplinary jurisdiction of the Exchange by becoming a Member or a
person associated with a Member.
\7\ For the avoidance of doubt, if a Member voluntarily
terminates its membership rights under Rule 2.8, as amended, while
an examination or investigation or disciplinary action is in-
process, the Exchange will continue to maintain disciplinary
jurisdiction over the Member following their termination, subject to
the provisions of Rule 8.1.
---------------------------------------------------------------------------
As such, the Exchange believes the proposed amendments will not
result in any practical changes to the Exchange's disciplinary
jurisdiction from an Exchange or Member perspective. Rather, the
proposed amendments are designed to facilitate a more efficient
voluntary termination process, by allowing Members to terminate their
Member status and therefore cease being subject to Member obligations
notwithstanding any ongoing disciplinary actions and exams (which may
continue for an indeterminate period of time), given the Exchange, via
Rule 8.1, maintains jurisdiction over the firm following such
termination for disciplinary matters.
Further, the Exchange notes there is no provision under the
Securities Exchange Act of 1934 (the ``Act'') which requires that
termination be conditioned on final disposition or exam completion. As
noted above, the proposed rule change aligns the Exchange's voluntary
termination requirements with those of its affiliates, Cboe Options and
C2. Under Cboe Options Rule 3.16 (Obligations of Terminating TPHs),
each terminating Trading Permit Holder is obligated to promptly (i)
return to the Exchange all Exchange badges, including trading and
access badges, that were issued to the Trading Permit Holder by the
Exchange with respect to that Trading Permit Holder's terminating
Trading Permit Holder status, (ii) make any outstanding filings
required under Exchange rules, and (iii) pay any outstanding fees,
assessments, charges, fines, or other amounts due to the Exchange, the
Securities and Exchange Commission, or the Securities Investor
Protection Corporation.\8\ The Exchange further notes that at least one
other exchange has similar obligations for terminating members, in that
it does not require that
[[Page 24053]]
termination be conditioned on final disposition or exam completion.\9\
---------------------------------------------------------------------------
\8\ Cboe Options Rule 3.1(c)(1) requires a Trading Permit Holder
seeking to terminate that holder's Trading Permit must notify the
Exchange, prior to the deadline announced by the Exchange and in a
form and manner prescribed by the Exchange, that the holder is
terminating that Trading Permit at the end of its term.
\9\ See MIAX Options Exchange Rule 206 (Obligations of
Terminating Members).
---------------------------------------------------------------------------
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.\10\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. 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 Members and persons associated with its Members with the
Act, the rules and regulations thereunder, and the rules of the
Exchange.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
\13\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed amendments to the
conditional requirements for voluntary termination of Membership will
make the termination process more efficient by allowing Members to
terminate their Member status and therefore cease being subject to
Member obligations notwithstanding any ongoing disciplinary actions and
exams (which may continue for an indeterminate period of time), given
the Exchange maintains jurisdiction over the firm following such
termination for disciplinary matters under Exchange Rules. The Exchange
believes the proposed amendments result in a termination process that
allows for proper disciplinary jurisdiction while also ensuring that
termination is not unduly prolonged due to an administrative
technicality within the termination requirements, to the benefit of
investors and the public interest. Further, the Exchange believes the
proposed changes will serve to avoid wasting Member and Exchange
resources on maintaining memberships that are no longer utilized, but
unable to be terminated due to ongoing disciplinary action or
examination process.
As noted above, the Exchange continues to maintain disciplinary
jurisdiction over terminated firms following termination for matters
that occurred prior to termination, provided written notice of the
commencement of an inquiry into such matters is provided to the
terminated Member within one year of the Member's written notice of
termination. Therefore, the Exchange believes that the termination
requirements set forth in Rule 2.8(iii) and (iv) are unnecessarily
duplicative, given the Exchange maintains disciplinary jurisdiction
over terminated members via Rule 8.1(b) with respect to matters that
occurred prior to such termination, thereby ensuring the Exchange may
continue to enforce compliance by the Exchange's Members and persons
associated with its Members with the Act, the rules and regulations
thereunder, and the rules of the Exchange.
Further, the Exchange believes the proposed rule changes are just,
equitable and not unfairly discriminatory because they conform to the
process used by its affiliated options exchange, thereby providing
consistency across the Cboe family options exchanges in regards to
termination requirements. Such consistent requirements may, in turn,
simplify the termination process for members of the Exchange that are
also participants on Cboe affiliated exchanges. The Exchange believes
this consistency will promote a fair and orderly national options
market system.
The proposed changes also apply uniformly to all Members that may
choose to voluntarily terminate their membership. As noted above, in
addition to the Exchange's affiliates, at least one other exchange also
has similar termination requirements as those proposed by the
Exchange.\14\ As such, the proposed rule change would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national market system.
---------------------------------------------------------------------------
\14\ See supra note 9. See also Cboe Options Rule 3.16 and C2
Rule 3.7.
---------------------------------------------------------------------------
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. This proposal does not
create an unnecessary or inappropriate intra-market burden on
competition because the proposed change will apply uniformly to all
Members that choose to voluntarily terminate their membership. Further,
the proposed change is not designed to address any competitive issues.
Indeed, this proposal does not create an unnecessary or inappropriate
inter-market burden on competition because it merely amends the
requirements for voluntary termination of rights as a Member and
conforms to the requirements of the Exchange's affiliated options
exchanges, Cboe Options and C2, as well as at least one other
exchange.\15\ Finally, as noted above, the Exchange believes the
proposed rule amendments will not result in any practical changes to
the Exchange's disciplinary jurisdiction from an Exchange or Member
perspective, given the Exchange maintains disciplinary jurisdiction
over terminated Members following their termination, subject to the
provisions of Rule 8.1.
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
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)(iii) of the Act \16\ and Rule
19b-4(f)(6) thereunder.\17\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange 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.
---------------------------------------------------------------------------
[[Page 24054]]
At any time within 60 days of the filing of such 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.
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7a080f161f57191517171f140e093a091f19541d150c"><span class="__cf_email__" data-cfemail="5220273e377f313d3f3f373c2621122137317c353d24">[email protected]</span></a>. Please include
file number SR-CboeEDGX-2024-018 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-CboeEDGX-2024-018. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeEDGX-2024-018 and should
be submitted on or before April 26, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-07225 Filed 4-4-24; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 5, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.