Notice2025-16575
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update Rules Regarding Requirements To Submit Annual Audits to the Exchange
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
August 29, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 166 (Friday, August 29, 2025)</title>
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[Federal Register Volume 90, Number 166 (Friday, August 29, 2025)]
[Notices]
[Pages 42281-42284]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-16575]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103778; File No. SR-CBOE-2025-060]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Update
Rules Regarding Requirements To Submit Annual Audits to the Exchange
August 26, 2025.
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 August 18, 2025, Cboe Exchange, Inc. (``Cboe Options'' or the
``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
has filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A) 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).
\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 (1) simplify and clarify its rule regarding audited reports; and (2)
require each Trading Permit Holder (``TPH'') to submit to the Exchange
an annual audited report in accordance with the provisions of Rule 17a-
5(d) under the Securities Exchange Act of 1934 (the ``Act'').\5\ The
text of the proposed rule change is provided in Exhibit 5.
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\5\ 17 CFR 240.17a-5(d).
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The text of the proposed rule change is also available on the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/">https://www.cboe.com/us/options/regulation/rule_filings/</a>) and at the Exchange's Office of the Secretary.
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 7.4 regarding TPH requirements
to submit certain reports to the Exchange. Specifically, the Exchange
proposes to amend Rule 7.4(a) to simplify and clarify the requirements
for TPHs to submit to the Exchange certain audited reports, including
audited financial statements, on an annual basis pursuant Rule 17a-5(d)
under the Act.\6\ The Exchange also proposes to amend Rule 7.4(a) to
require all TPHs to submit annual reports to the Exchange,
notwithstanding the exemption from submission provided for in Rule 17a-
5(d)(1)(iv) under the Act.\7\
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\6\ Id.
\7\ 17 CFR 240.17a-5(d)(1)(iv).
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Current Rule 7.4(a) requires each TPH organization approved to do
business with the public in accordance with Chapter 9 of the Rules and
each registered Market-Maker to submit annual reports of its financial
condition as of a date within each calendar year to the Exchange in
accordance with the requirements of Rule 17a-5 \8\ and Form X-17A-5
under the Act. It further requires the reports for TPHs approved to do
business with the public to be certified by an independent public
accountant. The Rule also requires each such TPH to notify the Exchange
of the name of the independent public accountant appointed for the year
by January 10 of each year. Reports of financial condition are due to
the Exchange under the Rule not later than 60 days after the date as of
which the financial condition of the TPH is reported, or such other
period as the Exchange may individually require. The Rule also permits
a TPH to file in lieu of the required report a copy of any financial
statement which they are required to file with any other national
securities exchange or national securities association of which they
are a member or with any agency of any State as a condition of doing
business therein, and which is acceptable to the Exchange as containing
substantially the same information as Form X-17A-5.
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\8\ 17 CFR 240.17a-5(d).
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First, the Exchange proposes to amend Rule 7.4(a) to simplify and
clarify its requirements regarding the submission of annual audited
reports (``Annual Audits''). Specifically, the Exchange proposes to
amend Rule 7.4(a) to align the requirements regarding timing and scope
of information for the filing of certain audited reports (``Annual
Audits'') with the Exchange with the requirements of Rule 17a-5 under
the Act,\9\ including as follows:
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\9\ 17 CFR 240.17a-5(d). The Exchange also proposes to amend the
heading of Rule 7.4(a) from ``Annual Audit'' to ``Annual Reports''
to match the title of SEC Rule 17a-5(d).
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<bullet> Current Rule 7.4(a) requires TPHs to report on their
``financial condition'' and include answers to an Exchange financial
questionnaire in accordance with the requirements of Rule 17a-5 and
Form X-17A-5 under the Act and contain the information called for by
that form. Rule 17a-5 and Form X-17A-5 set forth the specific
information that must be included in an annual financial report (as
broker-dealers, TPHs are subject to Rule 17a-5). The proposed rule
change modifies Rule 7.4(a) to require submission of Annual Audits in
[[Page 42282]]
accordance with the requirements of Rule 17a-5 under the Act.\10\ Rule
7.4(a) is intended to cover the report and information required under
Rule 17a-5, which is what TPHs currently submit to satisfy the
requirement under Rule 7.4(a). The proposed rule change clarifies that
the scope of information TPHs must include in their Annual Audits
pursuant to Rule 7.4(a) is the same as the scope of information TPHs
must include in their reports pursuant to Rule 17a-5(d) and Form X-17A-
5 under the Act.\11\ This proposed rule change has no impact on the
information the Exchange currently requires TPHs to submit in their
Annual Audits pursuant to Rule 7.4(a) (which is the same information
that is required to be submitted pursuant to Rule 17a-5(d) under the
Act). The proposed rule change aligns the rule text in Rule 7.4(a) with
Rule 17a-5(d) to eliminate any potential confusion regarding what
information is required information to be filed pursuant to Rule
7.4(a).
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\10\ 17 CFR 240.17a-5(d).
\11\ The proposed rule change also deletes the exception that
permits TPHs to submit reports required by other national securities
exchanges or associations that contain substantially the same
information as Form X-17A-5. The Exchange believes this exception is
unnecessary, as TPHs comply with the Act's requirement to submit the
Form X-17A-5 to satisfy this requirement.
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<bullet> Current Rule 7.4(a) requires that the report of financial
condition be filed not later than 60 days after the date within each
calendar year as of which the financial condition of the TPH is
reported (or such other period as the Exchange may individually
require). Rule 17a-5 under the Act requires the annual reports to be
filed not more than 60 calendar days after the end of the fiscal year
of the broker or dealer. Fiscal year end is generally the date on which
TPHs (who as broker-dealers are subject to Rule 17a-5 under the Act)
determine their ``financial condition.'' The proposed rule change
aligns the requirements regarding submission deadlines for submission
of the Annual Audits in Rule 7.4(a) with the deadlines for submission
of these reports in Rule 17a-5 under the Act. This proposed rule change
has no impact on TPHs, which currently submit their Annual Audits in
accordance with the required deadline set forth in Rule 17a-5. The
proposed rule change aligns the filing deadline in Rule 7.4(a) with
that in Rule 17a-5(d) to eliminate any potential confusion regarding
when Annual Audits must be filed pursuant to Rule 7.4(a).
<bullet> Current Rule 7.4(a) requires TPHs approved to do business
with the public to have its annual audit report certified by an
independent public accountant and, on or before January 10 of each
year, to notify the Exchange of the name of the independent public
accountant appointed for that year and the date as of which the report
will be made. Rule 17a-5(f)(2) under the Act, however, requires the
broker or dealer to file with the Commission and its designated
examining authority (``DEA'') no later than December 10 of each year
(or 30 calendar days after the effective date of its registration as a
broker or dealer, if earlier) a statement regarding independent public
accountant, which includes among other things, the name of the
independent public accountant. The proposed rule change aligns the
requirement regarding the timing of when TPHs approved to do business
with the public must notify the Exchange regarding the identity of
their independent public accounts. This proposed rule change eliminates
the discrepancy between Rule 7.4(a) and Rule 17a-5 under the Act
regarding the timing of this notification. Since TPHs are broker-
dealers and thus subject to Rule 17a-5, the TPHs currently required to
submit these reports \12\ are currently complying with the deadline in
the Act, and thus the proposed rule change has no impact on those TPHs.
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\12\ As discussed below, 5 of 94 TPHs currently rely on the
exemption in SEC Rule 17a-5(d)(1)(iv) and do not submit audited
reports to the Exchange but will be required to do so going forward
pursuant to the proposed rule change.
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<bullet> The Exchange proposes to add language to Rule 7.4(a) to
state that any TPH for which the Exchange is the DEA that is unable to
meet the filing deadline for its Annual Audits as a result of
exceptional circumstances may request from the Exchange an extension of
time, in writing, prior to the filing due date. The Exchange will also
recognize any extensions of time or other exemptions granted to the TPH
by the Commission or the TPH's DEA (if not the Exchange). This is
currently permitted by Rule 17a-5(m)(1) under the Act, which states
that a broker's or dealer's DEA may extend the period for filing annual
reports pursuant to Rule 17a-5. The proposed change further aligns the
Rules regarding the submission deadline for TPHs' Annual Audits with
Rule 17a-5(m)(1) under the Act.\13\
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\13\ 17 CFR 240.17a-5(m)(1).
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The Exchange believes aligning the requirements regarding timing
and scope of information in Rule 7.4(a) with those requirements in Rule
17a-5 under the Act will clarify for TPHs what information they need to
report to the Exchange and when and may ultimately reduce any potential
confusion for TPHs regarding their audit reporting requirements.
Second, the proposed rule change aligns the scope of firms to which
the reporting obligation applies with that of the obligation in Rule
17a-5 of the Act. Current Rule 7.4(a), states that each TPH
organization approved to do business with the public in accordance with
Chapter 9 of the Rules and each registered Market-Maker must file a
report of its financial condition annually in accordance with the
requirements in Rule 17a-5(d) under the Act.\14\ Rule 17a-5 under the
Act,\15\ however, requires every broker or dealer (and thus every TPH)
\16\ registered under Section 15 of the Act \17\ to file annual reports
unless an exemption applies. Therefore, the applicability of the
Exchange's current Rule is slightly narrower than the reporting
requirement in the Act. The proposed rule change will require each TPH
to submit the Annual Audit, even those that may qualify for an
exemption under Rule 17a-5(d)(1)(iv) of the Act.\18\ Rule 17a-
5(d)(1)(iv) under the Act exempts from filing annual reports pursuant
to 17a-5(d)(2) ``a broker or dealer that is a member of a national
securities exchange, has transacted a business in securities solely
with or for other members of a national securities exchange, and has
not carried any margin account, credit balance, or security for any
person who is defined as a customer in paragraph (c)(4) of this
section.'' \19\ This exemption was intended to apply to, and has been
limited to, specialists, market makers, and floor brokers that have no
contact with the public and are subject to close daily supervision by
an exchange.\20\ Only a small number of TPHs currently rely on this
exemption.\21\ The Exchange believes the proposed rule change will
eliminate confusion regarding which TPHs may qualify for an exemption
under Rule 17a-5 and impose the same reporting requirement on all TPHs.
The Exchange further believes requiring
[[Page 42283]]
every TPH to submit Annual Audits will enhance regulatory oversight and
subject all TPHs to the same standards regardless of their business
model. The Exchange believes that its TPHs, including those that
previously have not submitted Annual Audits due to the current
exemption, are sufficiently sophisticated to require that they complete
Annual Audits pursuant to the proposed rule change.\22\
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\14\ 17 CFR 240.17a-5(d).
\15\ 17 CFR 240.17a-5(d)(2).
\16\ Because the Exchange requires every TPH to be registered as
a broker or dealer pursuant to Section 15 of the Act, Rule 17a-5
under the Act requires all TPHs to submit audited reports unless an
applicable exemption applies. See Rule 3.3 (Qualifications of TPH
Organizations).
\17\ 15 U.S.C. 78o.
\18\ 17 CFR 240.17a-5(d)(1)(iv).
\19\ Id.
\20\ See, e.g., Cboe Regulatory Circular RG95-068, Annual
Audited Financial Statements (August 16, 1995).
\21\ As of March 31, 2025, 5 of 94 TPHs relied on the exemption
in SEC Rule 17a-5(d)(1)(iv) and did not submit audited reports to
the Exchange. Pursuant to the proposed rule change, these five TPHs
would be required to submit Annual Audits to the Exchange in the
same manner as all other TPHs.
\22\ The Exchange is in the process of informing the five TPHs
that currently rely on this exemption that they will be required to
submit Annual Audit reports going forward.
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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.\23\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \24\ 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) \25\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
\25\ Id.
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In particular, the Exchange believes the proposed rule changes to
align the requirements regarding timing and scope of information in
Rule 7.4(a) with those requirements in Rule 17a-5 under the Act will
benefit investors by clarifying for TPHs what information they need to
report to the Exchange and when and may ultimately reduce any potential
confusion for TPHs regarding their audit reporting requirements. The
proposed rule change aligns the requirements in Rule 7.4(a) with those
in Rule 17a-5(d) under the Act given both rules are intended to apply
to the same report and thus impose the same requirements on TPHs. The
Exchange believes the proposed rule change will benefit investors by
eliminating uncertainty regarding potential perceived differences
between the Exchange's requirements and those of the Commission. The
Exchange does not intend there to be any differences between the
requirements (aside from the exemption provided in 17a-5(d)(1)(iv)
described below) in its Rule and the requirements in Rule 17a-5 under
the Act and are, therefore, aligning the requirements in its Rule with
those in the Commission's rule.
The Exchange also believes the proposed rule change is consistent
with Section 6(b)(1) of the Act,\26\ 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 TPHs and persons
associated with its TPHs with the Act, the rules and regulations
thereunder, and the rules of the Exchange, and furthers the objectives
of Section 6(c)(3) of the Act,\27\ which authorizes the Exchange to,
among other things, prescribe standards of financial responsibility.
The proposed rule change will require all TPHs to file Annual Audits
pursuant to the requirements in Rule 17a-5(d) under the Act, regardless
of the exemption in 17a-5(d)(1)(iv), which the Exchange believes will
enhance its regulatory oversight and subject all TPHs to the same
standards, regardless of their business model. The Exchange believes
that its TPHs, including those that previously have not submitted
Annual Audits due to the current exemption, are sufficiently
sophisticated to require that they complete Annual Audits pursuant to
the proposed rule change.\28\ Having audited financial information from
all of its TPHs will further strengthen the Exchange's ability to
protect investors through a more informed understanding of its TPHs'
financial status.
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\26\ 15 U.S.C. 78f(b)(1).
\27\ 15 U.S.C. 78f(c)(3).
\28\ The Exchange is in the process of informing the five TPHs
that currently rely on this exemption that they will be required to
submit Annual Audit reports going forward.
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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 will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as it will apply in the same
manner to all TPHs, as all TPHs will be subject to the same Annual
Audit requirements. 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,
as it is consistent with a Commission rule applicable to broker-dealers
(and thus all members of all national securities exchange).
Additionally, the proposed rule change relates to certain regulatory
obligations of TPHs and is not intended for competitive purposes.
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 \29\ and
Rule 19b-4(f)(6) \30\ thereunder.
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\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
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.
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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:
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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#483a3d242d652b2725252d263c3b083b2d2b662f273e"><span class="__cf_email__" data-cfemail="1a686f767f37797577777f746e695a697f79347d756c">[email protected]</span></a>. Please include
file number SR-CBOE-2025-060 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-2025-060. 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 filing 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-CBOE-2025-060 and should be submitted on
or before September 19, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-16575 Filed 8-28-25; 8:45 am]
BILLING CODE 8011-01-P
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