Notice2026-09255
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Rule Regarding Trading Permit Holders and Associated Persons of a Trading Permit Holder Who Are or Become Subject to a Statutory Disqualification
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
May 11, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 90 (Monday, May 11, 2026)</title>
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[Federal Register Volume 91, Number 90 (Monday, May 11, 2026)]
[Notices]
[Pages 25672-25677]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09255]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105380; File No. SR-C2-2026-013]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Rule Regarding Trading Permit Holders and Associated Persons of a
Trading Permit Holder Who Are or Become Subject to a Statutory
Disqualification
May 6, 2026.
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 May 4, 2026, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe C2 Exchange, Inc. (the ``Exchange'') proposes to amend its
rule regarding Trading Permit Holders and associated persons of a
Trading Permit Holder who are or become subject to a statutory
disqualification. The text of the proposed rule change is provided in
Exhibit 5. The text of the proposed rule change is provided in Exhibit
5.
The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>) [sic], and at the principal office of the Exchange.
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 is proposing to amend Exchange Rule 3.5, the
Exchange's eligibility proceedings section regarding statutory
disqualifications, to conform (with certain exceptions) to rules of the
Financial Industry Regulatory Authority, Inc. (``FINRA'') \3\ and to
industry standard rules.<SUP>4 5</SUP> The Exchange's proposal also
includes the proposed Statutory Disqualification Circular (``SD
Circular'') that outlines the applicable eligibility procedures. The
amended rules would incorporate by reference the procedures in the SD
Circular. As further detailed in the SD Circular, the need for a
Trading Permit Holder (``TPH'') to file an application with the
Exchange for approval, notwithstanding the disqualification would
depend on (i) the type of disqualification; (ii) the date of
disqualification; and (iii) whether the firm or individual is seeking
admission, readmission or continuation in the securities industry.
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\3\ See Securities Exchange Act Release No. 59586 (March 17,
2009), 74 FR 12166 (March 23, 2009) (SR-FINRA-2008-045); Securities
Exchange Act Release No. 59722 (April 7, 2009), (SR-FINRA-2009-022).
\4\ See, e.g., NYSE Rules 9520-9550 or IEX Rule Series 9.520.
\5\ The Exchange initially submitted the proposed rule change on
April 28, 2026 (SR-C2-2026-012). On May 4, 2026, the Exchange
withdrew that filing and submitted this filing.
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By way of background, Section 3(a)(39) of the Act defines the term
``statutory disqualification'' and the circumstances that can cause a
person (either a Member, or a person associated with a Member) to be
subject to a statutory disqualification.\6\ Absent relief, a statutory
disqualification would preclude a TPH or person associated with a TPH
from certain activities, including membership in a self-regulatory
organization (``SRO'').
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\6\ 15 U.S.C. 78c(a)(39).
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There is, however, a well-established process through which a TPH
(or a person associated with a broker-dealer) may continue to operate
in the securities industry (and either become a TPH of, or continue as
a TPH of, one or more SROs) despite being subject to a statutory
disqualification.\7\
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\7\ See FINRA Regulatory Notice 09-19 (``Amendments to FINRA
Rule 9520 Series to Establish Procedures Applicable to Firms and
Associated Persons Subject to Certain Statutory
Disqualifications'').
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In particular, SEC Rule 19h-1 \8\ describes several ways an SRO may
seek
[[Page 25673]]
relief for a member (or prospective member) that is subject to a
statutory disqualification, including whether an SRO must file a notice
with the Commission in order to allow the disqualified firm to become
or continue as a member with the SRO (a ``19h-1 Notice'').
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\8\ 17 CFR 240.19h-1.
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The existing Rule 3.5(b) and (c) provides that either (i) a TPH
shall submit an application to the exchange within 10 days of becoming
subject to a statutory disqualification or, (ii) alternatively, if the
Exchange becomes aware that a TPH or associated person of a TPH is
subject to a statutory disqualification, then, in either event, the
Exchange shall then appoint a panel of three TPHs to conduct a hearing
concerning the matter. The existing Rule 3.5(d), (e), (f), (g), and (h)
provisions specify the procedural elements of the hearing itself and
the process for a final decision.
Currently, FINRA processes statutory disqualification applications
on behalf of the Exchange.\9\ Notably, having different rules has led
to outcomes where FINRA is not required to process an application and/
or an applicable 19h-1 Notice under its rules, but the Exchange (or
FINRA acting on the Exchange's behalf) is required under its existing
Rule 3.5. As such, the Exchange proposes to, in large part, conform to
FINRA Rule Series 9520 Eligibility Proceedings in order to prevent
different outcomes when FINRA is reviewing potential statutory
disqualifications on behalf of the Exchange. The Exchange also notes
that its existing Rule 3.5 is an outlier when compared to industry
standards, as other exchanges have adopted rules similar to FINRA's.
This may lead to inconsistent results when a firm is a member of
multiple exchanges and/or FINRA.\10\
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\9\ FINRA processes these applications on behalf of the Exchange
pursuant to a Regulatory Services Agreement (``RSA'') between the
Exchange and FINRA.
\10\ See, e.g., NYSE Rule 9520, IEX Rule 9.520 and Nasdaq Rule
9520.
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To aid in further conformity between the Exchange and FINRA, the
Exchange further proposes that it shall also rely on the no-action
letter issued to FINRA in 2009 that provides interpretive guidance
regarding (i) the effect of certain time-limited bars or license
revocations, (ii) the effect of bars by State securities commissions
that are based solely upon a disciplinary action taken by an SRO, (iii)
the notice requirements for willful violations of the Municipal
Securities Rulemaking Board and aiding and abetting violations, and
(iv) enforcement action to the Commission under Exchange Action
15A(g)(2) or Rule 19h-1(a) if an SRO does not file a notice with the
Commission for any person subject to a statutory disqualification under
Section 3(a)(39) that an SRO is proposing to admit or continue in
membership or association with a member under specific
circumstances.\11\ Due to FINRA's No-Action Letter, there have been
instances where review of the same circumstances had resulted in
different outcomes regarding when a notice is required pursuant to Rule
19h-1.\12\ Specifically, the No-Action Letter makes clear certain
instances where they will grant no-action relief if FINRA does not file
a 19h-1 Notice with the Commission. For example, the Commission
explicitly grants no-action relief if FINRA does not file a 19h-1
Notice if the subject person is subject to a statutory disqualification
solely due to a finding of a willful violation of the CEA or the rules
or regulations thereunder, provided that the sanctions are no longer in
effect. The FINRA No-Action Letter ultimately requires fewer 19h-1
Notices to be filed.
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\11\ See Financial Industry Regulatory Authority, Inc., SEC No-
Action Letter, 2009 SEC No-Act. (March 17, 2009) (``FINRA No-Action
Letter'').
\12\ For example, the FINRA No-Action Letter grants FINRA relief
from notice requirements regarding a member's continued association
with a disqualified person when the statutory disqualification is
based on willful violations of the CEA. Because of the relief
granted by the No Action Letter and pursuant to Regulatory Notice
09-19, FINRA would not require a member to file an application.
However, the Exchange's current Rule 3.13 does not offer relief from
application requirements for the firm to continue its association
with an associated person, notwithstanding their disqualification.
Relief is also not provided under the Exchange Act Rule 19h-
1(a)(3)(iii), since the disqualifying event is a finding by the CFTC
of a willful violation of the CEA and not a finding by the SEC or
SRO of a willful violation of the Exchange Act, among others. As
such, a notice pursuant to Rule 19h-1 for the Exchange is required,
but is not required for FINRA.
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The Exchanges notes that other exchanges, such as The Nasdaq Stock
Market LLC (``Nasdaq''), Investors Exchange (IEX) and New York Stock
Exchange (``NYSE''), have already adopted similar changes to more
materially align their rules with FINRA's.
Proposed Rule 3.5 would govern eligibility proceedings for persons
subject to statutory disqualifications. Proposed Rule 3.5(a) would add
certain definitions relating to eligibility proceedings that are not
currently part of the Exchange's rules, including ``Application,''
``disqualified TPH,'' ``disqualified person,'' ``sponsoring TPH,'' and
``Exchange staff.'' The Exchange notes that this is substantially
similar to FINRA's Rule 9521, with the following exceptions: (i)
``member'' has been replaced with ``TPH;'' (ii) references to FINRA By-
Laws have been replaced with references to the Exchange Act and
Exchange rules (where applicable); (iii) a new term of Exchange staff
has been added to account for the relationship between the Exchange and
FINRA, where the Exchange has a regulatory services agreement in place
with FINRA and FINRA may act within the bounds of the agreed upon
services; (iv) the definition of a disqualified TPH differs; and (v)
proposed Rule 3.5(a)(1) does not include reference to FINRA By-Laws.
The Exchange proposes to define ``disqualified TPH'' as a TPH that
is or becomes subject to a disqualification under Section 3(a)(39) of
the Exchange Act. This differs from the definition in FINRA Rule
9521(b)(2), which includes various other industry participants in
addition to existing members in the definition. The Exchange limited
its definition to TPHs, as the Exchange has jurisdiction over TPHs.\13\
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\13\ The Exchange notes the definition excludes TPH applicants
(the Exchange understands FINRA's definition also does not apply to
FINRA member applicants), because the Exchange would address a
disqualification of a TPH applicant as part of the TPH application
process, and the Exchange would not file a 19h-1 Notice with the
Commission for a TPH applicant. The proposed rule language, like
FINRA's, indicates the provisions that are applicable to a TPH
applicant. If the Exchange approves the TPH application of an
applicant that is or becomes subject to a disqualification, the firm
would then be a TPH that could take advantage of the provisions of
the proposed rule that apply to a disqualified TPH. The Exchange
understands this is consistent with FINRA's process with respect to
member applicants that are or become subject to a disqualification.
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Further, while the Exchange differs from FINRA in that it does not
include reference to FINRA By-Laws or Exchange Rules under proposed
Rule 3.5(a)(1), the Exchange believes this language better suits the
intended purpose of this section. Specifically, proposed Rule 3.5
specifies procedures to be followed in the event of a statutory
disqualification as defined in Section 3(a)(39) of the Exchange Act.
FINRA's equivalent Rule 9521 states that the Rule 9520 Series sets
forth procedures for a person to become or remain associated with a
member, notwithstanding the existence of a statutory disqualification
as defined in Article III, Section 4 of the FINRA By-Laws and for a
current member or person associated with a member to obtain relief from
the eligibility or qualification requirements of the FINRA By-Laws and
FINRA rules. Such actions hereinafter are referred to as `eligibility
proceedings.'' While the Exchange only references statutory
disqualification events in its equivalent rule, for its purposes, it
believes it is more fitting as
[[Page 25674]]
different procedures would be followed in the event a TPH, or TPH
applicant, is ineligible for other reasons.\14\
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\14\ See, e.g., Rule 3.2(c) specifying that the Exchange may
place conditions on a continuance (or may revoke TPH status) of a
TPH (or associated person of a TPH) for violating an agreement with
the Exchange. The Exchange understands FINRA similarly follows
procedures set forth in other applicable rules (such as FINRA Rule
9555) in the event a FINRA member or member applicant is ineligible
for other reasons.
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Proposed Rule 3.5(b) is largely mirrored off of FINRA's Rule 9522;
however, there were adjustments made to account for updating rule
references, adjusting ``member'' to ``TPH'', and replacing the
``National Adjudicatory Council'' with the ``Appeals Committee.''
First, the proposed Rules 3.5(b)(1) \15\ and 3.5(b)(2) would govern the
initiation of an eligibility proceeding by the Exchange and the
obligation for a TPH to file an application to initiate an eligibility
proceeding if it or a TPH's associated person \16\ has been subject to
certain disqualifications.
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\15\ The Exchange notes that for instances in which Exchange
staff will not issue written notice to TPHs or applicants for
membership with respect to disqualifications arising solely from
findings or orders specified in Section 15(b)(4)(D), (E), or (H) of
the Exchange Act or arising under Section 3(a)(39)(E) of the
Exchange Act (when a TPH or application for membership under
Exchange Rules is not required to file an application pursuant to
the SD Regulatory Circular), information regarding the disqualifying
event and the resolution of any fines, sanctions, or undertakings
related to the disqualification are recorded in WebCRD.
\16\ Under proposed Rule 3.5(b)(1)(C), if a TPH fails to file
the application or, where appropriate, the written request for
relief, within the 10-day period, the registration of the
disqualified person shall be revoked and the sponsoring TPH must
promptly terminate association with the disqualified person.
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Next, Rule 3.5(b)(3) sets out the process for a withdrawal of an
application and Rule 3.5(b)(4) sets out prohibitions against ex parte
communications when Exchange staff has initiated the eligibility
proceedings. The Exchange notes that its rule text does differ from
FINRA's; however, this is due to FINRA having a panel that reviews the
matter prior to an appeal and thus, ex parte communication concerns
arise before appeals. Under the Exchange's proposed rule, with Exchange
staff making determinations, a firm will need to talk to the Exchange
and FINRA while their application is pending. Thus, the Exchange
proposes to note that the proposed ex parte communications provision
shall become effective only when an appeal is initiated. Further, under
the proposed Rule 3.5(b)(5), the Exchange could approve a written
request for relief from the eligibility requirements under certain
circumstances. Specifically, Rule 3.5(b)(5)(A) describes certain
circumstances of which a matter may be approved by the Exchange staff
without the filing of an application. This provision is the same as the
corresponding provisions of FINRA, Nasdaq, and IEX, with one exception.
Specifically, under proposed Rule 3.5(b)(5)(A)(iii), Exchange staff may
approve a written request for relief without the filing of an
application if a disqualified TPH or sponsoring TPH is a TPH or seeking
to become a TPH is a member of both the Exchange and another SRO and
the other SRO intends to file a Notice under Exchange Act Rule 19h-1
approving the membership continuance of the disqualified TPH or, in the
case of a sponsoring TPH, the proposed association or continued
associated of the disqualified person and Exchange staff concurs with
that determination. This proposed provision is the same as that of
Nasdaq, FINRA, and IEX, except it applies to those seeking to become a
TPH in addition to TPHs, while the corresponding rules of Nasdaq,
FINRA, and IEX apply solely to members of those SROs. However, other
organizations have acknowledged this gap in their rules, noting it
would be their practice to apply this provision to prospective members
as well as members. Therefore, despite the differences in the rule text
of these other organizations, the Exchange believes the outcome under
its proposed rule would be the same as both IEX and Nasdaq from a
practical perspective.\17\
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\17\ See, e.g., Securities Exchange Act Release No. 101799
(November 29, 2024), 89 FR 96698 (December 5, 2024) (SR-IEX-2024-
26), where IEX states ``In the course of reviewing this membership
application, IEX identified that its rules do not specifically
address this situation, which has not previously occurred with
respect to IEX. Specifically, the Exchange believes that its rules
regarding the process by which a prospective Member that is subject
to a statutory disqualification can be approved for membership on
IEX notwithstanding the statutory disqualification could be enhanced
to provide additional clarity and more clearly align with the
processes set forth in Rule 19h-1 for a membership applicant that is
subject to a statutory disqualification.''
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Proposed Rule 3.5(b)(5)(B) covers matters that may be approved by
\18\ the Exchange staff after the filing of an application. Notably,
under proposed Rule 3.5(b)(5)(B) the Exchange staff may approve an
application with respect to disqualifications arising solely from
findings or orders specified in Section 15(b)(4)(D), (E), or (H) of the
Act or arising under Section 3(a)(39)(E) of the Act. Proposed Rule
3.5(b)(6) specifies the process for implementing an interim plan of
heightened supervision during the application process for a
disqualified person.
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\18\ The Exchange notes that approval of such an application
allows for a TPH's continued participation on the Exchange.
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Proposed Rules 3.5(b)(7) and 3.5(b)(8) cover the process for
determining that an application is substantially incomplete and the
consequences for not remedying an application in a timely manner.\19\
In the event an applicant fails to remedy an application under Rule
3.5(b)(8), Exchange staff will serve a written notice on the sponsoring
TPH of its determination to reject the application and the sponsoring
TPH must promptly terminate association with the disqualified person.
Under FINRA's Rule 9522, there is reference to FINRA's application fee
and that FINRA shall refund the application fee, less $1,000 which
shall be retained by FINRA as a processing fee. The Exchange notes,
however, that the Exchange has its own application fee program
reflected it its fee schedule that is distinct from FINRA's. As a
result, the Exchange proposes to not include this in its proposed rule.
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\19\ Proposed Rule 3.5(b)(7) applies to applications that are
deemed substantially incomplete if they do not include information
related to an interim plan of heightened supervision. Plans of
heightened supervisions are issued solely for associated persons
(and not TPHs), and thus this provision applies solely to associated
persons.
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As further explained, proposed Rule 3.5(c) largely mirrors FINRA
Rule 9523, with technical changes to account for different defined
terms and functions across the SROs. This proposed rule would allow the
Exchange staff (handled by FINRA) to recommend a supervisory plan to
which the disqualified TPH, sponsoring TPH, and/or disqualified person,
as the case may be, may consent and by doing so, waive the right to
appeal if the plan is accepted and right to claim bias or prejudgment,
or prohibited ex parte communications. If such a supervisory plan were
rejected, proposed Rule 3.5(d) would allow a request for review by the
applicant to the Appeals Committee and would provide that a filing of
an application for review would not stay the effectiveness of final
action by the Exchange unless the Commission otherwise ordered.
Proposed Rule 3.5(c) is covered under two parts: (i) to cover all
disqualification except those arising solely from findings or orders
specified in Section 15(b)(4)(D), (E), or (H) of the Exchange Act and
(ii) to cover disqualifications that arise solely from findings or
orders specified in Section 15(b)(4)(D), (E) or (H). The Exchange notes
that the latter (proposed Rule 3.5(c)(2)) is intended to cover events
where an application is required under the SD Circular, as under the
proposed
[[Page 25675]]
rule, events arising from findings or order specified in Section
15(b)(4)(D), (E) or (H) of the Exchange Act do not typically require an
application unless otherwise specified in the SD Circular.
The text of the proposed rule change is similar to that in FINRA's
counterpart rules, except for conforming and technical changes and
except as follows. First, under proposed Rule 3.5(c), if the
disqualified TPH, sponsoring TPH, and/or disqualified person executed a
letter consenting to a supervisory plan, it would be submitted to the
Exchange staff. Under FINRA's rule, the letter is submitted to FINRA
Office of General Counsel, which submits it to the Chairman of the
Statutory Disqualification Committee, acting on behalf of the NAC; the
Chairman may accept or reject the plan or refer it to the NAC for
action. The Exchange does not propose to utilize the NAC or the
Statutory Disqualification Committee Chairman for this purpose. The
Exchange believes that its staff can provide an appropriate review. The
staff is performing this same function today when it reviews statutory
disqualification decisions reached by FINRA subject to an RSA Agreement
between the Exchange and FINRA. In addition, under FINRA's rule, the
waiver of bias or prejudgment is with respect to the Department of
Member Regulation, the FINRA General Counsel, the NAC and any member
thereof, while under proposed Rule 3.5(c), the waiver would be with
respect to the Exchange staff, the Exchange, the Appeals Committee, or
any member of the Appeals Committee.
Next, under proposed Rule 3.5(d), if the Exchange staff rejects the
plan, the TPH or applicant may request a review by the Appeals
Committee.\20\ This differs from FINRA's process, which provides for a
hearing before the NAC and further consideration by the FINRA Board of
Directors. Because the Exchange does not propose to utilize the NAC,
the Exchange proposes instead that any appeal be heard by the Appeals
Committee. FINRA Rule 9525 also allows for discretionary review by the
FINRA Board and the Exchange does not propose to adopt a comparable
rule. The Exchange believes that the Exchange staff's role in the
process will provide sufficient oversight and independence.
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\20\ The Exchange's proposed Rule 3.5(d) closely aligns with
NYSE Rule 9524 except for conforming and technical changes.
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The Exchange does not propose to adopt the text of FINRA Rule 9526,
which provides for expedited proceedings by the FINRA Board of
Governors in certain instances. The Exchange believes that its proposed
rules for review can be carried out in a timely manner and would
sufficiently protect investors. The Exchange historically has not
provided an expedited statutory disqualification review.
Lastly, the Exchange also notes that it will adopt a definition of
``associated person'' in Rule 1.1, specifically as it pertains to
statutory disqualifications. This rule will be similar to the
definitions of associated persons implemented by other exchanges to
specifically apply to the process of statutory disqualifications.\21\
Currently, the Exchange's rule for associated person includes entities,
meaning that an entity that is under common control of a TPH is
considered a person associated with the TPH. As the proposed rule
requires TPHs to submit an application for continuance as a TH if any
person associated with the TPH becomes subject to a statutory
disqualification, the Exchange's current rules require TPHs to file
applications for affiliates under common control that would be subject
to a statutory disqualification under securities law. In contrast,
FINRA does not define ``Person Associated with a member'' or
``Associated Person of a Member'' as including affiliates under common
control of the FINRA member.\22\ Thus, a firm that is both an Exchange
TPH and FINRA member, which has an affiliate under common control that
would be subject to a statutory disqualification under securities laws,
is required to file an application with the Exchange, but not with
FINRA.
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\21\ See IEX Rule 1.160(y)(2) and Nasdaq General 3, Rule
1002(b)(2).
\22\ FINRA Regulation, Inc. By-laws, Article I, paragraph (ee)
defines the terms ``person associated with a member'' or
``associated person of a member'' in relevant part as: ``(2) a sole
proprietor, partner, officer, director, or branch manager of a
member, or other natural person occupying a similar status or
performing similar functions, or a natural person engaged in the
investment banking or securities business who is directly or
indirectly controlling or controlled by a member, whether or not any
such person is registered or exempt from registration with the
Corporation under these By-Laws or the Rules of the Corporation; and
(3) for purposes of Rule 8210, any other person listed in Schedule A
of Form BD.''
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The Exchange proposes to adopt a similar definition to Nasdaq and
IEX except that it shall (i) remove the reference to investment banking
as that is not applicable for the Exchange's functions and (ii) remove
subpoint (3) which specifies that for the purposes of another exchange
rule of Nasdaq and IEX \23\ (that is not the exchange's statutory
disqualification rule), that it shall also include any other person
listed in Schedule A of Form BD of a member. As the Exchange does not
have this rule, the Exchange proposes not to include this subpoint (3)
in its adopted definition of associated persons for the purpose of
statutory disqualifications.
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\23\ See IEX Rule 8.210 and Nasdaq General 5, Rule 8210.
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As noted above, other exchanges, such as Nasdaq, IEX and NYSE, have
already adopted similar changes to more materially align its rules with
FINRA's, and similar to the Exchange, have made some edits to align its
proposed rules with existing exchange processes.\24\
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\24\ See, e.g., Securities Exchange Act Release No. 61703 (March
12, 2010), 75 FR 13620 (March 22, 2010) (SR-NASDAQ-2010-023) and
Securities Exchange Act Release No. 68678 (January 16, 2013), 78 FR
5213 (January 24, 2013) (SR-NYSE-2013-02).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\25\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \26\ 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) \27\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers, because the rule applies
uniformly to all TPHs and does not unfairly discriminate against any
TPH or type of market participant. The Exchange also believes the
proposed rule change is consistent with Section 6(b)(1) of the Act,\28\
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.
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\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
\27\ Id.
\28\ 15 U.S.C. 78f(b)(1).
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[[Page 25676]]
In particular, the proposed rule change will better enable the
Exchange to streamline the administration of its statutory
disqualification program and better protect investors and the public
interest, as it will eliminate the need for TPHs or associated persons
of TPHs to submit Statutory Disqualification Applications for prior
statutory qualifications that have been resolved. Similar to Nasdaq,
IEX and NYSE, the Exchange proposes to harmonize its description of
statutory disqualification to align its application of statutory
disqualification to FINRA.\29\ This proposal would avoid potentially
different outcomes for members of both FINRA and the Exchange with
respect to ineligibility for membership and association.
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\29\ See supra note 12.
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The proposed changes will provide greater harmonization between
Exchange and FINRA rules of similar purpose, resulting in less
burdensome and more efficient regulatory compliance for dual members.
As previously noted, in many instances the proposed rule text is
substantially similar to FINRA's current rule text, which already has
been approved by the Commission, and in many other cases the
differences between current FINRA rules and the proposed rules would be
strictly technical in nature. Further, in other instances, such as the
Exchange's proposed Rule 3.5(d), the Exchange's rule closely follows
NYSE's Rule 9524.
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 rule change is
not designed to address any competitive issues but rather is designed
to provide greater harmonization between Exchange and FINRA rules of
similar purpose for investigations and disciplinary matters, resulting
in less burdensome and more efficient regulatory compliance for dual
members and facilitating FINRA's performance of its regulatory
functions under the RSA.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \30\ and Rule 19b-4(f)(6) thereunder.\31\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \32\ and Rule 19b-
4(f)(6) thereunder.\33\
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\30\ 15 U.S.C. 78s(b)(3)(A)(iii).
\31\ 17 CFR 240.19b-4(f)(6).
\32\ 15 U.S.C. 78s(b)(3)(A).
\33\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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 under Rule 19b-4(f)(6) \34\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\35\ the Commission
may 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 so that the Exchange
and its affiliates can have uniform proposed rules in place at the same
time. The Exchange notes that its proposed rule is mirrored off the
revised rule for Cboe Exchange, Inc., which will become operative on
May 18, 2026, and it is in the best interest of participants to have a
uniform change carried out across all Cboe exchanges \36\ on the same
date to avoid confusion. Further, the Exchange states that waiver of
the operative delay will permit the Exchange to harmonize its rules
regarding statutory disqualifications with the industry as soon as
practicable, allowing for consistent outcomes for industry participants
across exchanges and FINRA. For these reasons, and because the proposed
rule change does not raise any new or novel regulatory issues, the
Commission finds that waiving the 30-day operative delay is consistent
with the protection of investors and the public interest. Accordingly,
the Commission hereby waives the 30-day operative delay and designates
the proposed rule change as operative upon filing.\37\
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\34\ 17 CFR 240.19b-4(f)(6).
\35\ 17 CFR 240.19b-4(f)(6)(iii).
\36\ The Exchange notes that the Exchange's affiliated
exchanges, Cboe BZX Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe
BYX Exchange, Inc and Cboe EDGA Exchange, Inc. are also proposing
this revised new rule for statutory disqualifications.
\37\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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 under
Section 19(b)(2)(B) \38\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\38\ 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="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#a8daddc4cd85cbc7c5c5cdc6dcdbe8dbcdcb86cfc7de"><span class="__cf_email__" data-cfemail="0c7e796069216f6361616962787f4c7f696f226b637a">[email protected]</span></a>. Please include
file number SR-C2-2026-013 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-C2-2026-013. 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
[[Page 25677]]
publication submitted material that is obscene or subject to copyright
protection. All submissions should refer to file number SR-C2-2026-013
and should be submitted on or before June 1, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-09255 Filed 5-8-26; 8:45 am]
BILLING CODE 8011-01-P
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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.