83_FR_53540 83 FR 53336 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Approving a Proposed Rule Change To Amend Exchange Rule 6.49A, Transfer of Positions

83 FR 53336 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Approving a Proposed Rule Change To Amend Exchange Rule 6.49A, Transfer of Positions

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 204 (October 22, 2018)

Page Range53336-53337
FR Document2018-22908

Federal Register, Volume 83 Issue 204 (Monday, October 22, 2018) 
[Federal Register Volume 83, Number 204 (Monday, October 22, 2018)]
[Notices]
[Pages 53336-53337]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-22908]



[[Page 53336]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84437; File No. SR-CBOE-2018-060]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Order 
Approving a Proposed Rule Change To Amend Exchange Rule 6.49A, Transfer 
of Positions

October 16, 2018.

I. Introduction

    On August 16, 2018, the Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe'') filed with the Securities and Exchange Commission (the 
``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposal to amend Rule 6.49A (Transfer of Positions). The proposed rule 
change was published for comment in the Federal Register on September 
4, 2018.\3\ The Commission did not receive any comment letters on the 
proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83968 (August 28, 
2018), 83 FR 44938 (September 4, 2018) (``Notice'').
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II. Description of the Proposed Rule Change

    Cboe Rule 6.49 generally requires a Trading Permit Holder (``TPH'') 
to effect transactions in listed options on an exchange.\4\ 
Notwithstanding that provision, Cboe Rule 6.49A permits certain types 
of transfers involving a TPH's positions to be effected off the 
floor.\5\ In addition, Cboe Rule 6.49A provides a procedure for an 
``on-floor'' transfer of positions.\6\ As described in more detail in 
the Notice,\7\ the Exchange proposes to amend Rule 6.49A to eliminate 
the on-floor position transfer process,\8\ amend the criteria and 
procedures related to off-floor position transfers, amend the exemption 
provision, and make other non-substantive changes.
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    \4\ See Cboe Rule 6.49(a).
    \5\ See Cboe Rule 6.49A(a).
    \6\ See Cboe Rule 6.49A(b)-(c).
    \7\ See Notice, supra note 3.
    \8\ The Exchange represents that it no longer wants to make 
available the on-floor transfers of positions because it is 
administratively burdensome on the Exchange, used by TPHs on a 
limited basis, and no longer serves the uses for which it was 
originally adopted. Id. at 44938.
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    With respect to off-floor transfers, Cboe Rule 6.49A(a) currently 
sets forth specific events under which off-floor transfers are 
permitted. The Exchange proposes to delineate several additional events 
and add them to the list of permitted off-floor transfers in proposed 
Rule 6.49A.\9\ For example, the additional events address correcting 
bona fide errors in trade recording, consolidating accounts without a 
chance in beneficial ownership, and transfers by operation of law.\10\
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    \9\ Id. at 44939. The proposed amendments to Rule 6.49A(a) also 
add clarification that Rule 6.49A does not apply to products other 
than options listed on the Exchange consistent with the Exchange's 
other trading rules, a TPH must be on one side of the transfer, and 
that positions a TPH are transferring or receiving are held in the 
account of the Clearing Trading Permit Holder. Id.
    \10\ See proposed Cboe Rule 6.74A(a).
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    In addition, proposed Rule 6.49A(b) codifies prior Exchange 
guidance regarding certain restrictions on permissible off-floor 
transfers related to the netting of open positions and to margin and 
haircut treatment.\11\ Among other things, proposed Rule 6.49A(b)(2) 
will only permit netting for off-floor transfers between separate 
exchange-specific Market Maker accounts in the limited circumstances 
set forth in the Rule.\12\
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    \11\ See proposed Cboe Rule 6.74A(b).
    \12\ See proposed Cboe Rule 6.74A(b)(2). See also Notice, supra 
note 3, at 44939-40. In such instances, all Market Maker positions 
in the exchange-specific accounts for the multiply listed class may 
be automatically transferred on their trade date into one universal 
Market Maker account at the Clearing Corporation. See id.
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    Further, proposed Rule 6.49A(d) will require a TPH and its Clearing 
Trading Permit Holder (to the extent the TPH is not self-clearing) to 
submit written notice to the Exchange prior to effecting an off-floor 
transfer from or to the account of a TPH(s).\13\ Proposed Rule 6.49A(e) 
will require that each TPH and Clearing Trading Permit Holder that is a 
party to an off-floor transfer must make and retain records of the 
information provided in the written notice, as well as information on 
the Exchange-listed options that are ultimately transferred, the 
transfer date, transfer price, and any other information the Exchange 
may request.\14\
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    \13\ See proposed Cboe Rule 6.74A(d).
    \14\ See proposed Cboe Rule 6.74A(e).
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    In addition, the Exchange is clarifying and updating Proposed Rule 
6.49A(f), which allows the Exchange to grant an exemption from Rule 
6.49(a) in cases where allowing an off-floor transfer would be 
necessary or appropriate for the maintenance of a fair and orderly 
market and the protection of investors and is in the public 
interest.\15\
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    \15\ See proposed Cboe Rule 6.74A(f).
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    Finally, the Exchange is adding new proposed Rule 6.49A(g) to state 
that the off-floor position transfer process described in the Rule is 
``intended to facilitate non-routine, non-recurring movements of 
positions'' and is ``not to be used repeatedly or routinely in 
circumvention of the normal auction market process.'' \16\
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    \16\ See proposed Cboe Rule 6.74A(g). In addition, proposed Cboe 
Rule 6.74A(h) is being added to clarify that the off-floor transfer 
procedure is only applicable to positions in options listed on the 
Exchange, and that off-floor transfers of positions in Exchange-
listed options may be subject to applicable laws, rules and 
regulations, including rules of other self-regulatory organizations. 
See proposed Cboe Rule 6.74A(h).
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act,\17\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.\18\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\19\ which 
requires, among other things, that the rules of a national securities 
exchange be designed 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 and that the 
rules are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \17\ 15 U.S.C. 78f.
    \18\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change is designed to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system by providing a mechanism to permit off-floor position transfers 
in specified, limited, and narrowly-tailored circumstances. Thus, Rule 
6.49A makes clear that off-floor positions transfers are not to be used 
repeatedly or routinely in circumvention of the normal auction market 
process.\20\ While the amended Rule will continue to allow the Exchange 
to grant an exemption from Cboe Rule 6.49(a), the revised rule text 
makes it clear that exemptions may only be granted on rare occasions 
when necessary or appropriate for the maintenance of a fair and orderly 
market and the protection of investors and where the exemption is in 
the public interest, including due to unusual or extraordinary 
circumstances.
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    \20\ See proposed Cboe Rule 6.49A(g).
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    The Commission further notes that the proposal adds transparency to 
the off-floor transfer process by codifying certain long-standing Cboe 
guidance

[[Page 53337]]

regarding when off-floor transfers are permissible, whether netting is 
permitted, and the transfer price of an off-floor transfer. The 
Commission believes that those additional provisions are designed to 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
In addition, the Commission believes that the requirement for the 
parties to provide written notice to the Exchange and maintain detailed 
records of each transfer will ensure that the Exchange is made aware of 
off-floor transfers and is able to review them for compliance with 
applicable rules.
    With respect to the elimination of the on-floor transfer package 
procedure, the Commission notes that TPHs will continue to be able to 
transact on the Exchange using the regular auction market process.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-CBOE-2018-060) be, and 
hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22908 Filed 10-19-18; 8:45 am]
 BILLING CODE 8011-01-P

53336 Federal Register / Vol. 83, No. 204 / Monday, October 22, 2018 / Notices SECURITIES AND EXCHANGE events and add them to the list of facilitate non-routine, non-recurring COMMISSION permitted off-floor transfers in proposed movements of positions’’ and is ‘‘not to Rule 6.49A.9 For example, the be used repeatedly or routinely in [Release No. 34–84437; File No. SR–CBOE– additional events address correcting circumvention of the normal auction 2018–060] bona fide errors in trade recording, market process.’’ 16 Self-Regulatory Organizations; Cboe consolidating accounts without a chance in beneficial ownership, and III. Discussion and Commission Exchange, Inc.; Order Approving a Findings Proposed Rule Change To Amend transfers by operation of law.10 Exchange Rule 6.49A, Transfer of In addition, proposed Rule 6.49A(b) After careful review, the Commission Positions codifies prior Exchange guidance finds that the proposed rule change is regarding certain restrictions on consistent with the requirements of the October 16, 2018. permissible off-floor transfers related to Act,17 and the rules and regulations the netting of open positions and to thereunder applicable to a national I. Introduction margin and haircut treatment.11 Among securities exchange.18 In particular, the On August 16, 2018, the Cboe other things, proposed Rule 6.49A(b)(2) Commission finds that the proposed Exchange, Inc. (the ‘‘Exchange’’ or will only permit netting for off-floor rule change is consistent with Section ‘‘Cboe’’) filed with the Securities and transfers between separate exchange- 6(b)(5) of the Act,19 which requires, Exchange Commission (the specific Market Maker accounts in the among other things, that the rules of a ‘‘Commission’’), pursuant to Section limited circumstances set forth in the national securities exchange be 19(b)(1) of the Securities Exchange Act Rule.12 designed to remove impediments to and of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 Further, proposed Rule 6.49A(d) will perfect the mechanism of a free and thereunder,2 a proposal to amend Rule require a TPH and its Clearing Trading open market and a national market 6.49A (Transfer of Positions). The Permit Holder (to the extent the TPH is system, and, in general, to protect proposed rule change was published for not self-clearing) to submit written investors and the public interest and comment in the Federal Register on notice to the Exchange prior to effecting that the rules are not designed to permit September 4, 2018.3 The Commission an off-floor transfer from or to the unfair discrimination between did not receive any comment letters on account of a TPH(s).13 Proposed Rule customers, issuers, brokers, or dealers. the proposed rule change. This order 6.49A(e) will require that each TPH and The proposed rule change is designed approves the proposed rule change. Clearing Trading Permit Holder that is to remove impediments to and perfect a party to an off-floor transfer must the mechanism of a free and open II. Description of the Proposed Rule make and retain records of the market and a national market system by Change information provided in the written providing a mechanism to permit off- Cboe Rule 6.49 generally requires a notice, as well as information on the floor position transfers in specified, Trading Permit Holder (‘‘TPH’’) to effect Exchange-listed options that are limited, and narrowly-tailored transactions in listed options on an ultimately transferred, the transfer date, circumstances. Thus, Rule 6.49A makes exchange.4 Notwithstanding that transfer price, and any other clear that off-floor positions transfers are provision, Cboe Rule 6.49A permits information the Exchange may not to be used repeatedly or routinely in certain types of transfers involving a request.14 circumvention of the normal auction TPH’s positions to be effected off the In addition, the Exchange is clarifying market process.20 While the amended floor.5 In addition, Cboe Rule 6.49A and updating Proposed Rule 6.49A(f), Rule will continue to allow the provides a procedure for an ‘‘on-floor’’ which allows the Exchange to grant an Exchange to grant an exemption from transfer of positions.6 As described in exemption from Rule 6.49(a) in cases Cboe Rule 6.49(a), the revised rule text more detail in the Notice,7 the Exchange where allowing an off-floor transfer makes it clear that exemptions may only proposes to amend Rule 6.49A to would be necessary or appropriate for be granted on rare occasions when eliminate the on-floor position transfer the maintenance of a fair and orderly necessary or appropriate for the process,8 amend the criteria and market and the protection of investors maintenance of a fair and orderly procedures related to off-floor position and is in the public interest.15 market and the protection of investors transfers, amend the exemption Finally, the Exchange is adding new and where the exemption is in the provision, and make other non- proposed Rule 6.49A(g) to state that the public interest, including due to substantive changes. off-floor position transfer process unusual or extraordinary circumstances. With respect to off-floor transfers, described in the Rule is ‘‘intended to The Commission further notes that Cboe Rule 6.49A(a) currently sets forth the proposal adds transparency to the specific events under which off-floor 9 Id. at 44939. The proposed amendments to Rule 6.49A(a) also add clarification that Rule 6.49A does off-floor transfer process by codifying transfers are permitted. The Exchange not apply to products other than options listed on certain long-standing Cboe guidance proposes to delineate several additional the Exchange consistent with the Exchange’s other trading rules, a TPH must be on one side of the 16 See proposed Cboe Rule 6.74A(g). In addition, 1 15 U.S.C. 78s(b)(1). transfer, and that positions a TPH are transferring proposed Cboe Rule 6.74A(h) is being added to 2 17 CFR 240.19b–4. or receiving are held in the account of the Clearing clarify that the off-floor transfer procedure is only 3 See Securities Exchange Act Release No. 83968 Trading Permit Holder. Id. applicable to positions in options listed on the (August 28, 2018), 83 FR 44938 (September 4, 2018) 10 See proposed Cboe Rule 6.74A(a). Exchange, and that off-floor transfers of positions in (‘‘Notice’’). 11 See proposed Cboe Rule 6.74A(b). Exchange-listed options may be subject to 4 See Cboe Rule 6.49(a). 12 See proposed Cboe Rule 6.74A(b)(2). See also applicable laws, rules and regulations, including 5 See Cboe Rule 6.49A(a). Notice, supra note 3, at 44939–40. In such rules of other self-regulatory organizations. See daltland on DSKBBV9HB2PROD with NOTICES 6 See Cboe Rule 6.49A(b)–(c). instances, all Market Maker positions in the proposed Cboe Rule 6.74A(h). 7 See Notice, supra note 3. exchange-specific accounts for the multiply listed 17 15 U.S.C. 78f. 8 The Exchange represents that it no longer wants class may be automatically transferred on their 18 In approving this proposed rule change, the to make available the on-floor transfers of positions trade date into one universal Market Maker account Commission has considered the proposed rule’s because it is administratively burdensome on the at the Clearing Corporation. See id. impact on efficiency, competition, and capital 13 See proposed Cboe Rule 6.74A(d). formation. See 15 U.S.C. 78c(f). Exchange, used by TPHs on a limited basis, and no 14 See proposed Cboe Rule 6.74A(e). 19 15 U.S.C. 78f(b)(5). longer serves the uses for which it was originally adopted. Id. at 44938. 15 See proposed Cboe Rule 6.74A(f). 20 See proposed Cboe Rule 6.49A(g). 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Federal Register / Vol. 83, No. 204 / Monday, October 22, 2018 / Notices 53337 regarding when off-floor transfers are 455778. Written statements should be SECURITIES AND EXCHANGE permissible, whether netting is received on or before November 7, 2018. COMMISSION permitted, and the transfer price of an ADDRESSES: Written statements may be off-floor transfer. The Commission [Release No. 34–84436; File No. SR–CBOE– submitted by any of the following 2018–062] believes that those additional provisions methods: are designed to perfect the mechanism Self-Regulatory Organizations; Cboe of a free and open market and a national Electronic Statements Exchange, Inc.; Order Approving a market system, and, in general, to protect investors and the public interest. D Use the Commission’s internet Proposed Rule Change To Amend Rule submission form (http://www.sec.gov/ 6.2, Interpretation and Policy .01, In addition, the Commission believes Concerning Strategy Orders that the requirement for the parties to rules/other.shtml); or provide written notice to the Exchange D Send an email message to rules- October 16, 2018. and maintain detailed records of each comments@sec.gov. Please include File transfer will ensure that the Exchange is No. 265–28 on the subject line; or I. Introduction made aware of off-floor transfers and is Paper Statements On August 24, 2018, Cboe Exchange, able to review them for compliance with Inc. (‘‘Exchange’’) filed with the applicable rules. D Send paper statements to Brent J. Securities and Exchange Commission With respect to the elimination of the Fields, Secretary, Securities and (‘‘Commission’’), pursuant to Section on-floor transfer package procedure, the Exchange Commission, 100 F Street NE, 19(b)(1) of the Securities Exchange Act Commission notes that TPHs will Washington, DC 20549–1090. of 1934 (‘‘Act’’) 1 and Rule 19b–4 continue to be able to transact on the All submissions should refer to File No. thereunder,2 a proposal to amend Exchange using the regular auction 265–28. This file number should be Exchange Rule 6.2, Interpretation and market process. included on the subject line if email is Policy .01, concerning strategy orders. IV. Conclusion used. To help us process and review The proposed rule change was your statement more efficiently, please published for comment in the Federal It is therefore ordered, pursuant to Register on September 12, 2018.3 The Section 19(b)(2) of the Act,21 that the use only one method. Commission received no comment proposed rule change (SR–CBOE–2018– Statements also will be available for letters regarding the proposed rule 060) be, and hereby is, approved. website viewing and printing in the change. This order approves the Commission’s Public Reference Room, proposed rule change. For the Commission, by the Division of Trading and Markets, pursuant to delegated 100 F Street NE, Room 1503, authority.22 Washington, DC 20549, on official II. Description of the Proposed Rule Eduardo A. Aleman, business days between the hours of Change Assistant Secretary. 10:00 a.m. and 3:00 p.m. All statements Exchange Rule 6.2, Interpretation and received will be posted without change. Policy .01 sets forth the modified [FR Doc. 2018–22908 Filed 10–19–18; 8:45 am] Persons submitting comments are Hybrid Opening System (‘‘HOSS’’) BILLING CODE 8011–01–P cautioned that we do not redact or edit procedure for the option series used to personal identifying information from calculate the exercise or final settlement SECURITIES AND EXCHANGE comment submissions. You should value for expiring volatility index COMMISSION submit only information that you wish derivatives.4 As described in the to make available publicly. Notice,5 the Exchange notes that market [Release Nos. 33–10568; 34–84441; File No. 265–28] FOR FURTHER INFORMATION CONTACT: participants seeking to replicate the Marc Oorloff Sharma, Chief Counsel, exposure of their expiring VIX Investor Advisory Committee Meeting Office of the Investor Advocate, at (202) derivatives generally do so with 551–3302, Securities and Exchange portfolios of constituent SPX options AGENCY: Securities and Exchange Commission, 100 F Street NE, referred to as ‘‘strategy orders,’’ which Commission. Washington, DC 20549. they submit for execution in the ACTION: Notice of telephonic meeting of modified HOSS opening procedure on Securities and Exchange Commission SUPPLEMENTARY INFORMATION: The VIX exercise settlement value Dodd-Frank Investor Advisory meeting will be open to the public via determination days.6 As with any Committee. telephone. Persons needing special accommodations to take part because of 1 15 U.S.C. 78s(b)(1). SUMMARY: The Securities and Exchange a disability should notify the contact 2 17 CFR 240.19b–4. Commission Investor Advisory person listed in the section above 3 See Securities Exchange Act Release No. 84045 Committee, established pursuant to entitled FOR FURTHER INFORMATION (September 12, 2018), 83 FR 46230 (‘‘Notice’’). Section 911 of the Dodd-Frank Wall CONTACT. 4 See proposed Exchange Rule 6.2, Interpretation Street Reform and Consumer Protection and Policy .01(a). These volatility indexes include The agenda for the meeting includes: the Cboe Volatility Index (‘‘VIX’’) and the Russell Act of 2010, is providing notice that it Welcome remarks; a discussion of the 2000 Volatility Index. See Notice, supra note 3, at will hold a telephonic public meeting. Commission’s Proposed Regulation Best 46232, n.3. The public is invited to submit written Interest and Proposed Form CRS 5 See note 3, supra. statements to the Committee. Relationship Summary (which may 6 See Notice, supra note 3, at 46232–3. The exercise settlement value determination day is a DATES: The meeting will be held on include a recommendation of the daltland on DSKBBV9HB2PROD with NOTICES day on which the Exchange determines the exercise Wednesday, November 7, 2018 from Investor as Purchaser subcommittee). or final settlement value, as applicable, of expiring 2:00 p.m. until 3:30 p.m. (ET) and will volatility index derivatives. See proposed Exchange Dated: October 17, 2018. Rule 6.2, Interpretation and Policy .01(a). The be open to the public via telephone at Brent J. Fields, Exchange notes that because market participants 1–800–260–0702, participant code use strategy orders to convert vega (volatility) Secretary. exposure from one instrument (expiring VIX 21 15 U.S.C. 78s(b)(2). [FR Doc. 2018–22943 Filed 10–19–18; 8:45 am] derivative) to another (portfolio of SPX options 22 17 CFR 200.30–3(a)(12). 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Document Created: 2018-10-20 01:49:23
Document Modified: 2018-10-20 01:49:23
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 53336 
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