83 FR 58800 - Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice of Filing of a Proposed Rule Change Regarding Minor Rule Violations

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 225 (November 21, 2018)

[Federal Register Volume 83, Number 225 (Wednesday, November 21, 2018)]
[Notices]
[Pages 58800-58802]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-25358]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84601; File No. SR-CFE-2018-001]


Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice 
of Filing of a Proposed Rule Change Regarding Minor Rule Violations

November 15, 2018.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 31, 2018 Cboe 
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
Items have been prepared by CFE. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons. CFE also has filed this proposed rule change with the 
Commodity Futures Trading Commission (``CFTC''). CFE filed a written 
certification with the CFTC under Section 5c(c) of the Commodity 
Exchange Act (``CEA'') \2\ on October 31, 2018.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to amend its rules regarding the processing 
of minor rule violations. The scope of this filing is limited solely to 
the application of the proposed rule amendments to security futures 
that may be traded on CFE. Although no security futures are currently 
listed for trading on CFE, CFE may list security futures for trading in 
the future. The text of the proposed rule change is attached as Exhibit 
4 to the filing but is not attached to the publication of this notice.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CFE 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. CFE 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
    CFE Rule 714 (Imposition of Fines for Minor Rule Violations) 
provides for the issuance of letters of caution or summary fines for 
specified types of minor CFE rule violations instead of addressing 
these violations through formal disciplinary proceedings. Each 
violation type under Rule 714 has a summary fine schedule that includes 
increasing monetary fines for subsequent violations by a party during a 
specified rolling time period and a referral of that party to the CFE 
Business Conduct Committee once that party has committed a certain 
number of violations within that rolling time period. The referral to 
the BCC is so that a panel of the BCC (``BCC Panel'') may determine 
whether or not to authorize the issuance of a statement of charges 
against the party and proceed with a formal disciplinary proceeding 
with regard to the matter.
    CFE is making amendments to Rule 714 in conjunction with other rule 
amendments being made by CFE to its disciplinary rules, including to 
Rule 714, that are not required to be submitted to the Commission 
pursuant

[[Page 58801]]

to Section 19(b)(7) of the Act \3\ and thus are not included as part of 
this rule change. One of these other rule amendments is to vest in 
CFE's Chief Regulatory Officer (``CRO'') instead of in a BCC Panel the 
authority to determine whether to issue a statement charges in a CFE 
disciplinary matter.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------

    Since BCC Panels will no longer be determining whether to issue 
statements of charges, the proposed rule change deletes referral to the 
BCC from each of the summary fine schedules under Rule 714 that 
addresses violations of CFE rule provisions related to recordkeeping 
and reporting requirements. These summary fine schedules include the 
summary fine schedules under the following subparagraphs of Rule 714(f) 
which have the following titles and relate back to the following CFE 
rule provisions referenced in those titles:
    (i) Rule 714(f)(i) relating to Failure to Include an Order Entry 
Operator ID with Order that is Submitted to the CFE System (CFE Rule 
303A(a)), Improper Use of Order Entry Operator IDs (Rules 303A(b) and 
303A(c)), and Failure to Comply with Issuance, Recordkeeping, and 
Reporting Requirements Related to Order Entry Operator IDs (Rule 
303A(d));
    (ii) Rule 714(f)(ii) relating to Failure to Identify Correct 
Customer Type Indicator Code in Order (CFE Rule 403(a)(x));
    (iii) Rule 714(f)(iii) relating to Failure to Provide Correct 
Account Designation in Order (Rule 403(a)(xii));
    (iv) Rule 714(f)(iv) relating to Failure to Comply with Order Form 
Preparation and Recordkeeping Requirements Relating to Orders Which 
Cannot Be Immediately Entered into the CFE System (Rule 403(b)) and 
Failure to Maintain Front-End Audit Trail Information for All 
Electronic Orders Entered into the CFE System, Including Order 
Modifications and Cancellations (Rule 403(c));
    (v) Rule 714(f)(vi) relating to Failure to Comply with Notice 
Provisions for Position Accountability (CFE Rules 412A(c) and 412A(d));
    (vi) Rule 714(f)(vii) relating to Failure to Comply with Reporting 
Requirements for Ownership and Control Reports and Reportable Positions 
(CFE Rules 412B(a), 412B(b), and 412B(c));
    (vii) Rule 714(f)(viii) relating to Failure to Comply with Order 
Marking Requirement for Exchange of Contract for Related Position 
Transactions (CFE Rule 414(g)) and Failure to Comply with Recordkeeping 
Requirement for Exchange of Contract for Related Position Transactions 
(Rule 414(h));
    (viii) Rule 714(f)(ix) relating to Failure to Comply with Exchange 
of Contract for Related Position Transaction Rule Provisions Relating 
to Authorized Reporter (Rule 414(i));
    (ix) Rule 714(f)(x) relating to Failure to Comply with Exchange of 
Contract for Related Position Transaction Reporting Requirements (Rules 
414(k) and 414(l));
    (x) Rule 714(f)(xi) relating to Failure to Comply with Order 
Marking Requirement for Block Trades (CFE Rule 415(a)(i)(A)) and 
Failure to Comply with Recordkeeping Requirements for Block Trades 
(Rule 415(e));
    (xi) Rule 714(f)(xiii) relating to Failure to Comply with Block 
Trade Rule Provisions Relating to Authorized Reporter (Rule 415(f));
    (xii) Rule 714(f)(xiv) relating to Failure to Comply with Block 
Trade Reporting Requirements (Rules 415(h) and 415(i)); and
    (xiii) Rule 714(f)(xv) relating to Failure to Provide Books and 
Records Within Designated Time Frame (CFE Rule 502 and Other CFE Rules 
Allowing CFE to Request Books and Records).
    Regulatory staff already has the ability to proceed with a formal 
disciplinary proceeding whenever regulatory staff determines that any 
violation covered by Rule 714 is intentional, egregious, or otherwise 
not minor in nature. The proposed rule change also amends Rule 714(f) 
to clarify that regulatory staff may also proceed with a formal 
disciplinary proceeding if the number of recurring violations of a 
particular type covered by Rule 714 within the rolling time period for 
that type of violation warrants a formal disciplinary proceeding. 
Accordingly, with the proposed rule change, there will not be a need 
for a referral after a certain number of violations within the 
applicable rolling time period since regulatory staff may initiate a 
formal disciplinary proceeding for any violation covered by Rule 714 
when circumstances warrant no matter the number of previous violations 
of that type.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Sections 6(b)(5),\5\ 6(b)(6),\6\ and 6(b)(7) \7\ in 
particular in that it is designed:
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(6).
    \7\ 15 U.S.C. 78f(b)(7).
---------------------------------------------------------------------------

     To prevent fraudulent and manipulative acts and practices;
     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;
     to have rules that provide that Exchange members and 
persons associated with Exchange members shall be appropriately 
disciplined for violation of the Act, the rules and regulations 
thereunder, or the rules of the Exchange, by expulsion, suspension, 
limitation of activities, functions, and operations, fine, censure, 
being suspended or barred from being associated with a member, or any 
other fitting sanction; and
     to provide a fair procedure for the disciplining of 
members and persons associated with members.
    The proposed rule change is consistent with these provisions in 
that CFE believes that the proposed rule change provides an effective 
and efficient means of disciplining parties for certain types of minor 
rule violations that do not warrant formal disciplinary proceedings 
while also permitting regulatory staff to initiate formal disciplinary 
proceedings for these types violations when circumstances warrant.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CFE does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act in that the proposed rule change will improve 
the efficiency and functioning of CFE's disciplinary process by 
providing greater flexibility to regulatory staff to determine when to 
initiate a formal disciplinary proceeding for any violation covered by 
Rule 714. Additionally, CFE believes that the proposed amendments are 
equitable and not unfairly discriminatory because the changes will 
apply equally to all market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change will become operative on November 15, 
2018. At any time within 60 days of the date of effectiveness of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule

[[Page 58802]]

change and require that the proposed rule change be refiled in 
accordance with the provisions of Section 19(b)(1) of the Act.\8\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CFE-2018-001 on the subject line.

Paper Comments

     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-CFE-2018-001. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CFE-2018-001, and should be submitted on 
or before December 12, 2018.
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(73).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25358 Filed 11-20-18; 8:45 am]
BILLING CODE 8011-01-P