[Federal Register Volume 85, Number 148 (Friday, July 31, 2020)]
[Notices]
[Pages 46200-46202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16571]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89401; File No. SR-CBOE-2020-068]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Rule 10.3 by Extending the Credit Option Margin Pilot Program 
Through September 1, 2021

July 27, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 17, 2020, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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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)(iii).
    \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 amend Rule 10.3 by extending the Credit Option Margin Pilot Program 
through September 1, 2021. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    On February 2, 2011, the Commission approved the Exchange's 
proposal to establish a Credit Option Margin Pilot Program 
(``Program'').\5\ The proposal became effective on a pilot basis to run 
on a parallel track with Financial Industry Regulatory Authority 
(``FINRA'') Rule 4240 that similarly operates on an interim pilot 
basis.\6\
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    \5\ See Securities Exchange Act Release No. 63819 (February 2, 
2011), 76 FR 6838 (February 8, 2011) order approving (SR-CBOE-2010-
106). To implement the Program, the Exchange amended Rule 10.3(l), 
Margin Requirements, to make Cboe Option's margin requirements for 
Credit Options consistent with Financial Industry Regulatory 
Authority (``FINRA'') Rule 4240, Margin Requirements for Credit 
Default Swaps. Cboe Options Credit Options (i.e., Credit Default 
Options and Credit Default Basket Options) are analogous to credit 
default swaps.
    \6\ See Securities Exchange Act Release No. 59955 (May 22, 
2009), 74 FR 25586 (May 28, 2009) (Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change; SR-FINRA-
2009-012).
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    On January 17, 2012, the Exchange filed a rule change to, among 
other things, decouple the Program with the FINRA program and to extend 
the expiration date of the Program to January 17, 2013.\7\ The Program, 
however, continues to be substantially similar to the provisions of the 
FINRA program. Subsequently, the Exchange filed rule changes to extend 
the program until January 17, 2014, January 16, 2015, January 15, 2016, 
January 17, 2017, July 18, 2017, July 18, 2018, July 18, 2019 and July 
20, 2020, respectively.\8\ The

[[Page 46201]]

Exchange believes that extending the expiration date of the Program 
further will allow for further analysis of the Program and a 
determination of how the Program should be structured in the future. 
Thus, the Exchange is now currently proposing to extend the duration of 
the Program for an additional period until September 1, 2021.\9\
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    \7\ See Securities Exchange Act Release No. 66163 (January 17, 
2012), 77 FR 3318 (January 23, 2012) (SR-CBOE-2012-007).
    \8\ See Securities Exchange Act Release Nos. 68539 (December 27, 
2012), 78 FR 138 (January 2, 2013) (SR-CBOE-2012-125), 71124 
(December 18, 2013), 78 FR 77754 (December 24, 2013) (SR-CBOE-2013-
123), 73837 (December 15, 2014), 79 FR 75850 (December 19, 2014) 
(SR-CBOE-2014-091), 76824 (January 5, 2016), 81 FR 1255 (January 11, 
2016) (SR-CBOE-2015-118), 79621 (December 14, 2016) 81 FR 95236 
(December 27, 2016) (SR-CBOE-2016-089), 81083 (July 6, 2017) 82 FR 
32219 (July 12, 2017) (SR-CBOE-2017-051), 83672 (July 19, 2018) 83 
FR 35305 (July 25, 2018) (SR-CBOE-2018-052), and 86411 (July 18, 
2019) 84 FR 35702 (July 24, 2019) (SR-CBOE-2019-037).
    \9\ The Exchange is filing the proposed rule change for 
immediate effectiveness. The Exchange is proposing that the 
implementation date of the proposed rule change will be July 20, 
2020. The proposed rule change will expire on September 1, 2021, 
which is the same date FINRA's corresponding program expires. See 
Securities Exchange Act Release Nos. 89036 (June 10, 2020), 85 FR 
36458 (June 16, 2020) (SR-FINRA-2020-016).
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    Additionally, the Exchange believes that it is in the public 
interest to extend the expiration date of the Program because it will 
continue to allow the Exchange to list Credit Options for trading. As a 
result, the Exchange will remain competitive with the Over-the-Counter 
Market with respect to swaps and security-based swaps. In the future, 
if the Exchange proposes an additional extension of the Credit Option 
Margin Pilot Program or proposes to make the Program permanent, then 
the Exchange will submit a filing proposing such amendments to the 
Program.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitation 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    In particular, the Exchange believes that the proposed rule change 
will further the purposes of the Act because, consistent with the goals 
of the Commission at the initial adoption of the program, the margin 
requirements set forth by the proposed rule change will help to 
stabilize the financial markets. In addition, the proposed rule change 
is substantially similar to existing FINRA Rule 4240.

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. Specifically, the Exchange 
believes that, by extending the expiration of the Program, the proposed 
rule change will allow for further analysis of the Program and a 
determination of how the Program shall be structured in the future. In 
doing so, the proposed rule change will also serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.

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:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. 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 \13\ and 
Rule 19b-4(f)(6) \14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, as required under Rule 
19b-4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of the 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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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange states that waiver of the 30-day operative delay 
will allow it to maintain the status quo, thereby reducing market 
disruption. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest, as it will allow the Program to continue uninterrupted, 
thereby avoiding investor confusion that could result from a temporary 
interruption of the Program. For this reason, the Commission designates 
the proposed rule change to be operative upon filing.\15\
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    \15\ 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 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:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2020-068 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-CBOE-2020-068. 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

[[Page 46202]]

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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File Number SR-CBOE-2020-068 and 
should be submitted on or before August 21, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16571 Filed 7-30-20; 8:45 am]
BILLING CODE 8011-01-P


