[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51406-51408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19857]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92912; File No. SR-CBOE-2021-051]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 5.52 in Connection With the Minimum Initial Quote Size Requirement 
for Market-Makers

September 9, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on September 2, 2021, 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 \4\ and Rule 
19b-4(f)(6) thereunder.\5\ 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 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 5.52 in connection with the minimum initial quote size 
requirement for Market-Makers. 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/

[[Page 51407]]

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
    The Exchange proposes to amend Rule 5.52(b) to systematically 
reject Market-Maker quotes that do not meet the minimum initial quote 
size requirement determined by the Exchange.
    Rule 5.52 governs Market-Maker quoting obligations on the Exchange. 
Specifically, Rule 5.52(b) provides that a Market-Maker's bid (offer) 
\6\ for a series must be accompanied by the minimum number of contracts 
determined by the Exchange on a class-by-class basis, the minimum of 
which will be one contract at the price of the bid (offer) the Market-
Maker is willing to buy (sell). The proposed rule change updates Rule 
5.52(b) to provide that the System rejects a Market-Maker's bid (offer) 
that does not meet the minimum initial quote size determined by the 
Exchange for that class. Currently, the Exchange's Regulatory Division 
conducts surveillances to review for and enforce Market-Maker 
compliance with the minimum initial quote size requirements.\7\ By 
allowing the System to automatically reject Market-Maker quotes that do 
not meet the applicable minimum initial quote requirements for that 
class, the proposed rule change is designed to reduce a regulatory 
surveillance burden on the Exchange in having to manually surveil for 
and enforce Market-Maker compliance with the minimum initial quote size 
requirements, thereby allowing the Exchange to reallocate regulatory 
resources to other regulatory processes. The proposed rule change will 
also serve as an additional risk control for Market-Makers quoting on 
the Exchange by reducing the compliance risk associated with 
inadvertently submitting a bid (offer) that does not meet the minimum 
initial quote size requirement for that class. The Exchange notes, too, 
that other Exchange Rules provide for systematically enforced 
compliance with certain trading rules and requirements, including order 
size requirements.\8\
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    \6\ Pursuant to Rule 5.52, a Market Maker's quotes must be firm, 
two-sided bids (offers) that meet the applicable minimum initial 
quote size requirement.
    \7\ Currently, the Exchange has an initial minimum quote size in 
place for SPX during Regular Trading Hours (``RTH''). See Regulatory 
Circular 20-025, Reinstatement of Minimum Intraday Electronic Quote 
Size in SPX (April 2, 2020) available at https://cdn.cboe.com/resources/regulation/circulars/regulatory/RC20-025-Reinstatement-of-Minimum-Intraday-Electronic-Quote-Size-in-SPX.pdf. The minimum size 
for all other classes is the default size of one contract.
    \8\ See e.g., Rule 5.66(a), which provides that Trading Permit 
Holders shall not effect Trade-Throughs, however, Rule 5.32(c) 
provides that the System cancels or rejects an order that would 
trade through a Protected Quotation (if not otherwise eligible for 
routing or the price-adjust process); and Rule 5.34(c)(3), which 
provides that the System cancels or rejects an incoming order or 
quote with a size that exceeds the maximum contract size (which the 
Exchange determines).
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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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    The Exchange believes that, by having the System automatically 
reject Market-Maker quotes that do not meet the applicable minimum 
initial quote size requirement in a class, the proposed rule change 
will remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, will protect 
investors. In particular, the Exchange believes that the proposed rule 
change will reduce a surveillance burden on the Exchange in having to 
manually surveil for and enforce Market-Maker compliance with the 
minimum initial quote size requirements, thereby allowing the Exchange 
to reallocate regulatory resources into other regulatory functions. 
Additionally, the proposed rule change will benefit market participants 
by serving as an additional risk control for Market-Makers quoting on 
the Exchange and reducing the compliance risk associated with 
inadvertently submitting a bid (offer) that does not meet the minimum 
initial quote size requirement in that class. The proposed rule change 
does not present any new or novel issues or System functionality as 
other Exchange Rules provide for systematically enforced compliance 
with certain trading rules and requirements, including order size 
requirements.\12\
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    \12\ See supra note 7.
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    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(1) of the Act,\13\ 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 Trading Permit 
Holders and persons associated with its Trading Permit Holders with the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange, as the System will automatically enforce the minimum initial 
quote size requirement for Market-Makers.
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    \13\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change is competitive in nature, but 
rather is designed to enhance the Exchange's enforcement of Exchange 
Rules. The proposed rule change is not adding or amending a Market-
Maker quoting obligation; rather, it is merely automating surveillance 
of an existing obligation. The Exchange does not believe that the 
proposed rule change will impose any burden on

[[Page 51408]]

intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because it will apply equally to 
all Market-Maker quotes that do not meet the applicable minimum initial 
quote size requirement for a class. The Exchange does not believe that 
the proposed rule change will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because it is related to compliance with quoting 
requirements that are applicable only to Market-Makers on the Exchange.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\ 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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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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-2021-051 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-2021-051. 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 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. 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-CBOE-2021-051, and should be submitted 
on or before October 6, 2021.

    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. 2021-19857 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P


