Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice of Filing of Proposed Rule Change Relating To Exchange Jurisdiction
| Published date | 03 March 2020 |
| Citation | 85 FR 12594 |
| Record Number | 2020-04286 |
| Section | Notices |
| Court | Securities And Exchange Commission |
Federal Register, Volume 85 Issue 42 (Tuesday, March 3, 2020)
[Federal Register Volume 85, Number 42 (Tuesday, March 3, 2020)]
[Notices]
[Pages 12594-12595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04286]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88285; File No. SR-CFE-2020-002]
Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice
of Filing of Proposed Rule Change Relating To Exchange Jurisdiction
February 26, 2020.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 14, 2020 Cboe
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change described in Items I and II 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
February 14, 2020.
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\1\ 15 U.S.C. 78s(b)(7).
\2\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule
Change
The Exchange proposes to clarify and amend CFE's rule provisions
relating to Exchange jurisdiction. The scope of this filing is limited
solely to the application of the proposed rule change 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 308 (Consent to Exchange Jurisdiction) governs the
Exchange's jurisdiction. Rule 308(c) currently provides that any Person
initiating or executing a transaction on or subject to the rules of the
Exchange directly or through an intermediary, and any Person for whose
benefit such a transaction has been initiated or executed, expressly
consents to the jurisdiction of the Exchange and agrees to be bound by
and comply with the rules of the Exchange in relation to such
transactions, including, but not limited to, rules requiring
cooperation and participation in investigatory and disciplinary
processes. The cover page to the CFE Rulebook repeats this language
from Rule 308(c). CFE's rules refer to any Person subject to Rule
308(c) as a Market Participant.
CFTC Regulation 38.151(a) \3\ provides that prior to granting any
member or market participant access to its markets, a designated
contract market (``DCM'') must require that the member or market
participant consent to its jurisdiction. CFE originally adopted Rule
308(c) in order to comply with CFTC Regulation 38.151(a).\4\
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\3\ 17 CFR 38.151(a).
\4\ Id.
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The proposed rule change clarifies and amends CFE's rule provisions
relating to Exchange jurisdiction.
First, CFE proposes to revise CFE Rule 308(c) and amend the cover
page of the CFE Rulebook to clarify that any futures commission
merchant, broker-dealer, introducing broker, associated person, or
foreign Person performing a similar role, that charges a commission or
fee in connection with a transaction on or subject to the rules of the
Exchange also expressly consents to the Exchange's jurisdiction (and
thus is a Market Participant under CFE rules).
The proposed rule change furthers the Exchange's compliance with
CFTC Regulation Sec. 38.151(a) \5\ by clarifying the scope of the
Exchange's jurisdiction in relation to intermediaries. Between when a
customer enters an order and its actual execution, the order may be
routed through multiple different broker-dealers, futures commission
merchants, or introducing brokers before execution. The language of the
proposed rule change clarifies that if there is a third party involved
in the order routing process that receives a commission, it is still
subject to the Exchange's jurisdiction even if that party is a not a
customer of the ultimate execution firm. The proposed rule change was
developed by the Joint Compliance Committee, and the Exchange
understands that other DCMs also are adopting proposed rule changes
that contain the same or similar language.\6\
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\5\ Id.
\6\ The Joint Compliance Committee (``JCC'') is a voluntary,
cooperative organization comprised of members who are self-
regulatory organizations registered under the CEA. The JCC operates
through its members to protect market integrity within and across
the members' markets. It provides a forum to share information and
ideas on regulatory topics of interest, as well as identify issues
within the industry or elsewhere that may impact their markets,
members, or self-regulatory responsibilities. CFTC staff
representing the CFTC Division of Market Oversight Market Compliance
Section also participate in JCC meetings.
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Second, CFE is proposing to amend the definition of the term
``Person'' included in Chapter 1 of the CFE Rulebook. CFE's rules
currently define ``Person'' to mean ``any natural person, association,
partnership, limited liability company, joint venture, trust or
corporation.'' CFE proposes to amend this definition to add ``sole
proprietorship'' to the list included in the definition and to add
``any other type of entity or organization'' to the end of this list to
make clear that the definition of ``Person'' encompasses other
potential types of entities or organizations that may not be
specifically enumerated in the current list under the definition. These
proposed changes serve to clarify the meaning and scope of the term
``Person'' as used throughout CFE's rules, including in particular
within CFE's rule provisions relating to Exchange jurisdiction.
Third, CFE is proposing to revise Rule 308 to delete current Rule
308(e)(i). Rule 308(e)(i) provides that every Person in the chain of
custody of an order submitted to CFE that is not a CFE Trading
Privilege Holder (``TPH'') or Authorized Trader of a TPH, commencing
with the original initiation of the order until its receipt by CFE,
shall be deemed to be a Market Participant. This provision was recently
added to CFE's rules and was intended to provide the same type of
clarification as is intended by the provision that CFE is now adding to
Rule 308(c) in
[[Page 12595]]
conjunction with the same or similar proposed rule changes being made
by other DCMs. To further consistency with the jurisdictional rules of
other DCMs and to avoid any potential ambiguity that may be created by
having two differently worded provisions intended to accomplish the
same result, CFE is deleting Rule 308(e)(i). Because CFE is deleting
Rule 308(e)(i), CFE is changing the rule number for current Rule
308(e)(ii) to Rule 308(e)(i) and is changing the rule number for
current Rule 308(e)(iii) to Rule 308(e)(ii) without changing the text
of either rule provision.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Sections 6(b)(1) \8\ and 6(b)(5) \9\ in particular, in
that it is designed:
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(1).
\9\ 15 U.S.C. 78f(b)(5).
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To enable the Exchange to enforce compliance by its Market
Participants with the provisions of the rules of the Exchange,
to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade,
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.
The Exchange believes that the proposed rule change would
strengthen CFE's ability to carry out its responsibilities as a self-
regulatory organization by providing further clarity and guidance with
regard to provisions of the Exchange's rules that relate to trading
conduct by Market Participants. In particular, the proposed rule change
would clarify the definition of Person for purposes of, among other
things, applying CFE's rule provisions relating to Exchange
jurisdiction and would further clarify when intermediaries become
subject to the Exchange's jurisdiction. Accordingly, the proposed rule
change enhances the Exchange's ability to enforce compliance with its
rules and to protect the market and participants in the market from
abusive practices. In addition, the Exchange believes that the proposed
rule change will promote just and equitable principles of trade because
it would apply equally to all Market Participants.
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 enhance
CFE's ability to carry out its responsibilities as a self-regulatory
organization. The Exchange believes that the proposed rule change is
equitable and not unfairly discriminatory in that it would 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 March 2, 2020. 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 change and require that the
proposed rule change be refiled in accordance with the provisions of
Section 19(b)(1) of the Act.\10\
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\10\ 15 U.S.C. 78s(b)(1).
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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 [email protected]. Please include
File Number SR-CFE-2020-002 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-2020-002. 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-CFE-2020-002, and should be submitted on
or before March 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(73).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04286 Filed 3-2-20; 8:45 am]
BILLING CODE 8011-01-P
