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Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

executed the trade information required by Rule 6.1; 8
Rule 13.15g10, which currently imposes certain fines for violations of Rule 8.14 Communications to the Exchange or the Clearing Corporation; 9
and Rule 13.15g12, which currently imposes certain fines for trade-through violations pursuant to Rule 5.66 Order Protection.10
Additionally, as a result of the proposed deletion of Rule 13.15g4
and g5, the proposed rule change also deletes Interpretations and Policies .01
and .02 to Rule 13.15, as Interpretation and Policy .01 exclusively relates to Rule 13.15g5, and Interpretation and Policy .02 exclusively relates to Rule 13.15g4. The proposed rule change also moves the entirety of the rule text in Interpretation and Policy .03, which exclusively corresponds to current Rule 13.15g6, into Rule 13.15g6 itself.
Additionally, the proposed rule change moves the language currently in footnote 1 into current Rule 13.15g6.
Footnote 1 provides that Minor Rule Violation Fines imposed under this provision may be issued by Exchange Floor Officials. The Exchange notes that, while footnote 1 is currently appended to Rule 13.15g5, which is being deleted as proposed herein, it more appropriately applies to current Rule 13.15g6 Violations of Trading Conduct and Decorum Policies, as fines for violations of which are currently issued by Exchange Floor Officials pursuant to Rule 5.80c. Rule 5.80c1A specifically provides that Exchange Floor Officials may fine TPHs and persons employed by or associated 8 See Rule 6.1b, which requires parties to a trade to immediately record on a card or ticket, or enter in an electronic data storage medium acceptable to the Exchange, 1 the assigned broker initial code and clearing firm if a Market-Maker; 2 the symbol of the underlying security or index; 3 the type, expiration month, and exercise price of the option contract; 4 the transaction price; 5 the number of contract units comprising the transaction; 6 the time of the transaction obtained from a source designated by the Exchange; 7 the name of the contra Clearing Trading Permit Holder;
and 8 the assigned broker initial code of the contra Trading Permit Holder.
9 See Rule 8.14, which provides that no Trading Permit Holder, person associated with a Trading Permit Holder or applicant to be a Trading Permit Holder shall make any misrepresentation or omission in any application, report or other communication to the Exchange, or to the Clearing Corporation with respect to the reporting or clearance of any Exchange transaction, or adjust any position at the Clearing Corporation in any class of options traded on the Exchange except for the purpose of correcting a bona fide error in recording or of transferring the position to another account.
10 See Rule 5.66a, which provides that, except as provided in paragraph b, Trading Permit Holders shall not effect Trade-Throughs. The Exchange notes that trade-through compliance for electronic executions are systematically enforced.

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with TPHs pursuant to Rule 13.15 for trading conduct and decorum violations which are subject to fine under such fine schedules. As such, the proposed relocation of the language in footnote 1
merely provides additional clarity in the MRVP fine schedule regarding the issuance of Minor Rule Violation fines for trading conduct and decorum violations.
The Exchange no longer believes violations of the above-listed rules to be minor in nature and therefore proposes to remove them from the list of rules in Rule 13.15g eligible for a minor rule fine disposition. Particularly, the Exchange believes that violations of each of the rules listed above may directly impact trading on the Exchange, maintenance of a fair and orderly market, and/or customer protections.
For example, the Exchange believes that the requirement to submit trade information on time, to the Price Reporter and consistently on an orders transaction date, as well as the requirement to truthfully and accurately represent information in communications to the Exchange and the Clearing Corporation allows the Exchange and the Clearing Corporation to maintain an accurate audit trail and trade information. Likewise, honoring firm quotations is vital in promoting efficient functioning of intermarket price priority and trading in general.
Timely and accurate representation of both trade information and quotations protects investors by providing them with accurate information essential to their trading activities and participation in the markets. Upholding due diligence to honor the priority of customer orders and obligations as a principal, as well as the prohibition against the execution of trades at prices inferior to protected quotations trade-throughs, all provide important customer protections.
Pursuant to Rule 13.15f, the Exchange is not required to impose a fine pursuant to its MRVP with respect to the violation of any rule listed under Rule 13.15. If the Exchange determines that any violation is intentional, egregious, or otherwise not minor in nature, it may proceed under its formal disciplinary rules. As such, the Exchange has increasingly chosen to handle such violations in recent years under the Exchanges formal disciplinary rules, rather than imposing a fine pursuant to its MRVP.
The proposed rule change next amends the fine schedule applicable to Maker-Makers for failure to meet Exchange quoting obligations.
Specifically, Rule 13.15g14 g9, as
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amended 11 provides that a fine shall be imposed upon a Market-Maker, Designated Primary Market-Maker or Lead Market Maker as applicable in accordance with the fine schedule set forth below for the following conduct: 12
Failure to meet the continuous quoting obligation Rule 5.52, 5.55, and 5.54;
Failure to meet the initial quote volume requirements Rule 5.52; and Failure of a Lead Market-Maker or Designated Primary Market-Maker to enter opening quotes within one minute following the initiation of an opening rotation e.g., 9:31 a.m. in a series in its appointed or allocated class, respectively, that is not open due to the lack of a quote see Rule 5.31e2 or j5B, as applicable Rules 5.55 and 5.54, respectively.
For the first offense during any rolling 24-month period, the fine schedule imposed by Rule 13.15g14 currently permits the Exchange to apply a fine ranging between $2,000 and $4,000. For subsequent offenses during the same period, the fine schedule currently permits the Exchange to apply a fine ranging between $4,000 and $5,000. The proposed rule change updates the fine schedule to provide that, during any rolling 24-month period, the Exchange may give a Letter of Caution for a first offense, may apply a fine of $1,500 for a second offense, may apply a fine of $3,000 for a third offense,13 and may proceed with formal disciplinary action for subsequent offenses. As described above, and as is the case for all rule violations covered under Rule 13.15g, the Exchange may determine that a violation of Market-Maker quoting obligations is intentional, egregious, or otherwise not minor in nature and choose to proceed under the Exchanges formal disciplinary rules rather than its MRVP.14 The Exchange may continue to aggregate individual violations of 11 See
supra note 3.
proposed rule change also makes nonsubstantive clarifying updates to Rule 13.15g14, by removing the conduct listed in subparagraph g14B and updating the format in which time is reflected. These nonsubstantive amendments are described in further detail herein this proposal below.
13 The Exchange notes that Rule 13.15a authorizes the Exchange to impose a fine, not to exceed $5,000, for minor rule violations in lieu of commencing a disciplinary proceeding.
Additionally, any fine imposed pursuant to Rule 13.15 that 1 does not exceed $2,500 and 2 is not contested, shall be reported by the Exchange to the Commission on a periodic, rather than a current, basis, except as may otherwise be required by Exchange Act Rule 19d1 and by any other regulatory authority.
14 See Rule 13.15f.
12 The
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