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

particular rules and treat such violations as a single offense.15
The Exchange believes it is appropriate to remove the range of fines imposed for first and subsequent offenses and, instead, apply a letter of caution for a first offense, a specified fine amount for a second and a third offense, and formal disciplinary proceedings for subsequent offenses.
Particularly, the Exchange believes that applying a lesser penalty Letter of Caution for a first offense and then providing a higher, itemized fine per second and third offenses and, ultimately, formal disciplinary proceedings for any subsequent offenses during a rolling 24-month period, will allow the Exchange to levy progressively larger fines and greater penalties against repeat-offenders as opposed to a fine range for any offenses that may come after a first offense. The Exchange believes this fine structure may serve to more effectively deter repeat-offenders while providing reasonable warning for a first offense during a rolling 24-month period. The Exchange notes that a lesser penalty in the form of a warning letter for a first offense paired with a greater penalty in the form of formal disciplinary proceedings after a finite number of following offenses is consistent with the minor rule violation fine schedules applicable to minor rule violations of substantially the same market maker quoting obligations on the Exchanges affiliated options exchanges, EDGX and BZX,16 as well as substantially similar market maker quoting obligations on another options exchange.17 The Exchange notes that the proposed change is intended to provide for consistency across the Exchanges MRVP and the MRVPs of its affiliated options exchanges. Additionally, EDGX
and BZX also intend to file proposals to update their minor rule violation fines so that second, third, and subsequent offenses for violating market maker quoting obligations will receive the same sanctions,18 as proposed herein.
The proposed rule change also makes nonsubstantive clarifying changes to certain provisions in Rule 13.15g. The proposed rule change makes a clean-up revision by removing the conduct listed in subparagraph g14B, failure to meet the applicable quote width 15 See
Rule 13.15a.
BZX Rule 25.3d; and EDGX Rule 25.3d.
17 See e.g., MIAX Options Rule 1014d7.
18 The Exchange again notes that pursuant to the BZX and EDGX MRVPs, first offenses regarding market maker quoting obligations already receive a Letter of Caution and the highest/last range of offenses currently 5 or more are already subject to formal disciplinary action. See supra note 16.
16 See
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requirements Rule 5.52, because, as of 2019, Market-Makers are no longer subject to a quote width requirement.19
The proposed rule change amends the subsequent lettering in subparagraph g14 as a result of this revision. The proposed rule change corrects a typo in the fine amounts that inadvertently contain an additional digit in subparagraph g8. The proposed rule change also updates the time format in the example provided in subparagraph g14D, which is currently reflected in Central Time, to instead reflect Eastern Time without time zone indication. This proposed change is consistent with Rule 1.6, which states that unless otherwise specified, all times in the Rules are Eastern Time, and conforms the time reflected in g14D
to the time format reflected throughout the Rules. The proposed rule change corrects the cross-reference to Rule 5.24e in Rule 13.15g19 to, instead, correctly reflect Rule 5.5d. The Exchange previously restructured its Rulebook in connection with a 2019
technology migration and, prior to this restructuring, the provision in current Rule 13.15g19 referred to what is now Rule 5.5d former Rule 6.23Af,20 instead of what is now Rule 5.24e former Rule 6.18. Upon restructuring Chapter 13,21 the Exchange inadvertently changed the cross-reference in Rule 13.15g19 to reflect the incorrect rule and now proposes to update this cross-reference to reflect the correct and originally intended cross-reference to Rule 5.5d.
Likewise, the Exchange updates a crossreference to prior Rule 5.25 to current Rule 5.5 in subparagraph g19.
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 6b of the Act.22 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6b5 23 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable 19 See Securities Exchange Act Release No. 87024
September 19, 2019, 84 FR 50545 September 25, 2019 SRCBOE2019059.
20 See Securities Exchange Act Release No. 87320
October 16, 2019, 84 FR 56501 October 22, 2019
SRCBOE2019095.
21 See Securities Exchange Act Release No. 87210
October 3, 2019, 84 FR 54190 October 9, 2019
SRCBOE2019068.
22 15 U.S.C. 78fb.
23 15 U.S.C. 78fb5.

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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. The Exchange believes the proposed rule change is consistent with the Section 6b5 24 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
The Exchange believes that the proposed rule change to remove certain rules listed as eligible for a minor rule fine disposition under its MRVP, which it no longer considers violations of which to be minor in nature, will assist the Exchange in preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade, and will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. Particularly, the Exchange believes that violations of each of the rules proposed to be removed from its MRVP may directly impact trading on the Exchange, maintenance of a fair and orderly market, and/or customer protection. As such, the Exchange does not believe violations of these rules to be minor in nature and, instead, should continue to be handled under its formal disciplinary rules, as the Exchange has chosen to handle the majority of all such violations in recent years, rather than imposing fines pursuant to its MRVP.
The Exchange also believes that the proposed rule change to remove the range of fines imposed for first and subsequent Market-Maker quoting offenses and, instead, apply a letter of caution for a first offense, a specified fine amount for a second and a third offense, and formal disciplinary proceedings for subsequent offenses will assist the Exchange in preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade, and will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest.
Particularly, the Exchange believes that applying a lesser penalty Letter of Caution for a first offense and then providing an itemized fine per second 24 Id.

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