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CBOE Proposes Amendments to Rule 6.49A Concerning Off-Floor Position Transfers Including RWA Transfers

CBOE Exchange, Inc. (CBOE) recently filed a proposal to amend its Rule 6.49A to amend provisions related to permissible off-floor position transfers. Generally, CBOE Rule 6.49A(a) specifies limited circumstances in which CBOE Trading Permit Holders (TPHs) may transfer their positions off the floor. CBOE proposes to add four events where an off-floor transfer would be permitted to occur. Specifically, under the proposed amendments, in addition to the off-floor transfers addressed in the current version of the rule, an off-floor transfer would be permissible if the transfer:

  1. is an adjustment or transfer in connection with the correction of a bona fide error in the recording of a transaction, provided that the original trade documentation confirms the error;

  2. is a transfer of positions from one account to another account where there is no change in ownership involved (i.e., the accounts are for the same individual, partnership, joint stock company, corporation, limited liability company, trust or unincorporated organization, or governmental entity or agency), provided the accounts are not in separate aggregation units or otherwise subject to information barrier or account segregation requirements;

  3. is a consolidation of accounts where no change in ownership is involved; and

  4. is a transfer of positions through operation of law from death, bankruptcy, or otherwise.

CBOE also proposes to amend the Rule to permit off-floor transfers of existing positions in options listed on CBOE of a TPH or a non-TPH if the transfer established a net reduction of risk-weighted assets attributable to those options positions (an “RWA Transfer”).

Under the proposal, a TPH and its Clearing Trading Permit Holder would be required to submit to CBOE written notice prior to effecting an off-floor transfer other than such transfers made in connection with correcting a bona fide error and RWA transfers. Other than with respect to RWA transfers, when effecting an off-floor transfer under the proposed amendments, no position may net against another position or result in preferential margin or haircut treatment, and off-floor transfers may be used only to facilitate non-routine, non-recurring movements of positions.

The rule filing is available here.

©2020 Katten Muchin Rosenman LLP


About this Author

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

Susan Light, Katten Law Firm, Finance Law Attorney, New York

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

Previously, Sue was a senior vice president and chief counsel of Enforcement for FINRA, where she supervised all aspects of regulatory investigations, negotiations, settlements and disciplinary hearings concerning a wide variety of FINRA rules and federal securities laws. Prior to its merger with FINRA, she served in a similar role with NYSE Regulation, Inc. and helped lead the integration of the two enforcement departments. Earlier, Sue was a trial attorney in the Office of the District Attorney for Bronx County, New York.

Sue is a frequent speaker on regulatory and compliance topics for broker-dealer and securities conferences. She also advises several professional journals on securities industry topics.

Gregory Uffner, Financial Services Attorney, Katten Law Firm

Gregory Uffner is an associate in the Financial Services practice. 

While in law school, Gregory was an associate editor for the Moot Court Board, a member of the Fordham Urban Law Journal and served as managing editor for the Fordham Sports Law Forum.