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SEC Approves CBOE Proposed Rule Change Regarding Off-Floor Position Transfers

On March 19, the Securities and Exchange Commission approved a proposed rule change filed by Cboe Exchange, Inc. (CBOE) related to permissible off-floor position transfers. Generally, CBOE requires a Trading Permit Holder (TPH) to effect transactions in listed options on an exchange. However, certain types of transfers involving TPH positions are permitted to be effected off the exchange. The approved rule change adds four types of additional off-floor transfers:

  1. transfers to correct a bona fide error in the recording of a transaction or the transferring of a position to another account;

  2. transfers between accounts where there is no change in ownership, provided that the accounts are not in separate aggregation units or otherwise subject to information barrier or account segregation requirements;

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

  4. transfers through operation of law from death, bankruptcy, or otherwise.

Additionally, the approved rule change also codifies prior guidance that that off-floor transfers cannot net against another position and that no position transfer may result in preferential margin or haircut treatment.

For more information on the rule change, please see the September 27, 2019 edition of Corporate & Financial Weekly Digest.

The SEC Order approving the rule change is available here.

©2020 Katten Muchin Rosenman LLP


About this Author

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.

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 Commission, the US Commodity Futures Trading Commission and financial industry self-regulatory organizations. 

Jack West Financial Attorney Katten

Jack West is an associate in the Financial Markets and Funds practice.