Cboe Tweaks Rules for Disqualified Traders: Bureaucracy's Latest Align-Up
Published Date: 4/27/2026
Notice
Summary
Cboe Exchange is updating its rules for Trading Permit Holders and their associates who face legal disqualifications, making sure the rules match those of other financial regulators. This change affects anyone holding or linked to a trading permit and takes effect immediately, helping keep the market fair and trustworthy without extra costs. If you’re involved, pay attention now to stay in the game!
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Analyzed Economic Effects
7 provisions identified: 3 benefits, 2 costs, 2 mixed.
Rules Harmonize With FINRA Standards
Cboe amended Rule 3.13 to conform largely to FINRA Rule Series 9520 so that eligibility and statutory-disqualification procedures match industry standards. The change is intended to reduce inconsistent outcomes for firms that are both Cboe Trading Permit Holders (TPHs) and FINRA members.
Definition of Associated Persons Retained
The Exchange will adopt a definition of 'associated person' in Rule 1.1 for statutory-disqualification purposes that, as described, results in TPHs being required to submit applications if any person associated with the TPH (including affiliates under common control) becomes subject to a statutory disqualification. This means a firm that is both an Exchange TPH and a FINRA member may need to file with the Exchange even if FINRA would not require a filing.
Application Filing Deadline and Consequences
Proposed Rule 3.13 retains an obligation for a TPH to file an application or written request for relief within 10 days of becoming subject to a statutory disqualification; if a TPH fails to file within the 10-day period, the registration of the disqualified person shall be revoked and the sponsoring TPH must promptly terminate association with that person.
Fewer 19h-1 Notices in Some Cases
The Exchange will rely on the FINRA 2009 no-action letter in relevant situations, which the filing says results in fewer required notices under SEC Rule 19h-1 (for example, certain willful CEA violation findings when sanctions are no longer in effect). This alignment may reduce the number of Commission notices Cboe must file.
Staff Can Approve Relief Without Application
Under proposed Rule 3.13(b)(5), Exchange staff may approve written requests for relief without the filing of a full application in certain circumstances, including when another SRO intends to file a 19h-1 Notice and Exchange staff concurs. This can allow continued membership or association without a formal application.
Appeals Go to Exchange Appeals Committee
If an Exchange staff supervisory plan is rejected, requests for review under the proposed rule go to the Exchange's Appeals Committee rather than to FINRA's National Adjudicatory Council (NAC). The Exchange is not adopting FINRA's expedited-proceeding text.
Exchange Fee Practice Keeps Its Own Schedule
The Exchange states it will not adopt FINRA's application-fee and refund language in Rule 9522 and will rely on its own application fee program and fee schedule instead. The proposed rule therefore does not adopt FINRA's specific fee-refund approach.
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