Commission says CBOE must seek approval to use deferential appeals standard

By Mark S. Nelson, J.D. The Commission, in a matter of first impression, determined that an exchange’s decision to apply the clearly erroneous standard in an appeal of a decision by the exchange’s business conduct committee constituted an unfiled and unapproved rule change and could not be employed in disciplinary proceedings unless the exchange either obtained Commission approval to use the standard or was exempt from such requirement. The case arose from allegations by the regulatory unit of the Chicago Board Options Exchange, Inc. that ABN AMRO Clearing Chicago LLC violated the SEC’s market access rule. The Commission reached its conclusion about use of the deferential standard despite CBOE’s avowed decades-long use of that standard without prior SEC objection (In the Matter of the Application of ABN AMRO Clearing Chicago LLC, Release No. 34-83849, August 15, 2018). Deferential review standard is a rule. In the proceeding before the CBOE Board,…

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