Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change Relating to Stock-Option Order Handling, 29142-29143 [2015-12141]

Download as PDF 29142 Federal Register / Vol. 80, No. 97 / Wednesday, May 20, 2015 / Notices the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BATS– 2015–38 and should be submitted on or before June 10, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–12147 Filed 5–19–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74960; File No. SR–CBOE– 2015–029] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change Relating to Stock-Option Order Handling May 14, 2015. mstockstill on DSK4VPTVN1PROD with NOTICES I. Introduction On March 16, 2015, Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend its rules regarding the handling and processing of stock-option orders on the Exchange. The proposed rule change was published for comment in the Federal Register on April 1, 2015.3 The Commission received no comments on the proposal. This order grants approval of the proposed rule change. II. Description of the Proposed Rule Change The Exchange proposes to amend its rules regarding the handling and processing of stock-option orders represented in open outcry on the floor of the Exchange. As described in more detail below, the Exchange proposes to amend CBOE Rule 6.48 to allow Trading Permit Holders (‘‘TPHs’’) or PAR Officials 4 to electronically route the stock component of a stock-option order represented in open outcry on the floor CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 74590 (March 26, 2015), 80 FR 17528 (‘‘Notice’’). 4 See Notice, supra note 3 at 17529, defining ‘‘PAR Officials.’’ of the CBOE directly from a Public Automated Routing (‘‘PAR’’) workstation 5 to an Exchange-designated broker-dealer for electronic execution on a stock venue. In addition, the Exchange proposes to amend Interpretation .06 to Rule 6.53C to require that the Clearing Trading Permit Holder (‘‘CTPH’’) 6 identified as the Designated Give Up by the executing TPH in accordance with CBOE Rule 6.21 on a stock-option order enter into a brokerage agreement with the nonaffiliated Exchange-designated brokerdealers before the TPH electronically routes the stock component of the stockoption order to that Exchangedesignated broker-dealer for execution on a stock venue. Routing Stock Component of a StockOption Order via PAR. Currently, the stock component of stock-option orders handled and processed on the Exchange in open outcry are manually transmitted (e.g., via telephone) by the PAR user (i.e., a floor broker or PAR Official) on the floor to a broker on a stock trading venue for execution. The Exchange proposes to adopt subparagraph (d) to Exchange Rule 6.48 (Contract Made on Acceptance of Bid or Offer) to allow TPHs or PAR Officials to electronically route the stock component of such stock-option orders to an Exchangedesignated broker-dealer not affiliated with the Exchange for electronic execution at a stock trading venue directly from PAR.7 Proposed Rule 6.48(d) also provides that the stock component of a stock-option order represented in open outcry may be routed to an Exchange-designated broker-dealer not affiliated with the Exchange for electronic execution at a stock trading venue as single orders or as paired orders (including with orders transmitted from separate PAR workstations), and that the stock-option order must comply with the Qualified Contingent Trade (‘‘QCT’’) Exemption of Rule 611(a) of Regulation NMS.8 Finally, Rule 6.48(d) would require TPHs who route the stock component of a stock-option order represented in open outcry through PAR to comply with Rule 6.53C.06, which governs the trading of complex orders, including stock-option orders, on the CBOE Hybrid System.9 The Exchange represents that for any order whose stock component is routed via PAR to an Exchange-designated 17 17 1 15 VerDate Sep<11>2014 23:50 May 19, 2015 Jkt 235001 broker-dealer for execution at a stock trading venue, the Exchange-designated broker-dealer would be responsible for the proper execution, trade reporting, and submission to clearing of the stock trade that is part of the stock-option order.10 The Exchange also represents that once the stock component of a stock-option order is transmitted to the Exchange-designated broker-dealer, the Exchange-designated broker-dealers is responsible for determining whether the orders may be executed in accordance with all of the rules applicable to the execution of equity orders, including compliance with applicable short sale, trade-through, and reporting rules.11 The Exchange believes that the proposed rule change will support more efficient stock-option order execution, streamline the steps required for openoutcry stock-option order trading, and enhance the Exchange’s audit trail by creating a more robust record of the stock component of stock-option order executions on the floor of the Exchange.12 The Exchange also believes that the proposed rule change will promote liquidity on the national market system by allowing TPHs to more easily use stock-option orders and more quickly send the stock component of a stock-option order to a stock trading venue.13 Brokerage Agreement between the Clearing Trading Permit Holder and the Exchange-designated Broker-Dealer. Under current Interpretation and Policy .06(a) to CBOE Rule 6.53C, the stock component of a stock-option order cannot be processed automatically unless the executing TPH has entered into a brokerage agreement with one or more Exchange-designated brokerdealer(s) not affiliated with the Exchange that can electronically execute the equity order on a stock trading venue.14 Under the proposed rule change, Interpretation and Policy .06 to CBOE Rule 6.53C would instead require the CTPH that was previously identified by the TPH as the ‘‘Designated Give Up’’ pursuant to CBOE Rule 6.21 to enter into a brokerage agreement with the non-affiliated Exchange-designated broker-dealer(s) before the TPH electronically routes the stock component a of stock-option order to the Exchange-designated broker-dealer for execution at a stock-trading venue.15 The Exchange notes that it is the CTPH, not the order entry TPH that guarantees 5 Id., 10 See 6 Id. 11 Id. defining ‘‘PAR workstations.’’ at footnote 5, discussing the obligations of TPHs and CTPHs. 7 See Notice, supra note 3 at 17530. 8 Id. 9 See Proposed Rule 6.48(d). PO 00000 Frm 00214 Fmt 4703 Sfmt 4703 Notice, supra note 3 at 17530. 12 Id. 13 See 14 Id. Notice, supra note 3 at 17532. at 17531. 15 Id. E:\FR\FM\20MYN1.SGM 20MYN1 Federal Register / Vol. 80, No. 97 / Wednesday, May 20, 2015 / Notices authorization of a trade and accepts financial responsibility for all Exchange transactions made by the execution TPH. Accordingly, the Exchange believes that, consistent with CBOE Rule 6.21 (relating to give-ups), the CTPH should be responsible for order handling and processing requirements for trades that it guarantees.16 In connection with the Exchange’s proposal to amend Interpretation and Policy .06 to Rule 6.53C, the Exchange also clarified that the stock component of a stock-option order represented in open outcry shall be routed from PAR to the Exchange-designated brokerdealer for automated processing in accordance with the order’s terms.17 Conforming and Clarifying Changes. Finally, the Exchange also proposes conforming changes to Exchange Rules 6.45A (Priority and Allocation of Equity Option Trades on the CBOE Hybrid System) and 6.45B (Priority and Allocation of Trades in Index Options and Options on ETFs on the CBOE Hybrid System) to reference the revised functionality set forth in this proposal.18 The Exchange also proposes to specify that stock-option orders may be executed against other electronic stockoption orders in general, rather than state that such orders may be executed against other stock-option orders specifically through either the COB or COA.19 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.20 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act,21 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing 16 Id. at 17532. Proposed Interpretation and Policy .06(a) to Rule 6.53C. 18 See Notice, supra note 3 at 17531. 19 Id. According to the Exchange, this latter change reflects the fact that such orders may be subjected to the Automated Improvement Mechanism (‘‘AIM’’) as well as executed through the COB or COA. 20 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 21 15 U.S.C. 78f(b)(5). mstockstill on DSK4VPTVN1PROD with NOTICES 17 See VerDate Sep<11>2014 23:50 May 19, 2015 Jkt 235001 information with respect to, and facilitation 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; and are not designed to permit unfair discrimination between customers, issuers, brokers or dealers. The Commission believes that the proposed change to extend electronic stock component routing functionality to PAR users will create another method for processing stock-option orders entered into on the Exchange that is designed to facilitate transactions in stock-option orders on the Exchange. The Commission also believes that it is reasonable for the CTPH that guarantees a stock-option order transaction to enter into a brokerage agreement with the Exchange-designated broker-dealer that will execute the stock component of the stock-option order on a stock trading venue. 29143 Office of Business Development, Small Business Administration, 409 3rd Street, 8th Floor, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Melinda Edwards, Program Analyst, Office of Business Development, Melinda.Edwards@sba.gov, 202–619– 1843, or Curtis B. Rich, Management Analyst, 202–205–7030, Curtis.Rich@ sba.gov. In accordance with 13 CFR 124.604, as part of its annual review submission, each Participant owned by a Tribe, ANC, NHO or CDC must submit to SBA information showing how they have provided benefits to their members and communities. This data includes information relating to funded cultural programs, employment assistance, jobs, scholarships, internships, subsistence activities, and other services provided. SUPPLEMENTARY INFORMATION: Solicitation of Public Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Robert W. Errett, Deputy Secretary. SBA is requesting comments on (a) whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information. [FR Doc. 2015–12141 Filed 5–19–15; 8:45 am] Summary of Information Collection BILLING CODE 8011–01–P Title: 8(a) Participant Benefits Report. Description of Respondents: 8(a) Program Participants—Entity Owned (Indian Tribe, Alaskan Native Corporations, Native Hawaiian Organizations, and Community Development Corporations). Form Number: N/A. Total Estimated Annual Responses: 329. Total Estimated Annual Hour Burden: 165. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,22 that the proposed rule change (SR–CBOE–2015– 029) be, and it hereby is, approved. SMALL BUSINESS ADMINISTRATION Data Collection Available for Public Comments 60-day notice and request for comments. ACTION: The Small Business Administration (SBA) intends to request approval, from the Office of Management and Budget (OMB) for the new collection of information described below. The Paperwork Reduction Act (PRA) of 1995, 44 U.S.C. Chapter 35, required federal agencies to publish a notice in the Federal Register concerning each proposed collection of information before submission to OMB, and to allow 60 days for public comment in response to the notice. This notice complies with that requirement. DATES: Submit comments on or before July 20, 2015. ADDRESSES: Send all comments to Melinda Edwards, Program Analyst, SUMMARY: 22 15 23 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). Frm 00215 Fmt 4703 Sfmt 4703 Curtis B. Rich, Management Analyst. [FR Doc. 2015–12166 Filed 5–19–15; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION Reporting and Recordkeeping Requirements Under OMB Review Small Business Administration. 30-day notice. AGENCY: ACTION: The Small Business Administration (SBA) is publishing this notice to comply with requirements of the Paperwork Reduction Act (PRA) (44 U.S.C. Chapter 35), which requires SUMMARY: E:\FR\FM\20MYN1.SGM 20MYN1

Agencies

[Federal Register Volume 80, Number 97 (Wednesday, May 20, 2015)]
[Notices]
[Pages 29142-29143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12141]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74960; File No. SR-CBOE-2015-029]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of a Proposed Rule Change 
Relating to Stock-Option Order Handling

May 14, 2015.

I. Introduction

    On March 16, 2015, Chicago Board Options Exchange, Incorporated 
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change to amend its rules 
regarding the handling and processing of stock-option orders on the 
Exchange. The proposed rule change was published for comment in the 
Federal Register on April 1, 2015.\3\ The Commission received no 
comments on the proposal. This order grants approval of the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74590 (March 26, 
2015), 80 FR 17528 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to amend its rules regarding the handling and 
processing of stock-option orders represented in open outcry on the 
floor of the Exchange. As described in more detail below, the Exchange 
proposes to amend CBOE Rule 6.48 to allow Trading Permit Holders 
(``TPHs'') or PAR Officials \4\ to electronically route the stock 
component of a stock-option order represented in open outcry on the 
floor of the CBOE directly from a Public Automated Routing (``PAR'') 
workstation \5\ to an Exchange-designated broker-dealer for electronic 
execution on a stock venue. In addition, the Exchange proposes to amend 
Interpretation .06 to Rule 6.53C to require that the Clearing Trading 
Permit Holder (``CTPH'') \6\ identified as the Designated Give Up by 
the executing TPH in accordance with CBOE Rule 6.21 on a stock-option 
order enter into a brokerage agreement with the non-affiliated 
Exchange-designated broker-dealers before the TPH electronically routes 
the stock component of the stock-option order to that Exchange-
designated broker-dealer for execution on a stock venue.
---------------------------------------------------------------------------

    \4\ See Notice, supra note 3 at 17529, defining ``PAR 
Officials.''
    \5\ Id., defining ``PAR workstations.''
    \6\ Id. at footnote 5, discussing the obligations of TPHs and 
CTPHs.
---------------------------------------------------------------------------

    Routing Stock Component of a Stock-Option Order via PAR. Currently, 
the stock component of stock-option orders handled and processed on the 
Exchange in open outcry are manually transmitted (e.g., via telephone) 
by the PAR user (i.e., a floor broker or PAR Official) on the floor to 
a broker on a stock trading venue for execution. The Exchange proposes 
to adopt subparagraph (d) to Exchange Rule 6.48 (Contract Made on 
Acceptance of Bid or Offer) to allow TPHs or PAR Officials to 
electronically route the stock component of such stock-option orders to 
an Exchange-designated broker-dealer not affiliated with the Exchange 
for electronic execution at a stock trading venue directly from PAR.\7\ 
Proposed Rule 6.48(d) also provides that the stock component of a 
stock-option order represented in open outcry may be routed to an 
Exchange-designated broker-dealer not affiliated with the Exchange for 
electronic execution at a stock trading venue as single orders or as 
paired orders (including with orders transmitted from separate PAR 
workstations), and that the stock-option order must comply with the 
Qualified Contingent Trade (``QCT'') Exemption of Rule 611(a) of 
Regulation NMS.\8\ Finally, Rule 6.48(d) would require TPHs who route 
the stock component of a stock-option order represented in open outcry 
through PAR to comply with Rule 6.53C.06, which governs the trading of 
complex orders, including stock-option orders, on the CBOE Hybrid 
System.\9\
---------------------------------------------------------------------------

    \7\ See Notice, supra note 3 at 17530.
    \8\ Id.
    \9\ See Proposed Rule 6.48(d).
---------------------------------------------------------------------------

    The Exchange represents that for any order whose stock component is 
routed via PAR to an Exchange-designated broker-dealer for execution at 
a stock trading venue, the Exchange-designated broker-dealer would be 
responsible for the proper execution, trade reporting, and submission 
to clearing of the stock trade that is part of the stock-option 
order.\10\ The Exchange also represents that once the stock component 
of a stock-option order is transmitted to the Exchange-designated 
broker-dealer, the Exchange-designated broker-dealers is responsible 
for determining whether the orders may be executed in accordance with 
all of the rules applicable to the execution of equity orders, 
including compliance with applicable short sale, trade-through, and 
reporting rules.\11\
---------------------------------------------------------------------------

    \10\ See Notice, supra note 3 at 17530.
    \11\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change will support 
more efficient stock-option order execution, streamline the steps 
required for open-outcry stock-option order trading, and enhance the 
Exchange's audit trail by creating a more robust record of the stock 
component of stock-option order executions on the floor of the 
Exchange.\12\ The Exchange also believes that the proposed rule change 
will promote liquidity on the national market system by allowing TPHs 
to more easily use stock-option orders and more quickly send the stock 
component of a stock-option order to a stock trading venue.\13\
---------------------------------------------------------------------------

    \12\ Id.
    \13\ See Notice, supra note 3 at 17532.
---------------------------------------------------------------------------

    Brokerage Agreement between the Clearing Trading Permit Holder and 
the Exchange-designated Broker-Dealer. Under current Interpretation and 
Policy .06(a) to CBOE Rule 6.53C, the stock component of a stock-option 
order cannot be processed automatically unless the executing TPH has 
entered into a brokerage agreement with one or more Exchange-designated 
broker-dealer(s) not affiliated with the Exchange that can 
electronically execute the equity order on a stock trading venue.\14\ 
Under the proposed rule change, Interpretation and Policy .06 to CBOE 
Rule 6.53C would instead require the CTPH that was previously 
identified by the TPH as the ``Designated Give Up'' pursuant to CBOE 
Rule 6.21 to enter into a brokerage agreement with the non-affiliated 
Exchange-designated broker-dealer(s) before the TPH electronically 
routes the stock component a of stock-option order to the Exchange-
designated broker-dealer for execution at a stock-trading venue.\15\ 
The Exchange notes that it is the CTPH, not the order entry TPH that 
guarantees

[[Page 29143]]

authorization of a trade and accepts financial responsibility for all 
Exchange transactions made by the execution TPH. Accordingly, the 
Exchange believes that, consistent with CBOE Rule 6.21 (relating to 
give-ups), the CTPH should be responsible for order handling and 
processing requirements for trades that it guarantees.\16\ In 
connection with the Exchange's proposal to amend Interpretation and 
Policy .06 to Rule 6.53C, the Exchange also clarified that the stock 
component of a stock-option order represented in open outcry shall be 
routed from PAR to the Exchange-designated broker-dealer for automated 
processing in accordance with the order's terms.\17\
---------------------------------------------------------------------------

    \14\ Id. at 17531.
    \15\ Id.
    \16\ Id. at 17532.
    \17\ See Proposed Interpretation and Policy .06(a) to Rule 
6.53C.
---------------------------------------------------------------------------

    Conforming and Clarifying Changes. Finally, the Exchange also 
proposes conforming changes to Exchange Rules 6.45A (Priority and 
Allocation of Equity Option Trades on the CBOE Hybrid System) and 6.45B 
(Priority and Allocation of Trades in Index Options and Options on ETFs 
on the CBOE Hybrid System) to reference the revised functionality set 
forth in this proposal.\18\ The Exchange also proposes to specify that 
stock-option orders may be executed against other electronic stock-
option orders in general, rather than state that such orders may be 
executed against other stock-option orders specifically through either 
the COB or COA.\19\
---------------------------------------------------------------------------

    \18\ See Notice, supra note 3 at 17531.
    \19\ Id. According to the Exchange, this latter change reflects 
the fact that such orders may be subjected to the Automated 
Improvement Mechanism (``AIM'') as well as executed through the COB 
or COA.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\20\ In particular, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act,\21\ which requires, among other things, that the Exchange's 
rules be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitation 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; 
and are not designed to permit unfair discrimination between customers, 
issuers, brokers or dealers. The Commission believes that the proposed 
change to extend electronic stock component routing functionality to 
PAR users will create another method for processing stock-option orders 
entered into on the Exchange that is designed to facilitate 
transactions in stock-option orders on the Exchange. The Commission 
also believes that it is reasonable for the CTPH that guarantees a 
stock-option order transaction to enter into a brokerage agreement with 
the Exchange-designated broker-dealer that will execute the stock 
component of the stock-option order on a stock trading venue.
---------------------------------------------------------------------------

    \20\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-CBOE-2015-029) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12141 Filed 5-19-15; 8:45 am]
BILLING CODE 8011-01-P
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