Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a Market-Maker Trade Prevention Order on CBOE Stock Exchange, 68798-68800 [2011-28694]
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Federal Register / Vol. 76, No. 215 / Monday, November 7, 2011 / Notices
are subject to the recordkeeping
requirements of Rules 17a–3 and 17a–4
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information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information on respondents; and
(d) ways to minimize the burden of the
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unless it displays a currently valid
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Alexandria, Virginia 22312 or send an
email to: PRA_Mailbox@sec.gov.
Dated: November 1, 2011.
Kevin M. O’Neill,
Deputy Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Adopt a Market-Maker
Trade Prevention Order on CBOE
Stock Exchange
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
28, 2011, the Chicago Board Options
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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17:50 Nov 04, 2011
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt a
Market-Maker Trade Prevention Order
on CBOE Stock Exchange (‘‘CBSX’’).
The text of the proposed rule change is
available on the Exchange’s Web site
(https://www.cboe.org/legal), at the
Exchange’s Office of the Secretary, and
at the Commission.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, Proposed Rule
Change
[FR Doc. 2011–28720 Filed 11–4–11; 8:45 am]
November 1, 2011.
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange proposes to adopt a
Market-Maker Trade Prevention
(‘‘MMTP’’) Order. The proposed MMTP
Order is an immediate-or-cancel order
containing a designation that prevents
incoming orders for a Market-Maker
from executing against resting quotes
and orders for the same Market-Maker.
The MMTP Order type designation is
intended to prevent a Market-Maker
from trading on both sides of the same
transaction. Orders would be marked
with the MMTP designation on an
order-by-order basis. An incoming
MMTP Order cannot interact with
interest resting on the book from the
same Market-Maker. An MMTP Order
3 15
4 17
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U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
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that would trade against a resting quote
or order for the same Market-Maker will
be cancelled, as will the resting quote or
order. The MMTP Order will trade
against other tradable orders and quotes
entered by or on behalf of another
market participant (other than those
entered by or on behalf of the same
Market-Maker) in accordance with the
execution process described in
Exchange Rule 52.1 (Matching
Algorithm/Priority). When available, the
MMTP Order type will be available for
use by all Market-Makers in all
appointments.
For example, assume the Exchange’s
best bid and offer is $1.00–$1.20, 1000
shares on each side. A Market-Maker
marks an order to buy 1000 shares at
$1.20 with the MMTP distinction,
making it an MMTP Order. The MMTP
Order is submitted to the Exchange and
it would trade with a resting quote from
the same Market-Maker for 1000 shares
offered at $1.20, then both the order to
buy and the resting offer quote would be
canceled. However, if the resting offer
quote from the same Market-Maker was
for only 600 shares, then 600 shares
from the order to buy would be canceled
(as would the resting quote), but the
other 400 shares could trade with the
resting offer interest of the other market
participants.
At this time, the Exchange intends to
identify an incoming MMTP Order as
being for the same Market-Maker if the
MMTP Order and resting quote or order
share any of the following: (1) User
acronym, (2) login ID, or (3) sub-account
code. Each Market-Maker is assigned its
own acronym (sometimes multiple
acronyms). However, a Market-Maker
may have multiple different login IDs or
sub-account codes. A login ID is the
session through which a Market-Maker
routes orders to the Exchange. A
Market-Maker may elect to use different
login IDs to route different types of
communications to the Exchange. For
example, a Market-Maker may choose to
use login ID #1 for all orders it sends to
the Exchange and login ID #2 for all
quotes it sends to the Exchange. Or the
Market-Maker may be much more
specific, and use different login IDs for
different types of orders and quotes. A
sub-account code is simply a field on
each order or quote that lists the
account into which a trade clears at the
Options Clearing Corporation (‘‘OCC’’).
A Market-Maker may have different subaccount codes for each trader it
employs, so that the Market-Maker may
track each trader’s activity. Finally,
Market-Makers sometimes use different
acronyms but clear into the same
accounts (thereby using the same subaccounts codes).
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Federal Register / Vol. 76, No. 215 / Monday, November 7, 2011 / Notices
Allowing Market-Makers to designate
orders as MMTP Orders is intended to
allow firms to better manage order flow
and prevent unwanted executions
resulting from the interaction of
executable buy and sell trading interest
for the same Market-Maker, as well as
prevent the potential for (or appearance
of) ‘‘wash sales’’ that may occur as a
result of the velocity of trading in
today’s high speed marketplace. When a
Market-Maker is preparing to submit an
order, the Market-Maker may not know
whether or not his order is going to
trade against his own resting quote.
Further, many Market-Makers have
multiple connections into the Exchange
due to capacity- and speed-related
demands. Orders routed by the same
Market-Makers via different connections
may, in certain circumstances, trade
against each other. Finally, the
Exchange notes that offering the MMTP
modifiers will streamline certain
regulatory functions by reducing false
positive results that may occur on
Exchange-generated wash trading
surveillance reports when orders are
executed by the same Market-Maker. For
these reasons, the Exchange believes the
MMTP Order provides Market-Makers
enhanced order processing functionality
to prevent potentially unwanted trades
from occurring.
The proposed rule change is based on
rule changes recently proposed by the
Chicago Board Options Exchange, Inc.
(‘‘CBOE’’) and C2 Options Exchange,
Inc. (‘‘C2’’).5
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2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act 6
and the rules and regulations
thereunder and, in particular, the
requirements of Section 6(b) of the Act.7
Specifically, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 8 requirements that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to prevent fraudulent and
manipulative acts, to remove
impediments to and to perfect the
mechanism for a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The proposed rule
change advances these objectives by
making available to Market-Makers a
5 See Securities Exchange Act Release No. 65379
(September 22, 2011), 76 FR 60108 (September 28,
2011) (SR–CBOE–2011–079) and Securities
Exchange Act Release No. 65380 (September 22,
2011) 76 FR 60102 (September 28, 2011) (SR–C2–
2011–017).
6 15 U.S.C. 78s(b)(1).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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17:50 Nov 04, 2011
Jkt 226001
type of order that will assist MarketMakers in preventing unwanted
executions against themselves.
The proposed rule change is based on
rule changes recently proposed by the
Chicago Board Options Exchange, Inc.
(‘‘CBOE’’) and C2 Options Exchange,
Inc. (‘‘C2’’).9
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) 10 of the Act and
Rule 19b–4(f)(6) thereunder.11
A proposed rule change filed under
Rule 19b–4(f)(6) 12 normally may not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 13 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay, as
specified in Rule 19b–4(f)(6)(iii),14
which would make the rule change
effective and operative upon filing. As
indicated above by the Exchange, the
9 See
Note 5.
U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
12 17 CFR 240.19b–4(f)(6).
13 17 CFR 240.19b–4(f)(6)(iii).
14 Id.
10 15
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68799
MMTP Order type is intended to
prevent unwanted executions resulting
from the interaction of executable buy
and sell trading interest for the same
Market-Maker in a manner that is
consistent with other markets that have
similar order types. Further, the
Exchange stated that the rule is identical
to those recently filed by CBOE and C2
(aside from CBOE and C2’s added rule
text for MMTP Orders subject to auction
processes, which do not exist on C2) 15
and as a result it believes that the
proposed rule change does not present
any new, unique or substantive issues.
The Commission believes that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest because such waiver
would allow the Exchange to implement
the order type without delay and may
assist with the maintenance of orderly
markets. Accordingly, the Commission
designates the proposed rule change
operative upon filing with the
Commission.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–CBOE–2011–102 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549.
All submissions should refer to File
Number SR–CBOE–2011–102. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
15 See
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Note 5.
07NON1
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Federal Register / Vol. 76, No. 215 / Monday, November 7, 2011 / Notices
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of CBOE.
All comments received will be posted
without change; 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–CBOE–2011–102 and
should be submitted on or before
November 28, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–28694 Filed 11–4–11; 8:45 am]
BILLING CODE 8011–01–P
Investment Companies Rankings in
Retail Communications), 2213
(Requirements for the Use of Bond
Mutual Fund Volatility Ratings), 2214
(Requirements for the Use of Investment
Analysis Tools), 2215 (Communications
with the Public Regarding Security
Futures), and 2216 (Communications
with the Public About Collateralized
Mortgage Obligations (CMOs)) in the
Consolidated FINRA Rulebook.
I. Introduction
On July 14, 2011, the Financial
Industry Regulatory Authority
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’ or ‘‘Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to adopt NASD Rules 2210 and
2211 and NASD Interpretive Materials
2210–1 and 2210–3 through 2210–8 as
FINRA Rules 2210 and 2212 through
2216, and to delete paragraphs (a)(1), (i),
(j) and (l) of Incorporated NYSE Rule
472, Incorporated NYSE Rule
Supplementary Material 472.10(1), (3),
(4) and (5) and 472.90, and Incorporated
NYSE Rule Interpretations 472/01 and
472/03 through 472/11. The proposed
rule change was published for comment
in the Federal Register on August 3,
2011.3 The Commission received nine
comment letters in response to the
proposed rule change.4 On August 31,
2011, FINRA extended the time period
in which the Commission must approve
1 15
[(Release No. 34–65663; File No. SR–
FINRA–2011–035)]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Partial Amendment No. 1 and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change, etc.
mstockstill on DSK4VPTVN1PROD with NOTICES
November 1, 2011.
Overview Information
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Partial Amendment No. 1 and Order
Instituting Proceedings to Determine
Whether to Approve or Disapprove a
Proposed Rule Change, as modified by
Partial Amendment No. 1, to Adopt
FINRA Rules 2210 (Communications
with the Public), 2212 (Use of
16 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:50 Nov 04, 2011
Jkt 226001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 64984
(July 28, 2011), 76 FR 46870 (August 3, 2011)
(Notice of Filing of SR–FINRA–2011–035) (‘‘Notice
of Filing’’). The comment period closed on August
24, 2011.
4 See letter from Oscar S. Hackett, General
Counsel, BrightScope, Inc., dated August 23, 2011
(‘‘BrightScope Letter’’); letter from Alexander C.
Gavis, Fidelity Investments, dated August 24, 2011
(‘‘Fidelity Letter’’); letter from David T. Bellaire,
General Counsel and Director of Government
Affairs, Financial Services Institute, dated August
24, 2011 (‘‘FSI Letter’’); letter from Dorothy M.
Donohue, Senior Associate Counsel, Investment
Company Institute, dated August 24, 2011 (‘‘ICI
Letter’’); letter from Z. Jane Riley, Chief Compliance
Officer, The Leaders Group, Inc., dated August 24,
2011 (‘‘TLGI Letter’’); letter from Peter J. Mougey,
President, Public Investors Arbitration Bar
Association, dated August 23, 2011 (‘‘PIABA
Letter’’); letter from John Polanin and Clair
Santaniello, Co-Chairs, Compliance and Regulatory
Policy Committee 2011, Securities Industry and
Financial Markets Association, dated August 25,
2011 (‘‘SIFMA Letter’’); letter from Sandra J. Burke,
Principal, Vanguard, dated August 24, 2011
(‘‘Vanguard Letter’’); and letter from Yoon-Young
Lee, WilmerHale, on behalf of Citigroup Global
Markets Inc., Credit Suisse Securities (USA) LLC,
Goldman, Sachs & Co., JP Morgan Securities Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. LLC, and UBS Securities LLC,
dated August 26, 2011 (‘‘Wilmer Letter’’). Comment
letters are available at https://www.sec.gov.
2 17
SECURITIES AND EXCHANGE
COMMISSION
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the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule change, to November 1, 2011. On
October 31, 2011, FINRA filed Partial
Amendment No. 1 to the proposed rule
change and a letter responding to
comments.5 The Commission is
publishing this notice and order to
solicit comments on Partial Amendment
No. 1 to the proposed rule change from
interested persons and to institute
proceedings pursuant to Section
19(b)(2)(B) of the Act to determine
whether to approve or disapprove the
proposed rule change, as modified by
Partial Amendment No. 1.
Institution of these proceedings,
however, does not indicate that the
Commission has reached any
conclusions with respect to the
proposed rule change, nor does it mean
that the Commission will ultimately
disapprove the proposed rule change.
Rather, as discussed below, the
Commission seeks additional input from
interested parties on the issues
presented by the proposed rule change,
as modified by Partial Amendment No.
1, and on FINRA’s Response Letter.
II. Description of the Proposed Rule
Change and Summary of Comments
As part of the process of developing
a new consolidated rulebook
(‘‘Consolidated FINRA Rulebook’’),
FINRA is proposing to adopt NASD
Rules 2210 and 2211 and NASD
Interpretive Materials 2210–1 and 2210–
3 through 2210–8 as FINRA Rules 2210
and 2212 through 2216 in the
Consolidated FINRA Rulebook, and to
delete paragraphs (a)(1), (i), (j) and (l) of
Incorporated NYSE Rule 472,
Incorporated NYSE Rule Supplementary
Material 472.10(1), (3), (4) and (5), and
472.90, and Incorporated NYSE Rule
Interpretations 472/01 and 472/03
through 472/11. The proposed rule
change would renumber NASD Rules
2210 and 2211 and NASD Interpretive
Materials 2210–1 and 2210–4 as FINRA
Rule 2210, NASD Interpretive Material
2210–3 as FINRA Rule 2212, NASD
Interpretive Material 2210–5 as FINRA
Rule 2213, NASD Interpretive Material
2210–6 as FINRA Rule 2214, NASD
Interpretive Material 2210–7 as FINRA
5 See letter from Joseph P. Savage, FINRA, to
Elizabeth Murphy, Secretary, SEC, dated October
31, 2011 (‘‘Response Letter’’). The text of proposed
Amendment No. 1 and FINRA’s Response Letter are
available on FINRA’s Web site at https://
www.finra.org, at the principal office of FINRA and
at the Commission’s Public Reference Room.
FINRA’s Response Letter is also available on the
Commission’s Web site at https://www.sec.gov.
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]]>Agencies
[Federal Register Volume 76, Number 215 (Monday, November 7, 2011)]
[Notices]
[Pages 68798-68800]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28694]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Adopt a Market-Maker Trade Prevention Order on
CBOE Stock Exchange
November 1, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 28, 2011, the Chicago Board Options Exchange,
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities
and Exchange Commission (the ``Commission'') the proposed rule change
as described in Items I and II below, which Items have been prepared by
the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt a Market-Maker Trade Prevention
Order on CBOE Stock Exchange (``CBSX''). The text of the proposed rule
change is available on the Exchange's Web site (https://www.cboe.org/legal), at the Exchange's Office of the Secretary, and at the
Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, Proposed Rule Change
1. Purpose
The Exchange proposes to adopt a Market-Maker Trade Prevention
(``MMTP'') Order. The proposed MMTP Order is an immediate-or-cancel
order containing a designation that prevents incoming orders for a
Market-Maker from executing against resting quotes and orders for the
same Market-Maker.
The MMTP Order type designation is intended to prevent a Market-
Maker from trading on both sides of the same transaction. Orders would
be marked with the MMTP designation on an order-by-order basis. An
incoming MMTP Order cannot interact with interest resting on the book
from the same Market-Maker. An MMTP Order that would trade against a
resting quote or order for the same Market-Maker will be cancelled, as
will the resting quote or order. The MMTP Order will trade against
other tradable orders and quotes entered by or on behalf of another
market participant (other than those entered by or on behalf of the
same Market-Maker) in accordance with the execution process described
in Exchange Rule 52.1 (Matching Algorithm/Priority). When available,
the MMTP Order type will be available for use by all Market-Makers in
all appointments.
For example, assume the Exchange's best bid and offer is $1.00-
$1.20, 1000 shares on each side. A Market-Maker marks an order to buy
1000 shares at $1.20 with the MMTP distinction, making it an MMTP
Order. The MMTP Order is submitted to the Exchange and it would trade
with a resting quote from the same Market-Maker for 1000 shares offered
at $1.20, then both the order to buy and the resting offer quote would
be canceled. However, if the resting offer quote from the same Market-
Maker was for only 600 shares, then 600 shares from the order to buy
would be canceled (as would the resting quote), but the other 400
shares could trade with the resting offer interest of the other market
participants.
At this time, the Exchange intends to identify an incoming MMTP
Order as being for the same Market-Maker if the MMTP Order and resting
quote or order share any of the following: (1) User acronym, (2) login
ID, or (3) sub-account code. Each Market-Maker is assigned its own
acronym (sometimes multiple acronyms). However, a Market-Maker may have
multiple different login IDs or sub-account codes. A login ID is the
session through which a Market-Maker routes orders to the Exchange. A
Market-Maker may elect to use different login IDs to route different
types of communications to the Exchange. For example, a Market-Maker
may choose to use login ID 1 for all orders it sends to the
Exchange and login ID 2 for all quotes it sends to the
Exchange. Or the Market-Maker may be much more specific, and use
different login IDs for different types of orders and quotes. A sub-
account code is simply a field on each order or quote that lists the
account into which a trade clears at the Options Clearing Corporation
(``OCC''). A Market-Maker may have different sub-account codes for each
trader it employs, so that the Market-Maker may track each trader's
activity. Finally, Market-Makers sometimes use different acronyms but
clear into the same accounts (thereby using the same sub-accounts
codes).
[[Page 68799]]
Allowing Market-Makers to designate orders as MMTP Orders is
intended to allow firms to better manage order flow and prevent
unwanted executions resulting from the interaction of executable buy
and sell trading interest for the same Market-Maker, as well as prevent
the potential for (or appearance of) ``wash sales'' that may occur as a
result of the velocity of trading in today's high speed marketplace.
When a Market-Maker is preparing to submit an order, the Market-Maker
may not know whether or not his order is going to trade against his own
resting quote. Further, many Market-Makers have multiple connections
into the Exchange due to capacity- and speed-related demands. Orders
routed by the same Market-Makers via different connections may, in
certain circumstances, trade against each other. Finally, the Exchange
notes that offering the MMTP modifiers will streamline certain
regulatory functions by reducing false positive results that may occur
on Exchange-generated wash trading surveillance reports when orders are
executed by the same Market-Maker. For these reasons, the Exchange
believes the MMTP Order provides Market-Makers enhanced order
processing functionality to prevent potentially unwanted trades from
occurring.
The proposed rule change is based on rule changes recently proposed
by the Chicago Board Options Exchange, Inc. (``CBOE'') and C2 Options
Exchange, Inc. (``C2'').\5\
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\5\ See Securities Exchange Act Release No. 65379 (September 22,
2011), 76 FR 60108 (September 28, 2011) (SR-CBOE-2011-079) and
Securities Exchange Act Release No. 65380 (September 22, 2011) 76 FR
60102 (September 28, 2011) (SR-C2-2011-017).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \6\ and the rules and regulations thereunder and, in
particular, the requirements of Section 6(b) of the Act.\7\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \8\ requirements that the rules of
an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest. The proposed rule change advances these objectives
by making available to Market-Makers a type of order that will assist
Market-Makers in preventing unwanted executions against themselves.
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\6\ 15 U.S.C. 78s(b)(1).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is based on rule changes recently proposed
by the Chicago Board Options Exchange, Inc. (``CBOE'') and C2 Options
Exchange, Inc. (``C2'').\9\
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\9\ See Note 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) \10\ of the Act and Rule 19b-4(f)(6)
thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
may not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requests that the
Commission waive the 30-day operative delay, as specified in Rule 19b-
4(f)(6)(iii),\14\ which would make the rule change effective and
operative upon filing. As indicated above by the Exchange, the MMTP
Order type is intended to prevent unwanted executions resulting from
the interaction of executable buy and sell trading interest for the
same Market-Maker in a manner that is consistent with other markets
that have similar order types. Further, the Exchange stated that the
rule is identical to those recently filed by CBOE and C2 (aside from
CBOE and C2's added rule text for MMTP Orders subject to auction
processes, which do not exist on C2) \15\ and as a result it believes
that the proposed rule change does not present any new, unique or
substantive issues. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because such waiver would allow the Exchange to
implement the order type without delay and may assist with the
maintenance of orderly markets. Accordingly, the Commission designates
the proposed rule change operative upon filing with the Commission.
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ Id.
\15\ See Note 5.
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2011-102 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File Number SR-CBOE-2011-102. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will
[[Page 68800]]
post all comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing also will be available for inspection and copying at the
principal office of CBOE. All comments received will be posted without
change; 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-CBOE-2011-102 and should be submitted on or before November 28,
2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-28694 Filed 11-4-11; 8:45 am]
BILLING CODE 8011-01-P
