Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to the Opening of the Complex Order Book, 9953-9955 [2013-03103]

Download as PDF Federal Register / Vol. 78, No. 29 / Tuesday, February 12, 2013 / Notices staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Gallagher, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session. The subject matter of the Closed Meeting will be: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; and Other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400. Dated: February 7, 2013. Elizabeth M. Murphy, Secretary. [FR Doc. 2013–03254 Filed 2–8–13; 11:15 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68844; File No. SR–CBOE– 2013–007] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to the Opening of the Complex Order Book tkelley on DSK3SPTVN1PROD with NOTICES February 6, 2013. 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 January 28, 2013, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated the proposal as a ‘‘noncontroversial’’ proposed rule change 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 16:40 Feb 11, 2013 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend its electronic complex order rules. The text of the proposed rule change is available on the Exchange’s Web site (www.cboe.org/Legal), at the Exchange’s Office of the Secretary and at the Commission’s Public Reference Room. 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 Exchange 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, the Proposed Rule Change BILLING CODE 8011–01–P 1 15 pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder, which renders it effective upon filing with the Commission.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose The purpose of this proposed rule change is to include a description in Rule 6.53C of the manner in which complex orders are currently electronically processed through the Exchange’s complex order book (‘‘COB’’) when the COB opens for trading. Currently the rule does not include this level of detail, so the Exchange is proposing to include this information within the rule to provide additional clarity on the current operation of the COB. The Exchange notes that it is simply including additional detail in its rules on the existing process when the COB opens in response to Trading Permit Holder inquiries about its operation. No changes to the process are being contemplated by this rule change filing. In particular, the proposed rule change will provide that complex orders, including stock-option orders, do not participate in opening rotations conducted pursuant to Rule 6.2B for 3 15 4 17 Jkt 229001 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). Frm 00071 Fmt 4703 Sfmt 4703 9953 individual option series.5 When the last of the individual component option series legs that make up a complex order strategy has opened (and, in the case of a stock-option strategy, when the underlying stock has opened), the COB for that strategy will then open for trading. The COB for a given complex order strategy will open with no trade,6 except as follows: First, the COB will open with a trade against the individual component option series legs if there are complex orders on only one side of the COB that are marketable against the opposite side of the derived net market. The resulting execution will occur at the derived net market price to the extent marketable. Any remaining balance would be processed as it would on an intra-day basis as set forth in Rule 6.53C (including being subject to the applicable complex order priority and price check parameter provisions set forth in Rule 6.53C). This provision for ‘‘legging’’ against the individual series legs is not applicable to stock-option order strategies. (Stock-option orders processed through COB generally only trade against other stock-option orders. Stock-option orders processed through COB generally do not trade against individual component option series legs, except in one limited circumstance 5 The Exchange notes that, previously, Rule 6.2B had provided that spread orders (a general reference used to refer to complex orders) do not participate in the Hybrid Opening System (‘‘HOSS’’) opening trade for individual component option series legs or in the determination of the opening price, expected opening price or expected opening size for an individual component options series leg. This provision was eliminated from Rule 6.2B in 2010 and, as revised, the Exchange could determine whether to designate various complex order types as eligible for HOSS on a class-by-class basis (just as it would for any other order type). See Securities Exchange Act Release No. 63580 (December 20, 2010), 75 FR 81705 (December 28, 2010) (SR– CBOE–2010–114). To date, the Exchange has not determined to include spread orders/complex orders in the Rule 6.2B opening process. With this proposed rule change, SR–CBOE–2013–007, the Exchange would no longer be permitted to designate complex order (including stock-option order) order types as eligible for the Rule 6.2B opening process. If, in the future, the Exchange would desire to designate certain complex order (including stock-option order) order types as being eligible to participate in the HOSS opening process for simple orders, such a determination would be subject to a separate rule change filing. 6 For example, the COB would open with no trade if there are no complex orders resting for the strategy or if there are complex orders on only one side of the COB at a net price(s) that does not touch or cross the derived net market. The ‘‘derived net market’’ for a stock-option order strategy will be calculated using the Exchange’s best bid or offer in the individual option series leg(s) and the NBBO in the stock leg. The ‘‘derived net market’’ for any other complex order strategy will be calculated using the Exchange’s best bid or offer in the individual series legs. E:\FR\FM\12FEN1.SGM 12FEN1 9954 Federal Register / Vol. 78, No. 29 / Tuesday, February 12, 2013 / Notices for market orders at the conclusion of a complex order RFQ auction (‘‘COA’’).7) For example, if the derived net market for a given complex order strategy is $1.00–$1.20 for 100 units and the only interest in the COB is a complex order to buy the strategy at a net debit price of $1.21 for 120 units, then 100 units of the complex order would trade at a net price of $1.20 against the individual component series legs and the remaining 20 units of the complex order would be subject to processing under Rule 6.53C (e.g., remain in the COB if not marketable against the individual orders and quotes in the electronic book or other complex orders in the COB, execute or route for manual processing if marketable subject the applicable priority and price check parameters). Second, the COB will open with a trade against complex orders if there are complex orders on both sides of the COB that are marketable against each other and that are priced within the derived net market. The resulting execution will occur at a market clearing price that is inside the derived net market and that matches complex orders to the extent marketable. In determining the priority, the COB gives priority to complex orders whose net price is better than the market clearing price first, and then to complex orders at the market clearing price.8 This provision for complex orders to trade against each other is applicable to stockoption order strategies. For example, assume the derived net market for a given complex order strategy is $1.00–$1.20 for 100 units and there is a complex order in the COB to sell the strategy at a net credit price of $1.19 for 20 units, a complex order in the COB to sell the strategy at a net credit price of $1.18 for 10 units, and a complex order in COB to buy the strategy at a net debit price of $1.19 for 50 units. When the COB opens, 30 units of the buy strategy would trade at a net price of $1.19 against the two sell strategies. The remaining 20 units of the buy strategy would be subject to processing under Rule 6.53C (e.g., remain in the COB if not marketable against the individual orders and quotes 7 See Rule 6.53C.06. ‘‘market clearing price’’ process for executing complex orders when the COB opens is similar to the process for executing simple orders when HOSS opens an individual component options series. See Rule 6.2B(c)(iv) (‘‘[t]he opening price of a series is the ‘market-clearing’ price that will leave bids and offers which cannot trade with each other. In determining the priority of orders and quotes to be traded, the System gives priority to market orders first, then to limit orders and quotes whose price is better than the opening price, and then to resting orders and quotes at the opening price.’’) tkelley on DSK3SPTVN1PROD with NOTICES 8 This VerDate Mar<15>2010 16:40 Feb 11, 2013 Jkt 229001 in the electronic book or other complex orders in the COB, execute or route for manual processing if marketable subject the applicable priority and price check parameters). As another example, if the derived net market for a given stock-option order strategy is $5.00–$5.20 for 100 units and there is a stock-option order in the COB to sell the strategy at a net credit price of $5.19 for 20 units, a stock-option order in the COB to sell the strategy at a net credit price of $5.18 for 10 units, and a stock-option order in COB to buy the strategy at a net debit price of $5.19 for 50 units, then 30 units of the buy strategy would trade at a net price of $5.19 against the two sell strategies. The remaining 20 units of the buy strategy would be subject to processing under Rule 6.53C (e.g., remain in the COB if not marketable against the derived net market (considering the individual orders and quotes in the electronic book for the component options series legs and the NBBO in the stock leg) or other stock-option orders in the COB, or execute or route for manual processing if marketable subject the applicable priority and price check parameters). 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act 9 in general and furthers the objectives of Section 6(b)(5) of the Act 10 in particular in that it should promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. In particular, the Exchange believes that including detail within the rules should provide additional clarity and avoid any confusion on the current operation of the COB open. The Exchange also believes that the operation of the COB increases opportunities for all types of market participants (e.g., public customers, broker-dealers and marketmakers) to participate in the trading of complex orders. This participation may promote liquidity and result in better prices for customers throughout the trading day, including when the COB opens. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. As noted above, the Exchange believes that 9 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00072 Fmt 4703 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b–4(f)(6) thereunder.12 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–2013–007 on the subject line. 11 15 10 15 PO 00000 including detail within the rules should provide additional clarity and avoid any confusion on the current operation of the COB open. The Exchange also believes that the operation of the COB increases opportunities for all types of market participants (e.g., public customers, broker-dealers and marketmakers) to participate in the trading of complex orders. This participation may promote liquidity and result in better prices for customers throughout the trading day, including when the COB opens. 12 17 Sfmt 4703 E:\FR\FM\12FEN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 12FEN1 Federal Register / Vol. 78, No. 29 / Tuesday, February 12, 2013 / Notices Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2013–007. 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 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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– 2013–007 and should be submitted on or before March 5, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–03103 Filed 2–11–13; 8:45 am] tkelley on DSK3SPTVN1PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68851; File No. SR–BATS– 2013–009] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot Program Related to Trading Pauses Due to Extraordinary Market Volatility February 6, 2013. 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 January 30, 2013, BATS Exchange, Inc. (‘‘BATS’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to extend a pilot program previously approved by the Commission related to Rule 11.18, entitled ‘‘Trading Halts Due to Extraordinary Market Volatility.’’ The text of the proposed rule change is available at the Exchange’s Web site at https://www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 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 Exchange 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 these 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. 1 15 U.S.C.78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 2 17 13 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:40 Feb 11, 2013 Jkt 229001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 9955 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to extend the effectiveness of the Exchange’s rule related to individual stock circuit breakers, which is contained in Rule 11.18(d) and Interpretation and Policy .05 to Rule 11.18. The rule, explained in further detail below, is currently operating as a pilot program set to expire on February 4, 2013. On June 10, 2010, the Commission approved on a pilot basis changes to BATS Rule 11.18 to provide for uniform market-wide trading pause standards for individual securities in the S&P 500® Index that experience rapid price movement.5 Later, the Exchange and other markets proposed extension of the trading pause standards on a pilot basis to individual securities in the Russell 1000® Index and specified Exchange Traded Products, which changes the Commission approved on September 10, 2010.6 More recently, the Exchange proposed expansion of the pilot program to apply to all NMS stocks.7 This expansion was approved on June 23, 2011.8 The pilot program relating to trading pause standards has been extended five times since its inception.9 The Exchange believes the benefits to market participants from the individual stock trading pause rule should be continued on a pilot basis until individual stocks become, on a rolling basis, subject to the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS 5 Securities Exchange Act Release No. 62252 (June 10, 2010), 75 FR 34186 (June 16, 2010) (SR– BATS–2010–014). 6 Securities Exchange Act Release No. 62884 (September 10, 2010), 75 FR 56618 (September 16, 2010) (SR–BATS–2010–018). 7 Securities Exchange Act Release No. 64435 (May 6, 2011), 76 FR 27684 (May 12, 2011) (SR–BATS– 2011–016). 8 Securities Exchange Act Release No. 64735 (June 23, 2011), 76 FR 38243 (June 29, 2011) (File Nos. SR–BATS–2011–016; SR–BYX–2011–011; SR– BX–2011–025; SR–CBOE–2011–049; SR–CHX– 2011–09; SR–EDGA–2011–15; SR–EDGX–2011–14; SR–FINRA–2011–023; SR–ISE–2011–028; SR– NASDAQ–2011–067; SR–NYSE–2011–21; SR– NYSEAmex-2011–32; SR–NYSEArca-2011–26; SR– NSX–2011–06; SR–Phlx–2011–64). 9 Securities Exchange Act Release No. 63497 (December 9, 2010), 75 FR 78315 (December 15, 2010) (SR–BATS–2010–037); Securities Exchange Act Release No. 64207 (April 6, 2011), 76 FR 20424 (April 12, 2011) (SR–BATS–2011–011); Securities Exchange Act Release No. 65081 (August 9, 2011), 76 FR 50798 (August 16, 2011) (SR–BATS–2011– 027); Securities Exchange Act Release No. 66190 (January 19, 2012), 77 FR 3834 (January 25, 2012) (SR–BATS–2012–001); Securities Exchange Act Release No. 67520 (July 27, 2012), 77 FR 46129 (August 2, 2012) (SR–BATS–2012–031). E:\FR\FM\12FEN1.SGM 12FEN1

Agencies

[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9953-9955]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03103]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68844; File No. SR-CBOE-2013-007]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to the Opening of the Complex Order Book

February 6, 2013.
    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 January 28, 2013, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Exchange has designated the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder, which renders it effective upon filing 
with the Commission.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its electronic complex order 
rules. The text of the proposed rule change is available on the 
Exchange's Web site (www.cboe.org/Legal), at the Exchange's Office of 
the Secretary and at the Commission's Public Reference Room.

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 Exchange 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, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to include a 
description in Rule 6.53C of the manner in which complex orders are 
currently electronically processed through the Exchange's complex order 
book (``COB'') when the COB opens for trading. Currently the rule does 
not include this level of detail, so the Exchange is proposing to 
include this information within the rule to provide additional clarity 
on the current operation of the COB. The Exchange notes that it is 
simply including additional detail in its rules on the existing process 
when the COB opens in response to Trading Permit Holder inquiries about 
its operation. No changes to the process are being contemplated by this 
rule change filing.
    In particular, the proposed rule change will provide that complex 
orders, including stock-option orders, do not participate in opening 
rotations conducted pursuant to Rule 6.2B for individual option 
series.\5\ When the last of the individual component option series legs 
that make up a complex order strategy has opened (and, in the case of a 
stock-option strategy, when the underlying stock has opened), the COB 
for that strategy will then open for trading. The COB for a given 
complex order strategy will open with no trade,\6\ except as follows:
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    \5\ The Exchange notes that, previously, Rule 6.2B had provided 
that spread orders (a general reference used to refer to complex 
orders) do not participate in the Hybrid Opening System (``HOSS'') 
opening trade for individual component option series legs or in the 
determination of the opening price, expected opening price or 
expected opening size for an individual component options series 
leg. This provision was eliminated from Rule 6.2B in 2010 and, as 
revised, the Exchange could determine whether to designate various 
complex order types as eligible for HOSS on a class-by-class basis 
(just as it would for any other order type). See Securities Exchange 
Act Release No. 63580 (December 20, 2010), 75 FR 81705 (December 28, 
2010) (SR-CBOE-2010-114). To date, the Exchange has not determined 
to include spread orders/complex orders in the Rule 6.2B opening 
process. With this proposed rule change, SR-CBOE-2013-007, the 
Exchange would no longer be permitted to designate complex order 
(including stock-option order) order types as eligible for the Rule 
6.2B opening process. If, in the future, the Exchange would desire 
to designate certain complex order (including stock-option order) 
order types as being eligible to participate in the HOSS opening 
process for simple orders, such a determination would be subject to 
a separate rule change filing.
    \6\ For example, the COB would open with no trade if there are 
no complex orders resting for the strategy or if there are complex 
orders on only one side of the COB at a net price(s) that does not 
touch or cross the derived net market. The ``derived net market'' 
for a stock-option order strategy will be calculated using the 
Exchange's best bid or offer in the individual option series leg(s) 
and the NBBO in the stock leg. The ``derived net market'' for any 
other complex order strategy will be calculated using the Exchange's 
best bid or offer in the individual series legs.
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    First, the COB will open with a trade against the individual 
component option series legs if there are complex orders on only one 
side of the COB that are marketable against the opposite side of the 
derived net market. The resulting execution will occur at the derived 
net market price to the extent marketable. Any remaining balance would 
be processed as it would on an intra-day basis as set forth in Rule 
6.53C (including being subject to the applicable complex order priority 
and price check parameter provisions set forth in Rule 6.53C). This 
provision for ``legging'' against the individual series legs is not 
applicable to stock-option order strategies. (Stock-option orders 
processed through COB generally only trade against other stock-option 
orders. Stock-option orders processed through COB generally do not 
trade against individual component option series legs, except in one 
limited circumstance

[[Page 9954]]

for market orders at the conclusion of a complex order RFQ auction 
(``COA'').\7\)
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    \7\ See Rule 6.53C.06.
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    For example, if the derived net market for a given complex order 
strategy is $1.00-$1.20 for 100 units and the only interest in the COB 
is a complex order to buy the strategy at a net debit price of $1.21 
for 120 units, then 100 units of the complex order would trade at a net 
price of $1.20 against the individual component series legs and the 
remaining 20 units of the complex order would be subject to processing 
under Rule 6.53C (e.g., remain in the COB if not marketable against the 
individual orders and quotes in the electronic book or other complex 
orders in the COB, execute or route for manual processing if marketable 
subject the applicable priority and price check parameters).
    Second, the COB will open with a trade against complex orders if 
there are complex orders on both sides of the COB that are marketable 
against each other and that are priced within the derived net market. 
The resulting execution will occur at a market clearing price that is 
inside the derived net market and that matches complex orders to the 
extent marketable. In determining the priority, the COB gives priority 
to complex orders whose net price is better than the market clearing 
price first, and then to complex orders at the market clearing 
price.\8\ This provision for complex orders to trade against each other 
is applicable to stock-option order strategies.
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    \8\ This ``market clearing price'' process for executing complex 
orders when the COB opens is similar to the process for executing 
simple orders when HOSS opens an individual component options 
series. See Rule 6.2B(c)(iv) (``[t]he opening price of a series is 
the `market-clearing' price that will leave bids and offers which 
cannot trade with each other. In determining the priority of orders 
and quotes to be traded, the System gives priority to market orders 
first, then to limit orders and quotes whose price is better than 
the opening price, and then to resting orders and quotes at the 
opening price.'')
---------------------------------------------------------------------------

    For example, assume the derived net market for a given complex 
order strategy is $1.00-$1.20 for 100 units and there is a complex 
order in the COB to sell the strategy at a net credit price of $1.19 
for 20 units, a complex order in the COB to sell the strategy at a net 
credit price of $1.18 for 10 units, and a complex order in COB to buy 
the strategy at a net debit price of $1.19 for 50 units. When the COB 
opens, 30 units of the buy strategy would trade at a net price of $1.19 
against the two sell strategies. The remaining 20 units of the buy 
strategy would be subject to processing under Rule 6.53C (e.g., remain 
in the COB if not marketable against the individual orders and quotes 
in the electronic book or other complex orders in the COB, execute or 
route for manual processing if marketable subject the applicable 
priority and price check parameters).
    As another example, if the derived net market for a given stock-
option order strategy is $5.00-$5.20 for 100 units and there is a 
stock-option order in the COB to sell the strategy at a net credit 
price of $5.19 for 20 units, a stock-option order in the COB to sell 
the strategy at a net credit price of $5.18 for 10 units, and a stock-
option order in COB to buy the strategy at a net debit price of $5.19 
for 50 units, then 30 units of the buy strategy would trade at a net 
price of $5.19 against the two sell strategies. The remaining 20 units 
of the buy strategy would be subject to processing under Rule 6.53C 
(e.g., remain in the COB if not marketable against the derived net 
market (considering the individual orders and quotes in the electronic 
book for the component options series legs and the NBBO in the stock 
leg) or other stock-option orders in the COB, or execute or route for 
manual processing if marketable subject the applicable priority and 
price check parameters).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\9\ in general and furthers the objectives of Section 6(b)(5) of the 
Act \10\ in particular in that it should promote just and equitable 
principles of trade, serve to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
protect investors and the public interest. In particular, the Exchange 
believes that including detail within the rules should provide 
additional clarity and avoid any confusion on the current operation of 
the COB open. The Exchange also believes that the operation of the COB 
increases opportunities for all types of market participants (e.g., 
public customers, broker-dealers and market-makers) to participate in 
the trading of complex orders. This participation may promote liquidity 
and result in better prices for customers throughout the trading day, 
including when the COB opens.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. As noted above, the Exchange 
believes that including detail within the rules should provide 
additional clarity and avoid any confusion on the current operation of 
the COB open. The Exchange also believes that the operation of the COB 
increases opportunities for all types of market participants (e.g., 
public customers, broker-dealers and market-makers) to participate in 
the trading of complex orders. This participation may promote liquidity 
and result in better prices for customers throughout the trading day, 
including when the COB opens.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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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-2013-007 on the subject line.

[[Page 9955]]

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2013-007. 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 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. 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-2013-007 and should be 
submitted on or before March 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03103 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P
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