Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Multi-Class Spread Orders, 73211-73214 [2013-29041]

Download as PDF Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices cannot guarantee that all requests can be fulfilled. Dated: December 2, 2013. Atitaya C. Rok, Staff Attorney. [FR Doc. 2013–29198 Filed 12–3–13; 4:15 pm] BILLING CODE 7050–01–P NUCLEAR REGULATORY COMMISSION [NRC–2013–0256] Agency Information Collection Activities: Proposed Collection; Comment Request Nuclear Regulatory Commission. ACTION: Proposed collection; request for comment. AGENCY: The U.S. Nuclear Regulatory Commission (NRC) invites public comment about our intention to request the Office of Management and Budget’s (OMB’s) approval for renewal of an existing information collection that is summarized below. We are required to publish this notice in the Federal Register under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). Information pertaining to the requirement to be submitted: 1. The title of the information collection: NRC Nuclear Education Grantee Survey. 2. Current OMB approval number: 3150–XXXX. 3. How often the collection is required: Once every 5 years. 4. Who is required or asked to report: NRC Grantees. 5. The number of annual respondents: 60. 6. The number of hours needed annually to complete the requirement or request: 45 hours. 7. Abstract: The NRC seeks to conduct a survey of grantees funded between 2007 and 2011 under NRC’s Nuclear Education Grants. The survey will allow the NRC to collect information that is not otherwise available from all grantees to assess the impact of these funds on grantee programs, their faculty, and their students. Submit, by February 3, 2014, comments that address the following questions: 1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility? 2. Is the burden estimate accurate? 3. Is there a way to enhance the quality, utility, and clarity of the information to be collected? ehiers on DSK2VPTVN1PROD with NOTICES SUMMARY: VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 4. How can the burden of the information collection be minimized, including the use of automated collection techniques or other forms of information technology? The public may examine and have copied, for a fee, publicly available documents, including the draft supporting statement, at the NRC’s Public Document Room, Room O–1F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland. Office of Management and Budget clearance requests are available at http:// www.nrc.gov/public-involve/doccomment/omb/. The document will be available on the NRC’s public Web site for 60 days after the signature date of this notice. Comments submitted in writing or in electronic form will be made available for public inspection. Because your comments will not be edited to remove any identifying or contact information, the NRC cautions you against including any information in your submission that you do not want to be publicly disclosed. Comments submitted should reference Docket ID NRC–2013–0256. You may submit your comments by any of the following methods: Electronic comments: Go to http://www.regulations.gov and search for Docket ID NRC–2013–0256. Mail comments to NRC Clearance Officer, Tremaine Donnell (T–5 F53), U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001. Questions about the information collection requirements may be directed to the NRC Clearance Officer, Tremaine Donnell (T–5 F53), U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001, by telephone at 301– 415–6258, or by email to INFOCOLLECTS.Resource@NRC.GOV. Dated at Rockville, Maryland, this 29th day of November, 2013. For the Nuclear Regulatory Commission. Tremaine Donnell, NRC Clearance Officer, Office of Information Services. [FR Doc. 2013–29048 Filed 12–4–13; 8:45 am] BILLING CODE 7590–01–P PO 00000 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70961; File No. SR–CBOE– 2013–113] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Multi-Class Spread Orders November 29, 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 November 18, 2013, 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, II, and III below, which Items have been prepared by the Exchange. 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 the Substance of the Proposed Rule Change CBOE proposes to amend its rule related to Multi-Class Broad-Based Index Option Spread Orders (referred to herein as ‘‘Multi-Class Spread Orders’’). The text of the proposed rule change is available on the Exchange’s Web site (http://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), 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 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 aspects of such statements. 1 2 Frm 00026 Fmt 4703 Sfmt 4703 73211 15 U.S.C. 78s(b)(1). 17 CFR 240.19b–4. E:\FR\FM\05DEN1.SGM 05DEN1 73212 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change ehiers on DSK2VPTVN1PROD with NOTICES 1. Purpose The Exchange proposes to make changes regarding the trading of MultiClass Spread Orders. The proposed changes to the rule update the definition of ‘‘Broad-Based Index Option’’ in Rule 24.19 in order to reflect the Broad-Based Index Options currently eligible to be used in Multi-Class Spread Orders under Rule 24.19.3 An updated definition of ‘‘Broad-Based Index Option’’ necessarily requires an update to the definition of Multi-Class Spread Order to reflect the valid combinations of Broad-Based Index Options to which the rule applies.4 The Exchange also proposes to update the definition of Multi-Class Spread Order to more clearly and accurately reflect what such an order is. Currently, the term MultiClass Spread Order is defined as ‘‘an order or quote to buy a stated number of contracts of a Broad-Based Index Option and to sell an equal number, or an equivalent number, of contracts of a different Broad-Based Index Option.’’ 5 However, a Multi-Class Spread Order can be effected without necessarily buying contracts and selling other contracts. The key component of a Multi-Class Spread Order is really the establishment of an appropriate hedge between the two options classes. As such, a Multi-Class Spread Order could be effected by buying contracts in two different classes, without selling any contracts (or vice versa). For example, a market participant could buy 100 SPX calls and buy 200 OEX puts, thereby establishing an appropriate hedge (since the first leg creates a long position and the second leg creates a short position). Therefore, the Exchange proposes to amend this statement to replace the terms ‘‘buy’’ and ‘‘sell’’ with ‘‘transact’’, and to add the language regarding 3 As such, the Exchange proposes to add options on the S&P 500 Index PM-Settled (SPXPM), MiniSPX Index (XSP), CBOE Volatility Index (VIX), CBOE Binary Options on the S&P 500 Index (BSZ), CBOE Binary Options on the CBOE Volatility Index (BVZ), S&P 500 Range Options (SRO), and Russell 2000 Index (RUT) to the definition of ‘‘Broad-Based Index Option’’ described in CBOE Rule 24.19(a)(1) as well as clarify that the S&P 100 Index includes both the OEX and XEO classes. 4 As such, the Exchange proposes to amend CBOE Rule 24.19(a)(2) to state that Multi-Class Spread Orders may be composed of (i) any combination of MNX, NDX, or QQQ; (ii) any combination of OEF, OEX, XEO or SPX; (iii) any combination of SPX (including SPXW and SPXQ), SPXPM, SPY, XSP, VIX, VXX, VXZ, BSZ, BVZ or SRO; (iv) any combination of IWM and RUT; and (v) any other combination of related Broad-Based Index Options as determined by the Exchange. 5 See CBOE Rule 24.19(a)(2). VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 establishing of an appropriate hedge. Also, the description of a Multi-Class Spread Order being ‘‘an order or quote’’ is somewhat misleading, as a quote cannot be submitted for a Multi-Class Spread Order unless that quote is submitted in response to a Multi-Class Spread Order. As such, the Exchange proposes to clarify that it is an ‘‘order or quote in response to an order . . .’’ Going forward a Multi-Class Spread Order shall be defined as an order or quote in response to an order to transact a stated number of contracts of a BroadBased Index Option and to transact an equal number, or an equivalent number, of contracts of a different Broad-Based Index Option to create an appropriate hedge. Currently, Multi-Class Spread Orders are manually created and executed on the floor of the Exchange and may not be entered electronically. The Exchange is in the process of modifying its electronic order-entry systems to provide for the electronic entry and routing of Multi-Class Spread Orders to the floor of the Exchange. Accordingly, the Exchange is proposing changes to Rule 24.19(b) that will state that MultiClass Spread Orders may be entered from on or off the CBOE floor. Consistent with the audit trail requirements that apply to all orders (in accordance with Rule 6.24), the proposed rule will require that all Multi-Class Spread Orders must be systematized as Multi-Class Spread Orders prior to representation at a trading station. An order is systematized if the order is sent electronically to the Exchange or the order is sent to the Exchange non-electronically and input electronically into the Exchange’s systems contemporaneously upon receipt on the Exchange. Because the rule applies only to Multi-Class Spread Orders composed of certain combinations of Broad-Based Index Options, any Multi-Class Spread Order received by CBOE that contains an invalid combination of options will be rejected by the Exchange’s systems. The market participant who sends such an error will receive notice of such rejection. Because the current order creation process is a manual, on-floor process, the current language states that a MultiClass Spread Order may be represented at the trading station of either BroadBased Index Option involved, and also requires that the Trading Permit Holder (‘‘TPH’’) initiating the order in the trading crowd to contact an Order Book Official (‘‘OBO’’), Designated Primary Market-Maker (‘‘DPM’’), or Exchange staff, as applicable, at the other trading station to have a notice of such order PO 00000 Frm 00027 Fmt 4703 Sfmt 4703 disseminated to the other trading crowd. The proposed rule change will require a Multi-Class Spread Order must [sic] be represented at the primary trading station, and state that the TPH representing the order must contact an OBO, DPM, or Exchange staff (as applicable) at the other trading station in order to provide notice of such order for dissemination to the other trading crowd. This ensures that all market participants at both physical trading locations are aware of the terms of the order being processed. The proposed change recognizes that a Multi-Class Spread Order may be routed from off of the Exchange floor. Furthermore, the proposed rule change also makes minor changes to the text of the rule in order to enhance reader clarity. The proposed rule change will simplify the process of creating and executing Multi-Class Spread Orders on the floor of the Exchange, and it will enhance the Exchange’s audit trail with respect to such orders. No later than 90 days following the effective date of the proposed rule change, the Exchange will announce to TPHs via Regulatory Circular the implementation date by which TPHs must be in compliance with the changes described herein. The implementation date will be no later than 180 days following the effective date of the proposed rule change, and will be at least 60 days following the release of the abovementioned Regulatory Circular (in order to give TPHs ample time to come into compliance with the changes described herein). 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.6 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 7 requirements that the rules of an exchange 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 facilitating 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. Additionally, the Exchange believes the 6 15 7 15 E:\FR\FM\05DEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 05DEN1 ehiers on DSK2VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices proposed rule change is consistent with the Section 6(b)(5) 8 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Automating the Multi-Class Spread Order creation process and allowing such orders to be routed from on or off of the floor of the Exchange serves to remove impediments to and to perfect the mechanism for a free and open market and a national market system by providing market participants the ability to route Multi-Class Spread Orders to the Exchange electronically. More accurately defining the term ‘‘MultiClass Spread Orders’’ prevents confusion, thereby to [sic] removing impediments to and perfecting the mechanism for a free and open market. The Exchange believes the proposed changes, which include increasing the explicit list of the number of securities that can be included in Multi-Class Spread Orders, will increase opportunities for execution of MultiClass Spread Orders, which will benefit investors. Finally, the Exchange believes that the proposed rule change is designed to not permit unfair discrimination among market participants as all market participants may participate in Multi-Class Spread Orders. Additionally, enhancing the audit trail with respect to Multi-Class Spread Orders promotes transparency and aids in surveillance, thereby protecting investors. Further, updating the definitions of ‘‘Broad-Based Index Options’’ and ‘‘Multi-Class Spread Orders’’ will reduce possible confusion regarding what Multi-Class Spread Orders are and which Broad-Based Index Options may be eligible for representation as a Multi-Class Spread Order in accordance with Rule 24.19, thereby removing impediments to and perfecting the mechanism for a free and open market and a national market system The Exchange also believes the proposed rule change is consistent with Section 6(b)(1) of the Act,9 which provides that the Exchange be organized and have the capacity to be able to carry out the purposes of the Act and to enforce compliance by the Exchange’s Trading Permit Holders and persons associated with its Trading Permit Holders with the Act, the rules and regulations thereunder, and the rules of the Exchange. Enhancing the audit trail with respect to Multi-Class Spread Orders will allow the Exchange to better enforce compliance by the Exchange’s TPHs and persons associated with its 8 Id. 9 15 U.S.C. 78f(b)(1). VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 73213 TPHs with the Act, the rules and regulations thereunder, and the rules of the Exchange. B. institute proceedings to determine whether the proposed rule change should be disapproved. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that automating the Multi-Class Spread Order creation process and allowing such orders to be routed from on or off of the floor of the Exchange promotes fair and orderly markets, as well as assists the Exchange in its ability to effectively attract order flow and liquidity to its market, and ultimately benefits all CBOE TPHs and all investors. The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because Multi-Class Spread Orders are available to all market participants through CBOE TPHs. The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because, again, Multi-Class Spread Orders are available to all market participants through CBOE TPHs, which makes CBOE a more effective marketplace. Further, the proposed changes only affect trading on CBOE. To the extent that the proposed changes make CBOE more attractive to market participants at other exchanges, such market participants may elect to become CBOE market participants. IV. Solicitation of Comments 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 proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or PO 00000 Frm 00028 Fmt 4703 Sfmt 4703 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2013–113 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 20549–1090. All submissions should refer to File Number SR–CBOE–2013–113. 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 (http://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 20549–1090 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices 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– 2013–113, and should be submitted on or before December 26, 2013. E:\FR\FM\05DEN1.SGM 05DEN1 73214 Federal Register / Vol. 78, No. 234 / Thursday, December 5, 2013 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–29041 Filed 12–4–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70962; File No. SR–NYSE– 2013–76] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Rules Concerning Communications With the Public To Harmonize Them With Certain Financial Industry Regulatory Authority, Inc. Rules and Make Other Conforming Changes November 29, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and Rule 19b–4 thereunder,2 notice is hereby given that on November 15, 2013, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) 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 substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. The Exchange has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under Exchange Act Rule 19b–4(f)(6),3 which renders the proposal effective upon receipt of this filing by the Commission. ehiers on DSK2VPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules concerning communications with the public to harmonize them with certain Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) rules and make other conforming changes. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 10 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 VerDate Mar<15>2010 13:57 Dec 04, 2013 Jkt 232001 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its rules concerning communications with the public to harmonize them with certain FINRA rules and make other conforming changes. Set forth below are descriptions of the harmonization process, the current NYSE rules, and the proposed NYSE rules. Specifically, the Exchange proposes to (i) delete paragraphs (a)(1), (d), (i), (j) and (l) of NYSE Rule 472, Supplementary Materials 472.10(1), (3), (4) and (5), and 472.90, and Interpretations 472/01 and 472/03 through 472/11; (ii) adopt new rule text that is substantially similar to FINRA Rules 2210, 2212, and 9551; and (iii) make other conforming changes.4 Background On July 30, 2007, FINRA’s predecessor, the National Association of Securities Dealers, Inc. (‘‘NASD’’), and NYSE Regulation, Inc. (‘‘NYSER’’) consolidated their member firm regulation operations into a combined organization, FINRA. Pursuant to Exchange Act Rule 17d–2, the Exchange, NYSER, and FINRA entered into an agreement (the ‘‘Agreement’’) to reduce regulatory duplication for their members by allocating to FINRA certain regulatory responsibilities for NYSE rules and rule interpretations (‘‘FINRA Incorporated NYSE Rules’’). NYSE MKT LLC (‘‘NYSE MKT’’) became a party to the Agreement effective December 15, 2008.5 4 References to rules are to NYSE rules unless otherwise indicated. The remaining provisions of Rule 472 and supplementary material and interpretations not addressed in this proposal concern research and would remain in place because FINRA and NYSE have not yet harmonized their research rules. 5 See Exchange Act Release No. 56148 (Jul. 26, 2007), 72 FR 42146 (Aug. 1, 2007) (order approving the Agreement); Exchange Act Release No. 56147 PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 As part of its effort to reduce regulatory duplication and relieve firms that are members of FINRA, the Exchange, and NYSE MKT of conflicting or unnecessary regulatory burdens, FINRA is now engaged in the process of reviewing and amending the NASD and FINRA Incorporated NYSE Rules in order to create a consolidated FINRA rulebook.6 FINRA recently harmonized NASD and FINRA Incorporated NYSE Rules and interpretations concerning communications with the public.7 In that filing, FINRA adopted 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 deleted paragraphs (a)(1), (i), (j) and (l) of FINRA Incorporated NYSE Rule 472, FINRA Incorporated NYSE Rule Supplementary Materials 472.10(1), (3), (4) and (5) and 472.90, and FINRA Incorporated NYSE Rule Interpretations 472/01 and 472/03 through 472/11. FINRA’s rule change became effective on February 4, 2013.8 Current Communications With the Public Rules and Interpretations Rule 472(a)(1) requires that each advertisement, sales literature or other similar type of communication that is generally distributed or made available by a member organization to customers or the public be approved in advance by an allied member, supervisory analyst, or qualified person designated under the provisions of Rule 342(b)(1). Rule 472(d) requires that communications with the public be retained in accordance with Rule 440. Rule 472(i) provides that no member organization may use any communication that contains (i) any untrue statement or omission of a material fact or is otherwise false or misleading; (ii) promises of specific results, exaggerated or unwarranted claims; (iii) opinions for which there is (Jul. 26, 2007), 72 FR 42166 (Aug. 1, 2007) (order approving the incorporation of certain NYSE Rules as ‘‘Common Rules’’); Exchange Act Release No. 60409 (July 30, 2009), 74 FR 39353 (Aug. 6, 2009) (order approving the amended and restated Agreement, adding NYSE MKT LLC as a party). Paragraph 2(b) of the Agreement sets forth procedures regarding proposed changes by FINRA, NYSE or NYSE MKT to the substance of any of the Common Rules. 6 FINRA’s rulebook currently has three sets of rules: (1) NASD Rules, (2) FINRA Incorporated NYSE Rules, and (3) consolidated FINRA Rules. The FINRA Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’), while the consolidated FINRA Rules apply to all FINRA members. For more information about the FINRA rulebook consolidation process, see FINRA Information Notice, dated March 12, 2008. 7 See Exchange Act Release No. 66681 (Mar. 29, 2012), 77 FR 20452 (Apr. 4, 2012). 8 See FINRA Regulatory Notice 12–29. E:\FR\FM\05DEN1.SGM 05DEN1

Agencies

[Federal Register Volume 78, Number 234 (Thursday, December 5, 2013)]
[Notices]
[Pages 73211-73214]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29041]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70961; File No. SR-CBOE-2013-113]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
Multi-Class Spread Orders

November 29, 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 November 18, 2013, 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, II, and III below, which Items have been prepared by the 
Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    CBOE proposes to amend its rule related to Multi-Class Broad-Based 
Index Option Spread Orders (referred to herein as ``Multi-Class Spread 
Orders''). The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 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 aspects of such 
statements.

[[Page 73212]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make changes regarding the trading of 
Multi-Class Spread Orders. The proposed changes to the rule update the 
definition of ``Broad-Based Index Option'' in Rule 24.19 in order to 
reflect the Broad-Based Index Options currently eligible to be used in 
Multi-Class Spread Orders under Rule 24.19.\3\ An updated definition of 
``Broad-Based Index Option'' necessarily requires an update to the 
definition of Multi-Class Spread Order to reflect the valid 
combinations of Broad-Based Index Options to which the rule applies.\4\ 
The Exchange also proposes to update the definition of Multi-Class 
Spread Order to more clearly and accurately reflect what such an order 
is. Currently, the term Multi-Class Spread Order is defined as ``an 
order or quote to buy a stated number of contracts of a Broad-Based 
Index Option and to sell an equal number, or an equivalent number, of 
contracts of a different Broad-Based Index Option.'' \5\ However, a 
Multi-Class Spread Order can be effected without necessarily buying 
contracts and selling other contracts. The key component of a Multi-
Class Spread Order is really the establishment of an appropriate hedge 
between the two options classes. As such, a Multi-Class Spread Order 
could be effected by buying contracts in two different classes, without 
selling any contracts (or vice versa). For example, a market 
participant could buy 100 SPX calls and buy 200 OEX puts, thereby 
establishing an appropriate hedge (since the first leg creates a long 
position and the second leg creates a short position). Therefore, the 
Exchange proposes to amend this statement to replace the terms ``buy'' 
and ``sell'' with ``transact'', and to add the language regarding 
establishing of an appropriate hedge. Also, the description of a Multi-
Class Spread Order being ``an order or quote'' is somewhat misleading, 
as a quote cannot be submitted for a Multi-Class Spread Order unless 
that quote is submitted in response to a Multi-Class Spread Order. As 
such, the Exchange proposes to clarify that it is an ``order or quote 
in response to an order . . .'' Going forward a Multi-Class Spread 
Order shall be defined as an order or quote in response to an order to 
transact a stated number of contracts of a Broad-Based Index Option and 
to transact an equal number, or an equivalent number, of contracts of a 
different Broad-Based Index Option to create an appropriate hedge.
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    \3\ As such, the Exchange proposes to add options on the S&P 500 
Index PM-Settled (SPXPM), Mini-SPX Index (XSP), CBOE Volatility 
Index (VIX), CBOE Binary Options on the S&P 500 Index (BSZ), CBOE 
Binary Options on the CBOE Volatility Index (BVZ), S&P 500 Range 
Options (SRO), and Russell 2000 Index (RUT) to the definition of 
``Broad-Based Index Option'' described in CBOE Rule 24.19(a)(1) as 
well as clarify that the S&P 100 Index includes both the OEX and XEO 
classes.
    \4\ As such, the Exchange proposes to amend CBOE Rule 
24.19(a)(2) to state that Multi-Class Spread Orders may be composed 
of (i) any combination of MNX, NDX, or QQQ; (ii) any combination of 
OEF, OEX, XEO or SPX; (iii) any combination of SPX (including SPXW 
and SPXQ), SPXPM, SPY, XSP, VIX, VXX, VXZ, BSZ, BVZ or SRO; (iv) any 
combination of IWM and RUT; and (v) any other combination of related 
Broad-Based Index Options as determined by the Exchange.
    \5\ See CBOE Rule 24.19(a)(2).
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    Currently, Multi-Class Spread Orders are manually created and 
executed on the floor of the Exchange and may not be entered 
electronically. The Exchange is in the process of modifying its 
electronic order-entry systems to provide for the electronic entry and 
routing of Multi-Class Spread Orders to the floor of the Exchange. 
Accordingly, the Exchange is proposing changes to Rule 24.19(b) that 
will state that Multi-Class Spread Orders may be entered from on or off 
the CBOE floor. Consistent with the audit trail requirements that apply 
to all orders (in accordance with Rule 6.24), the proposed rule will 
require that all Multi-Class Spread Orders must be systematized as 
Multi-Class Spread Orders prior to representation at a trading station. 
An order is systematized if the order is sent electronically to the 
Exchange or the order is sent to the Exchange non-electronically and 
input electronically into the Exchange's systems contemporaneously upon 
receipt on the Exchange.
    Because the rule applies only to Multi-Class Spread Orders composed 
of certain combinations of Broad-Based Index Options, any Multi-Class 
Spread Order received by CBOE that contains an invalid combination of 
options will be rejected by the Exchange's systems. The market 
participant who sends such an error will receive notice of such 
rejection.
    Because the current order creation process is a manual, on-floor 
process, the current language states that a Multi-Class Spread Order 
may be represented at the trading station of either Broad-Based Index 
Option involved, and also requires that the Trading Permit Holder 
(``TPH'') initiating the order in the trading crowd to contact an Order 
Book Official (``OBO''), Designated Primary Market-Maker (``DPM''), or 
Exchange staff, as applicable, at the other trading station to have a 
notice of such order disseminated to the other trading crowd. The 
proposed rule change will require a Multi-Class Spread Order must [sic] 
be represented at the primary trading station, and state that the TPH 
representing the order must contact an OBO, DPM, or Exchange staff (as 
applicable) at the other trading station in order to provide notice of 
such order for dissemination to the other trading crowd. This ensures 
that all market participants at both physical trading locations are 
aware of the terms of the order being processed. The proposed change 
recognizes that a Multi-Class Spread Order may be routed from off of 
the Exchange floor. Furthermore, the proposed rule change also makes 
minor changes to the text of the rule in order to enhance reader 
clarity.
    The proposed rule change will simplify the process of creating and 
executing Multi-Class Spread Orders on the floor of the Exchange, and 
it will enhance the Exchange's audit trail with respect to such orders. 
No later than 90 days following the effective date of the proposed rule 
change, the Exchange will announce to TPHs via Regulatory Circular the 
implementation date by which TPHs must be in compliance with the 
changes described herein. The implementation date will be no later than 
180 days following the effective date of the proposed rule change, and 
will be at least 60 days following the release of the abovementioned 
Regulatory Circular (in order to give TPHs ample time to come into 
compliance with the changes described herein).
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\6\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \7\ requirements that the rules of 
an exchange 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 
facilitating 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. 
Additionally, the Exchange believes the

[[Page 73213]]

proposed rule change is consistent with the Section 6(b)(5) \8\ 
requirement that the rules of an exchange not be designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
---------------------------------------------------------------------------

    Automating the Multi-Class Spread Order creation process and 
allowing such orders to be routed from on or off of the floor of the 
Exchange serves to remove impediments to and to perfect the mechanism 
for a free and open market and a national market system by providing 
market participants the ability to route Multi-Class Spread Orders to 
the Exchange electronically. More accurately defining the term ``Multi-
Class Spread Orders'' prevents confusion, thereby to [sic] removing 
impediments to and perfecting the mechanism for a free and open market. 
The Exchange believes the proposed changes, which include increasing 
the explicit list of the number of securities that can be included in 
Multi-Class Spread Orders, will increase opportunities for execution of 
Multi-Class Spread Orders, which will benefit investors. Finally, the 
Exchange believes that the proposed rule change is designed to not 
permit unfair discrimination among market participants as all market 
participants may participate in Multi-Class Spread Orders. 
Additionally, enhancing the audit trail with respect to Multi-Class 
Spread Orders promotes transparency and aids in surveillance, thereby 
protecting investors. Further, updating the definitions of ``Broad-
Based Index Options'' and ``Multi-Class Spread Orders'' will reduce 
possible confusion regarding what Multi-Class Spread Orders are and 
which Broad-Based Index Options may be eligible for representation as a 
Multi-Class Spread Order in accordance with Rule 24.19, thereby 
removing impediments to and perfecting the mechanism for a free and 
open market and a national market system
    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(1) of the Act,\9\ which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and to enforce compliance by the Exchange's Trading Permit 
Holders and persons associated with its Trading Permit Holders with the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange. Enhancing the audit trail with respect to Multi-Class Spread 
Orders will allow the Exchange to better enforce compliance by the 
Exchange's TPHs and persons associated with its TPHs with the Act, the 
rules and regulations thereunder, and the rules of the Exchange.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(1).
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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 that is not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange believes that automating the Multi-Class Spread Order 
creation process and allowing such orders to be routed from on or off 
of the floor of the Exchange promotes fair and orderly markets, as well 
as assists the Exchange in its ability to effectively attract order 
flow and liquidity to its market, and ultimately benefits all CBOE TPHs 
and all investors.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because Multi-
Class Spread Orders are available to all market participants through 
CBOE TPHs. The Exchange does not believe that the proposed rule change 
will impose any burden on intermarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act because, 
again, Multi-Class Spread Orders are available to all market 
participants through CBOE TPHs, which makes CBOE a more effective 
marketplace. Further, the proposed changes only affect trading on CBOE. 
To the extent that the proposed changes make CBOE more attractive to 
market participants at other exchanges, such market participants may 
elect to become CBOE market participants.

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 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-113 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 20549-1090.

All submissions should refer to File Number SR-CBOE-2013-113. 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 (http://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 20549-1090 on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal offices 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-2013-113, and should be submitted on or before December 26, 2013.


[[Page 73214]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29041 Filed 12-4-13; 8:45 am]
BILLING CODE 8011-01-P