Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Order Format 1, 1660-1661 [2014-00119]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 6 (Thursday, January 9, 2014)]
[Notices]
[Pages 1660-1661]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00119]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71233; File No. SR-CBOE-2013-127]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Order Format 1

January 3, 2014.
    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 December 24, 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.
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    \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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend CBOE Rule 6.53A (Types of Order 
Formats). The text of the proposed rule change is available on the 
Exchange's Web site (https://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.

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

1. Purpose
    The Exchange proposes to amend Rule 6.53A. (Types of Order 
Formats), which rule describes the types of order formats available to 
Trading Permit Holders (TPHs) to facilitate order entry. Specifically 
the Exchange proposes to amend where Order Format 1 orders are 
processed.
    By way of background, order formats are message types that are used 
to send orders into CBOE Command \3\ through a user's selected API. 
Currently, all orders must be submitted to CBOE using the message type 
Order Format 1 (``OF1''). Orders using the OF1 format must pass through 
various processes, including validation checks in the Order Handling 
Service (``OHS''),\4\ before execution, entry into the book, 
cancellation, or routing for manual handling. Where an order is routed 
for processing by the OHS depends on various parameters configured by 
the Exchange and the order entry firm itself. Examples of such 
parameters are firm-specific volume restrictions (i.e., orders larger 
than a firm-imposed quantity are routed to booth/order management 
terminal) or inbound limit order price reasonability (i.e., orders may 
be rerouted to booth/order management terminal for manual review if 
``too marketable''). OF1 supports all order types, including auction 
responses.
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    \3\ CBOE Command is the trading engine platform for CBOE, C2, 
CBSX and CBOE Futures Exchange (``CFE''). CBOE Command incorporates 
both order handling and trade processing on the same platform.
    \4\ The Order Handling System (``OHS'') performs basic 
validation checks and has the capability to route orders to the 
trade engine for automatic execution and book entry, to Trading 
Permit Holder and PAR Official workstations located in the trading 
crowds for manual handling, and/or to other order management 
terminals (``OMTs'') generally located in booths on the trading 
floor for manual handling.
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    The Exchange proposes to change where OF1 orders are processed. 
Specifically, the Exchange proposes to have orders using the OF1 format 
pass through various processes, including the validation checks in the 
trade engine, as opposed to the OHS. The Exchange notes that OF1 orders 
will still be subject to the same validation checks. The proposed rule 
change merely changes where these checks occur.
    As before, orders using OF1 can still be executed in the trade 
engine, routed to TPH and PAR Official workstations located in the 
trading crowds for manual handling, and/or routed to other order 
management terminals (``OMTs'') generally located in booths on the 
trading floor for manual handling. Where an order is routed will still 
depend upon various parameters set by the Exchange and the order entry 
firms. For example, if during these checks in the trade engine an order 
hits a certain parameter that requires it to be routed to a booth/order 
management terminal (e.g. a firm-specific volume restriction which 
requires orders larger than the firm-imposed quantity to be routed to 
booth/order management terminal), that order will be routed to the OHS, 
and the OHS will then route the order to the appropriate booth/order 
management terminal for manual review and processing. The Exchange 
believes that allowing OF1 orders to pass straight to the trade engine 
for validation checks, as opposed to stopping first in the OHS for 
these checks, increases overall efficiency. The Exchange finally notes 
that the proposed new Order Format 1 will operate substantially similar 
to how C2 Order Format 1 currently operates on C2.\5\
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    \5\ See C2 Rule 6.19(i).
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    The Exchange will announce the implementation date of the proposed 
rule change in an Information Circular to be published no later than 90 
days following the effective date of this rule filing. The 
implementation date will be no later than 180 days following the 
effective date of this rule filing.
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) \6\ of 
the Act. Specifically, the Exchange believes the proposed rule

[[Page 1661]]

change is consistent with the requirements under Section 6(b)(5) \7\ 
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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    First, the proposed rule change to have orders using the OF1 format 
pass through various processes, including validation checks, in the 
trade engine as opposed to the OHS provides for increased efficiency 
while still maintaining important validation checks, thereby protecting 
investors and the public interest. Additionally, clearly specifying the 
manner in which inbound orders are submitted and processed provides 
additional transparency in the rules and provides market participants 
an additional avenue to easily understand the system and processes CBOE 
offers. The Exchange believes additional transparency removes a 
potential impediment to and perfecting the mechanism for a free and 
open market and a national market system, and, in general, protecting 
investors and the public interest. Additionally, the Exchange believes 
that the proposed change to Order Format 1 still allows for the 
Exchange to receive from TPHs information in a uniform format, which 
aids the Exchange's efforts to monitor and regulate CBOE's markets and 
TPHs and helps prevent fraudulent and manipulative practices. The 
Exchange finally believes that the proposed rule change is designed to 
not permit unfair discrimination among market participants, as the 
proposed change is applicable to all TPHs and provides that all TPHs 
must submit their orders using Order Format 1.

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. The Exchange does not believe the proposed 
rule changes impose any burden on intramarket competition because it 
applies to all TPHs and all orders must be submitted to CBOE using the 
OF1 message type. The Exchange does not believe the proposed rule 
change will impose any burden on intermarket competition as it is 
merely proposing to change the location of where an order using OF1 is 
processed. The Exchange believes the proposed rule change promotes 
transparency in the rules without adding any burden on 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

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \8\ and 
Rule 19b-4(f)(6) \9\ thereunder. At any time within 60 days of the 
filing of the 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. If the Commission takes such action, the 
Commission will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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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-2013-127 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-2013-127. 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 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-2013-127, 
and should be submitted on or before January 30, 2014.

    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. 2014-00119 Filed 1-8-14; 8:45 am]
BILLING CODE 8011-01-P