Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change, as Modified by Amendment 1, To Amend Its Rules Related to Complex Orders, 53798-53799 [2014-21519]
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Federal Register / Vol. 79, No. 175 / Wednesday, September 10, 2014 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72986; File No. SR–CBOE–
2014–017]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change, as Modified by
Amendment 1, To Amend Its Rules
Related to Complex Orders
September 4, 2014.
I. Introduction
On February 19, 2014, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’), pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend its rules relating to
complex orders. On March 3, 2014, the
Exchange filed Amendment No. 1 to the
proposed rule change. The proposed
rule change, as modified by Amendment
No. 1 thereto, was published for
comment in the Federal Register on
March 10, 2014.3 On April 23, 2014, the
Commission extended the time period
in which to either approve the proposal,
disapprove the proposal, or to institute
proceedings to determine whether to
approve or disapprove the proposal, to
June 6, 2014.4 On June 5, 2014, the
Commission instituted proceedings to
determine whether to approve or
disapprove the proposed rule change.5
The Commission then received two
comment letters on proposal.6 This
order approves the proposed rule
change.
II. Description of Proposed Rule Change
Under current CBOE Rule 6.53C(d)(ii),
a Trading Permit Holder representing a
COA-eligible order may request that the
Exchange initiate a complex order
auction (‘‘COA’’) for the COA-eligible
order before such order enters the
complex order book (‘‘COB’’).7 In this
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 71648
(March 5, 2014), 79 FR 13359 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 72008,
79 FR 24032 (April 29, 2014).
5 See Securities Exchange Act Release No. 72329,
79 FR 33627 (June 11, 2014).
6 See letter to Kevin M. O’Neill, Deputy Secretary,
Commission, from John Kinahan, Interim-CEO,
Group One Trading, L.P., dated July, 7, 2014
(‘‘Group One Letter’’); and letter to the Office of the
Secretary, Commission, from Martha Redding, Chief
Counsel and Assistant Corporate Secretary, NYSE,
Inc., dated July 10, 2014 (‘‘NYSE Letter’’).
7 Under current CBOE Rule 6.53C(d)(i)(2), the
Exchange may determine on a class-by-class basis
which complex orders are eligible for a COA,
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2 17
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proposed rule change, the Exchange
proposes to require all complex orders
with three or more legs to be subject to
a COA prior to entering the COB.8
Specifically, the Exchange proposes to
amend Rule 6.53C(d)(ii) to provide that
CBOE’s Hybrid Trading System 9 (the
‘‘System’’) will initiate a COA on receipt
of: (1) A COA-eligible order with two
legs and request from the Trading
Permit Holder representing the order
that it initiate a COA; or (2) a complex
order with three or more legs, regardless
of the order’s routing parameters (e.g., a
request to route directly to the COB) or
handling instructions (except for orders
routed for manual handling).10 Thus, as
proposed, all complex orders in Hybrid
classes with three or more legs would
automatically be subject to a COA (other
than those routed for manual handling)
prior to entering the COB where they
can leg into the market.11
The Exchange proposes to amend
CBOE Rule 6.53C(d)(ii) to provide that
CBOE’s System will reject back to a
Trading Permit Holder any complex
order with three or more legs that
includes a request pursuant to CBOE
Rule 6.53C, Interpretation and Policy
including by complex order type and origin type.
The Exchange notes that currently, in all Hybrid
classes, customer, firm and broker-dealer complex
orders are eligible for a COA, and all complex order
types except for immediate-or-cancel (‘‘IOC’’) orders
are eligible for a COA in all Hybrid classes. See
Notice, supra note 3, n.8. Additionally, only
marketable orders and ‘‘tweeners’’ (limit orders
bettering the same side of the derived net market)
are eligible for a COA. For Hybrid 3.0 classes (i.e.
SPX), all complex order types (including IOC
orders) are eligible for a COA, but only customer
complex orders are eligible for a COA. See id.
(citing CBOE Regulatory Circulars RG06–73, RG08–
38, and RG08–97).
8 The Exchange explains that this proposed
change applies to Hybrid classes only, and not
Hybrid 3.0 classes. See Notice, supra note 3, n.7.
In this regard, the proposed rule change proposes
to amend CBOE Rule 6.53C, Interpretation and
Policy .10 to indicate that complex orders in Hybrid
3.0 classes, regardless of the number of legs, will
initiate a COA in the same manner they currently
do. See id.
9 The proposed rule change proposes to amend
CBOE Rule 6.53C(d)(ii) to say that the System,
rather than the Exchange, will send the RFR
message. See id. at n.9. Because the System will
automatically send the RFR message when the
conditions set forth in CBOE Rule 6.53C(d)(ii) are
met, the Exchange believes using the term ‘‘System’’
in the rule text is appropriate. See id.
10 The Exchange explains that if a complex order
with three or more legs contains an instruction to
route for manual handling, such as to PAR, and
through such manual handling routes to the COB,
the proposed rule change would provide that such
order will initiate a COA prior to entry on the COB,
even if the PAR operator requests that the order not
initiate a COA. See Notice, supra note 3, n.10.
11 The Exchange states that this automatic
initiation of a COA does not apply to stock-option
orders. See id. at n.11.
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
.04 12 that the order not initiate a COA.13
The Exchange also proposes to amend
CBOE Rule 6.53C(d)(ii), which currently
provides that only a Trading Permit
Holder representing an order may
request that the order initiate a COA, to
also provide that PAR operators
handling an order may request that a
COA-eligible order initiate a COA.14
According to the Exchange, this
proposed rule change will address the
concern that market makers may reduce
the size of their quotations in the leg
markets because of the presence of
certain complex orders that are designed
to circumvent the ‘‘Quote Risk Monitor
Mechanism’’ (‘‘QRM’’) settings
established by market makers.15 CBOE
describes the QRM as a functionality
designed to help market makers provide
liquidity across most series in their
appointed classes without being at risk
of executing the full cumulative size of
all their quotes before being given
adequate opportunity to adjust their
quotes.16
The QRM, according to CBOE,
generally operates by allowing market
makers to set a variety of parameters,
which, if triggered, will cause the
System to cancel a market maker’s
quotes in all series in an appointed class
after executing the order that triggered
the parameter.17 CBOE states that the
System performs the QRM parameter
calculations to determine if the QRM
has been triggered after each execution
against a market maker’s quotes.18
According to the Exchange, when a
complex order legs into the regular
market (i.e., executes against individual
quotes for each of the legs in the regular
market), all of the legs of a complex
order are considered as a single
execution for purposes of the QRM, and
12 CBOE Rule 6.53C, Interpretation and Policy .04
provides that Trading Permit Holders routing
complex orders directly to the COB may request
that the complex orders initiate a COA on a classby-class basis and Trading Permit Holders with
resting complex orders on PAR may request that
complex orders initiate a COA on an order-by-order
basis.
13 See Notice, supra note 3, at 13362.
14 CBOE believes that permitting orders resting on
PAR to initiate a COA is consistent with other
CBOE rules. See id. at n. 15 and accompanying text
(citing to CBOE Rule 6.53C(d), which, according to
the Exchange, states that complex orders may be
subject to a COA once on PAR, and CBOE Rule
6.53C, Interpretation and Policy .04(a), which,
according to the Exchange, states that Trading
Permit Holders with resting complex orders on PAR
may request that complex orders initiate a COA).
15 See Notice, supra note 3, at 13363.
16 See id. at 13361.
17 See id. at 13360–61. CBOE states that the
System performs the parameter calculations after an
execution against a market maker quote occurs in
order to assure that all quotations are firm for their
full size. See id. at 13361.
18 See id.
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Federal Register / Vol. 79, No. 175 / Wednesday, September 10, 2014 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
not as a series of individual
transactions, because each leg of the
complex order is contingent on the
other leg.19 Thus, the System performs
the QRM parameter calculations after
the entire complex order executes
against interest in the regular market. In
contrast, if the legs of the complex order
had been submitted to the regular
market separately and without any
complex order contingency, the System
would perform the QRM parameter
calculations after each leg executed
against interest in the regular market.
According to the Exchange, this
differential treatment may result in
market makers exceeding their risk
parameters by a greater number of
contracts when complex orders leg into
the regular market.20
The Exchange believes that the
potential risk to market makers of
complex orders legging into the regular
market limits the amount of liquidity
that market makers are willing to
provide in the regular market.21 In
particular, according to the Exchange,
market makers may reduce the size of
their quotations in the regular market
because of the presence of these
complex orders that are designed to
circumvent QRM and risk the execution
of the cumulative size of market makers’
quotations across multiple series
without market makers’ being aware of
these complex orders or having an
opportunity to adjust their quotes.22
Accordingly, the Exchange believes that
reducing market maker risk in the
regular market by requiring complex
orders in Hybrid classes with three or
more legs to be subject to a COA—
which will allow market makers to react
accordingly, including adjusting their
quotes to avoid the circumvention of
their QRM parameter settings—will
benefit investors by encouraging market
makers to provide additional liquidity
in the regular market and enhance
competition in those classes.23
According to the Exchange, this
potential benefit to investors far exceeds
any ‘‘perceived detriment’’ to requiring
certain complex orders to be subject to
a COA prior to potential interaction
with the leg markets.24 The Exchange
notes that complex orders with three or
more legs will still have opportunities
for execution through a COA, in the
COB or in the leg markets if they do not
execute at the end of the COA.25
19 See
id.
id.
21 See Notice, supra note 3, at 13362.
22 See id.
23 See id.
24 See id.
25 See id.
20 See
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In the Notice, the Exchange states that
it will announce the implementation
date of the proposed rule change in a
Regulatory Circular to be published no
later than 90 days following the
effective date of this proposed rule
change.26 The Exchange also states that
the implementation date will be no later
than 180 days following the effective
date of this proposed rule change.27
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,33 that the
proposed rule change (SR–CBOE–2014–
017) is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Kevin M. O’Neill,
Deputy Secretary.
III. Summary of Comment Letters
[FR Doc. 2014–21519 Filed 9–9–14; 8:45 am]
As noted above, the Commission
received two comments, both expressing
support for the proposed rule change.28
One commenter stated that it believes
CBOE’s proposal is a reasonable
response to the problem of complex
orders circumventing market makers
QRM parameters.29 The other
commenter stated that it believes that
the proposal will allow market makers
to better rely on the Exchange’s QRM to
remove quotes when a market makers
risk tolerance is exceed, which,
according to the commenter, will allow
market makers to provide quotations
with large sizes and tight spreads.30
BILLING CODE 8011–01–P
IV. Discussion and Commission
Findings
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 August
28, 2014, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.31 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,32 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, 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. The
Commission notes that participating in
a COA will provide complex orders
with three or more legs an opportunity
for price improvement through the
auction mechanism. The Commission
also notes that both commenters
expressed support for the proposal.
26 See
Notice, supra note 3, at 13363.
id.
28 See supra note 6.
29 See NYSE Letter, supra note 6, at 2.
30 See Group One Letter, supra note 6, at 2.
31 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
32 15 U.S.C. 78f(b)(5).
27 See
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72990; File No. SR–CBOE–
2014–068]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the Strike
Setting Regimes for SPY and DIA
Options
September 4, 2014.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Interpretation .08 to Rule 5.5 (Series of
Option Contracts Open for Trading) to
modify the strike setting regimes for
options on The Standard & Poor’s
Depository Receipts Trust (‘‘SPY’’) and
The DIAMONDS Trust (‘‘DIA’’). The text
of the proposed rule change is provided
below. (additions are italicized;
deletions are [bracketed])
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated Rules
*
*
*
33 15
*
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
34 17
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*
]]>Agencies
[Federal Register Volume 79, Number 175 (Wednesday, September 10, 2014)]
[Notices]
[Pages 53798-53799]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21519]
[[Page 53798]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72986; File No. SR-CBOE-2014-017]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change, as Modified by
Amendment 1, To Amend Its Rules Related to Complex Orders
September 4, 2014.
I. Introduction
On February 19, 2014, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend its rules relating to
complex orders. On March 3, 2014, the Exchange filed Amendment No. 1 to
the proposed rule change. The proposed rule change, as modified by
Amendment No. 1 thereto, was published for comment in the Federal
Register on March 10, 2014.\3\ On April 23, 2014, the Commission
extended the time period in which to either approve the proposal,
disapprove the proposal, or to institute proceedings to determine
whether to approve or disapprove the proposal, to June 6, 2014.\4\ On
June 5, 2014, the Commission instituted proceedings to determine
whether to approve or disapprove the proposed rule change.\5\ The
Commission then received two comment letters on proposal.\6\ This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 71648 (March 5,
2014), 79 FR 13359 (``Notice'').
\4\ See Securities Exchange Act Release No. 72008, 79 FR 24032
(April 29, 2014).
\5\ See Securities Exchange Act Release No. 72329, 79 FR 33627
(June 11, 2014).
\6\ See letter to Kevin M. O'Neill, Deputy Secretary,
Commission, from John Kinahan, Interim-CEO, Group One Trading, L.P.,
dated July, 7, 2014 (``Group One Letter''); and letter to the Office
of the Secretary, Commission, from Martha Redding, Chief Counsel and
Assistant Corporate Secretary, NYSE, Inc., dated July 10, 2014
(``NYSE Letter'').
---------------------------------------------------------------------------
II. Description of Proposed Rule Change
Under current CBOE Rule 6.53C(d)(ii), a Trading Permit Holder
representing a COA-eligible order may request that the Exchange
initiate a complex order auction (``COA'') for the COA-eligible order
before such order enters the complex order book (``COB'').\7\ In this
proposed rule change, the Exchange proposes to require all complex
orders with three or more legs to be subject to a COA prior to entering
the COB.\8\ Specifically, the Exchange proposes to amend Rule
6.53C(d)(ii) to provide that CBOE's Hybrid Trading System \9\ (the
``System'') will initiate a COA on receipt of: (1) A COA-eligible order
with two legs and request from the Trading Permit Holder representing
the order that it initiate a COA; or (2) a complex order with three or
more legs, regardless of the order's routing parameters (e.g., a
request to route directly to the COB) or handling instructions (except
for orders routed for manual handling).\10\ Thus, as proposed, all
complex orders in Hybrid classes with three or more legs would
automatically be subject to a COA (other than those routed for manual
handling) prior to entering the COB where they can leg into the
market.\11\
---------------------------------------------------------------------------
\7\ Under current CBOE Rule 6.53C(d)(i)(2), the Exchange may
determine on a class-by-class basis which complex orders are
eligible for a COA, including by complex order type and origin type.
The Exchange notes that currently, in all Hybrid classes, customer,
firm and broker-dealer complex orders are eligible for a COA, and
all complex order types except for immediate-or-cancel (``IOC'')
orders are eligible for a COA in all Hybrid classes. See Notice,
supra note 3, n.8. Additionally, only marketable orders and
``tweeners'' (limit orders bettering the same side of the derived
net market) are eligible for a COA. For Hybrid 3.0 classes (i.e.
SPX), all complex order types (including IOC orders) are eligible
for a COA, but only customer complex orders are eligible for a COA.
See id. (citing CBOE Regulatory Circulars RG06-73, RG08-38, and
RG08-97).
\8\ The Exchange explains that this proposed change applies to
Hybrid classes only, and not Hybrid 3.0 classes. See Notice, supra
note 3, n.7. In this regard, the proposed rule change proposes to
amend CBOE Rule 6.53C, Interpretation and Policy .10 to indicate
that complex orders in Hybrid 3.0 classes, regardless of the number
of legs, will initiate a COA in the same manner they currently do.
See id.
\9\ The proposed rule change proposes to amend CBOE Rule
6.53C(d)(ii) to say that the System, rather than the Exchange, will
send the RFR message. See id. at n.9. Because the System will
automatically send the RFR message when the conditions set forth in
CBOE Rule 6.53C(d)(ii) are met, the Exchange believes using the term
``System'' in the rule text is appropriate. See id.
\10\ The Exchange explains that if a complex order with three or
more legs contains an instruction to route for manual handling, such
as to PAR, and through such manual handling routes to the COB, the
proposed rule change would provide that such order will initiate a
COA prior to entry on the COB, even if the PAR operator requests
that the order not initiate a COA. See Notice, supra note 3, n.10.
\11\ The Exchange states that this automatic initiation of a COA
does not apply to stock-option orders. See id. at n.11.
---------------------------------------------------------------------------
The Exchange proposes to amend CBOE Rule 6.53C(d)(ii) to provide
that CBOE's System will reject back to a Trading Permit Holder any
complex order with three or more legs that includes a request pursuant
to CBOE Rule 6.53C, Interpretation and Policy .04 \12\ that the order
not initiate a COA.\13\ The Exchange also proposes to amend CBOE Rule
6.53C(d)(ii), which currently provides that only a Trading Permit
Holder representing an order may request that the order initiate a COA,
to also provide that PAR operators handling an order may request that a
COA-eligible order initiate a COA.\14\
---------------------------------------------------------------------------
\12\ CBOE Rule 6.53C, Interpretation and Policy .04 provides
that Trading Permit Holders routing complex orders directly to the
COB may request that the complex orders initiate a COA on a class-
by-class basis and Trading Permit Holders with resting complex
orders on PAR may request that complex orders initiate a COA on an
order-by-order basis.
\13\ See Notice, supra note 3, at 13362.
\14\ CBOE believes that permitting orders resting on PAR to
initiate a COA is consistent with other CBOE rules. See id. at n. 15
and accompanying text (citing to CBOE Rule 6.53C(d), which,
according to the Exchange, states that complex orders may be subject
to a COA once on PAR, and CBOE Rule 6.53C, Interpretation and Policy
.04(a), which, according to the Exchange, states that Trading Permit
Holders with resting complex orders on PAR may request that complex
orders initiate a COA).
---------------------------------------------------------------------------
According to the Exchange, this proposed rule change will address
the concern that market makers may reduce the size of their quotations
in the leg markets because of the presence of certain complex orders
that are designed to circumvent the ``Quote Risk Monitor Mechanism''
(``QRM'') settings established by market makers.\15\ CBOE describes the
QRM as a functionality designed to help market makers provide liquidity
across most series in their appointed classes without being at risk of
executing the full cumulative size of all their quotes before being
given adequate opportunity to adjust their quotes.\16\
---------------------------------------------------------------------------
\15\ See Notice, supra note 3, at 13363.
\16\ See id. at 13361.
---------------------------------------------------------------------------
The QRM, according to CBOE, generally operates by allowing market
makers to set a variety of parameters, which, if triggered, will cause
the System to cancel a market maker's quotes in all series in an
appointed class after executing the order that triggered the
parameter.\17\ CBOE states that the System performs the QRM parameter
calculations to determine if the QRM has been triggered after each
execution against a market maker's quotes.\18\ According to the
Exchange, when a complex order legs into the regular market (i.e.,
executes against individual quotes for each of the legs in the regular
market), all of the legs of a complex order are considered as a single
execution for purposes of the QRM, and
[[Page 53799]]
not as a series of individual transactions, because each leg of the
complex order is contingent on the other leg.\19\ Thus, the System
performs the QRM parameter calculations after the entire complex order
executes against interest in the regular market. In contrast, if the
legs of the complex order had been submitted to the regular market
separately and without any complex order contingency, the System would
perform the QRM parameter calculations after each leg executed against
interest in the regular market. According to the Exchange, this
differential treatment may result in market makers exceeding their risk
parameters by a greater number of contracts when complex orders leg
into the regular market.\20\
---------------------------------------------------------------------------
\17\ See id. at 13360-61. CBOE states that the System performs
the parameter calculations after an execution against a market maker
quote occurs in order to assure that all quotations are firm for
their full size. See id. at 13361.
\18\ See id.
\19\ See id.
\20\ See id.
---------------------------------------------------------------------------
The Exchange believes that the potential risk to market makers of
complex orders legging into the regular market limits the amount of
liquidity that market makers are willing to provide in the regular
market.\21\ In particular, according to the Exchange, market makers may
reduce the size of their quotations in the regular market because of
the presence of these complex orders that are designed to circumvent
QRM and risk the execution of the cumulative size of market makers'
quotations across multiple series without market makers' being aware of
these complex orders or having an opportunity to adjust their
quotes.\22\ Accordingly, the Exchange believes that reducing market
maker risk in the regular market by requiring complex orders in Hybrid
classes with three or more legs to be subject to a COA--which will
allow market makers to react accordingly, including adjusting their
quotes to avoid the circumvention of their QRM parameter settings--will
benefit investors by encouraging market makers to provide additional
liquidity in the regular market and enhance competition in those
classes.\23\ According to the Exchange, this potential benefit to
investors far exceeds any ``perceived detriment'' to requiring certain
complex orders to be subject to a COA prior to potential interaction
with the leg markets.\24\ The Exchange notes that complex orders with
three or more legs will still have opportunities for execution through
a COA, in the COB or in the leg markets if they do not execute at the
end of the COA.\25\
---------------------------------------------------------------------------
\21\ See Notice, supra note 3, at 13362.
\22\ See id.
\23\ See id.
\24\ See id.
\25\ See id.
---------------------------------------------------------------------------
In the Notice, the Exchange states that it will announce the
implementation date of the proposed rule change in a Regulatory
Circular to be published no later than 90 days following the effective
date of this proposed rule change.\26\ The Exchange also states that
the implementation date will be no later than 180 days following the
effective date of this proposed rule change.\27\
---------------------------------------------------------------------------
\26\ See Notice, supra note 3, at 13363.
\27\ See id.
---------------------------------------------------------------------------
III. Summary of Comment Letters
As noted above, the Commission received two comments, both
expressing support for the proposed rule change.\28\ One commenter
stated that it believes CBOE's proposal is a reasonable response to the
problem of complex orders circumventing market makers QRM
parameters.\29\ The other commenter stated that it believes that the
proposal will allow market makers to better rely on the Exchange's QRM
to remove quotes when a market makers risk tolerance is exceed, which,
according to the commenter, will allow market makers to provide
quotations with large sizes and tight spreads.\30\
---------------------------------------------------------------------------
\28\ See supra note 6.
\29\ See NYSE Letter, supra note 6, at 2.
\30\ See Group One Letter, supra note 6, at 2.
---------------------------------------------------------------------------
IV. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\31\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\32\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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. The Commission notes that participating in a COA will
provide complex orders with three or more legs an opportunity for price
improvement through the auction mechanism. The Commission also notes
that both commenters expressed support for the proposal.
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\31\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\32\ 15 U.S.C. 78f(b)(5).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\33\ that the proposed rule change (SR-CBOE-2014-017) is approved.
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\33\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21519 Filed 9-9-14; 8:45 am]
BILLING CODE 8011-01-P
