Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Automated Improvement Mechanism Order Allocations, 34467-34471 [2015-14672]
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Federal Register / Vol. 80, No. 115 / Tuesday, June 16, 2015 / Notices
8. The estimated number of annual
respondents: 7.2 respondents (1 NRC
licensee and 6.2 Agreement State
licensees).
9. The estimated number of hours
needed annually to comply with the
information collection requirement or
request: 9.4 hours (1.3 NRC licensee
hours and 8.1 Agreement State licensee
hours).
10. Abstract: Part 40 of Title 10 of the
Code of Federal Regulations (10 CFR),
establishes requirements for the receipt,
possession, use and transfer of
radioactive source and byproduct
materials. Section 40.25 established a
general license authorizing the use of
depleted uranium contained in
industrial products or devices for the
purpose of providing a concentrated
mass in a small volume of the product
or device. The NRC Form 244 is used to
report the receipt and transfer of
depleted uranium, as required by
§ 40.25. The registration information
required by the NRC Form 244 enables
the NRC to make a determination on
whether the possession, use, or transfer
of depleted uranium source and
byproduct material is in conformance
with the NRC’s regulations for the
protection of public health and safety.
SECURITIES AND EXCHANGE
COMMISSION
III. Specific Requests for Comments
The Exchange proposes to amend
Rule 6.51 relating to the functionality of
its Automated Improvement Mechanism
(‘‘AIM’’). 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.
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The NRC is seeking 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 estimate of the burden of the
information collection accurate?
3. Is there a way to enhance the
quality, utility, and clarity of the
information to be collected?
4. How can the burden of the
information collection on respondents
be minimized, including the use of
automated collection techniques or
other forms of information technology?
Dated at Rockville, Maryland, this 11th day
of June, 2015.
For the Nuclear Regulatory Commission.
Tremaine Donnell,
NRC Clearance Officer, Office of Information
Services.
[FR Doc. 2015–14717 Filed 6–15–15; 8:45 am]
BILLING CODE 7590–01–P
[Release No. 34–75143; File No. SR–C2–
2015–013]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to Automated
Improvement Mechanism Order
Allocations
June 10, 2015.
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 June 3,
2015, C2 Options Exchange,
Incorporated (the ‘‘Exchange’’ or ‘‘C2’’)
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
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 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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 its
AIM auction Rule 6.51 to provide that
in instances where an Initiating
Participant electronically submits an
order that it represents as agent
(‘‘Agency Order’’) into an AIM Auction
(‘‘Auction’’), which the Initiating
Participant is willing to automatically
match (‘‘auto-match’’) as principal the
price and size of all Auction responses
up to an optional designated limit price
and there is only one competing
Participant at the final Auction price
level, the Initiating Participant may be
allocated up to fifty percent (50%) of the
size of the order. The Exchange also
proposes to add language in Rule 6.51
to more fully describe the manner in
which any remaining contracts will be
allocated at the conclusion of an
Auction and make other nonsubstantive changes to Rule 6.51 to
update terminology in the Rule. This is
a competitive filing that is substantially
and materially based on the price
improvement auction rules of BOX
Options Exchange, LLC (‘‘BOX’’),3
Nasdaq PHLX MKT (‘‘PHLX’’),4 and
NYSE MKT LLC (‘‘NYSE MKT’’).5 Also,
the filing is, in all material respects,
substantially similar to Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’) filing, SR–CBOE–2015–043,
which was recently filed with the
Securities and Exchange Commission
(the ‘‘Commission’’).6
Pursuant to Rule 6.51(b)(3), upon
conclusion of an Auction, an Initiating
Participant will retain certain priority
and trade allocation privileges for both
Agency Orders that the Initiating
Participant seeks to cross at a single
price (‘‘single-price submissions’’) and
Agency Orders that the Initiating
Participant 7 is willing to automatically
3 See
BOX Rule 7150(h).
PHLX Rule 1080(n).
5 See NYSE MKT Rule 9.71.1NY(c).
6 See Securities and Exchange Act Release No.
74864 (May 4, 2015), 80 FR 26601 (May 8, 2015)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Automated
Improvement Mechanism Order Allocation) (SR–
CBOE–2015–043); see also CBOE Rule 6.74A.
7 Rule 6.51(b)(3)(F) currently contains a
typographical error in that it provides that if only
one Market-Maker matches the Initiating
Participant’s single price submission then the
Initiating Participant may be allocated up to 50%
of the order. Under Rule 6.51(b)(1)(D), however,
responses to RFRs may be submitted by all
Participant that have subscribed to receive auction
messages, not only Market-Makers. As described
below, this typographical error would be changed
upon the operability of the instant filing.
4 See
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Federal Register / Vol. 80, No. 115 / Tuesday, June 16, 2015 / Notices
match, as principal, the price and size
of all Auction responses (‘‘auto-match
submissions’’). Under current Rule
6.51(b)(3)(F), if the best competing
Auction response price equals the
Initiating Participant’s single-price
submission, the Initiating Participant’s
single-price submission shall be
allocated the greater of one contract or
a certain percentage of the order, which
percentage will be determined by the
Exchange and may not be larger than
40%. However, if only one competing
Participant matches the Initiating
Participant’s single price submission
then the Initiating Participant may be
allocated up to 50% of the order.
Similarly, current Rule 6.51(b)(3)(G)
provides that if the Initiating Participant
selects the auto-match option for the
Auction, the Initiating Participant shall
be allocated its full size at each price
point until a price point is reached
where the balance of the order can be
fully executed. At such price point, the
Initiating Participant shall be allocated
the greater of one contract or a certain
percentage of the remainder of the
order, which percentage will be
determined by the Exchange and may
not be larger than 40%. Notably, unlike
the single-price submission rules in
Rule 6.51(b)(3)(F), current Rule
6.51(b)(3)(G) provides that an Initiating
Participant would only receive an
allocation of up to 40% for orders that
are matched at the final price level by
only one competing Participant when
the auto-match option is selected for the
Agency Order. The Exchange believes
this result to be inconsistent within the
Rules and that Initiating Participants
that price orders more aggressively
using the auto-match option should
receive allocations at least equal to
Participants that select the single-price
submission option for an Auction.
Accordingly, the Exchange proposes
to amend Rule 6.51(b)(3)(G) to provide
that if only one competing Participant is
present at the final Auction price, then
the Initiating Participant may be
allocated up to 50% of the remainder of
the Agency Order at the final Auction
price level. As discussed above, current
Rule 6.51(b)(3)(G) provides that an
Initiating Participant will receive an
allocation of up to 40% for orders that
are matched at the final price level by
only one competing Participant when
the auto-match option is selected by the
Initiating Participant for the Auction.
The Exchange believes this result to be
inconsistent within the Rules and
believes that Initiating Participants that
price orders more aggressively using the
auto-match option should receive
allocations at least equal to those that
select the single-price submission
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option. The Exchange also believes
proposed rule change will more closely
align the language in Rule 6.51(b)(3)(G)
with the language in Rule 6.51(b)(3)(F)
and will thus, provide additional
internal consistency within the Rules by
harmonizing order allocations of singleprice submissions and auto-match
Auction orders in instances where there
is only one competing order at the final
Auction price level. Furthermore, the
proposed rule change will bring the
Exchange’s AIM rules in line with the
Rules of other competitor exchanges
with which the Exchange competes for
order flow.
The Exchange notes that the proposed
rule change would not affect the priority
of public customer orders under Rule
6.51(b)(3)(B). Public customer orders in
the book would continue to have
priority even in cases in which a public
customer order is resting in the book at
the final Auction price. For example,
suppose that the national best bid
(‘‘NBB’’) for a particular option is $1.00
and the national best offer (‘‘NBO’’) for
the option is $1.20 and that the NBB is
an order to buy 10 contracts resting in
the book on C2. The minimum
increment in the option series is $0.01.
An Initiating Participant at C2 submits
an auto-match Agency Order to sell 100
options contracts in the series. The
Auction begins and, during the auction,
one competing Participant submits an
Auction response to buy 50 contracts at
$1.00. The Auction then concludes. In
this case, the public customer order
resting in the book would have priority
and be allocated 10 contracts with the
remaining 90 contracts being allocated
50/50 to the responding Participant and
the Initiating Participant, 45 contracts
each.
Similarly, a public customer order
resting in the book at a final Auction
price level worse than the best Auction
response will also retain priority in the
book. Accordingly, assume again that
the national best bid (‘‘NBB’’) for a
particular option is $1.00 and the
national best offer (‘‘NBO’’) for the
option is $1.20 and that the NBB is an
order to buy 10 contracts resting in the
book on C2. The minimum increment in
the option series is $0.01. An Initiating
Participant at C2 submits an auto-match
Agency Order to sell 100 options
contracts in the series. The Auction
begins and during the Auction, one
competing Participant (‘‘P1’’) submits an
Auction response to buy 20 contracts at
$1.02, a second Participant (‘‘P2’’)
submits an Action response to buy 20
contracts at $1.01, and a third
Participant (‘‘P3’’) submits an Auction
response to buy 20 contracts at $1.00.
The Auction then concludes. In this
PO 00000
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case, P1 and the Initiating Participant
would each be allocated 20 contracts at
$1.02 and P2 and the Initiating
Participant would each be allocated 20
contracts at $1.01 since the Initiating
Participant is willing to match the price
and size at each improved price level.
The remaining 20 contracts would be
allocated 10 to the public customer
order resting in the book at $1.00
because the public customer would
retain priority at that price level with
the remaining 10 contracts being
allocated 50/50 to P3 and the Initiating
Participant, 5 contracts each.8
The Exchange believes that increasing
the Initiating Participant’s allocation
priority for auto-match submissions that
only have one competing order at the
final price level fairly distributes the
order when there are only two
counterparties to the Agency Order
involved in the Auction at the final
Auction price, and that doing so is
reasonable because of the value that
Initiating Participants provide to the
market. Initiating Participants selecting
the auto-match option for Agency
Orders guarantee an execution at the
NBBO or at a better price, and are
subject to a greater market risk than
single-price submissions while the order
is exposed to other AIM participants. As
such, the Exchange believes that the
value added from Initiating Participants,
guaranteeing execution of Agency
Orders at a price equal to or better than
the NBBO in combination with the
additional market risk of initiating automatch submissions warrants an
allocation priority of at least the same
percentage as Initiating Participants that
submit single-price orders into AIM.
The Exchange also believes that the
proposed rule change, like other price
improvement allocation programs
currently offered by competitor
exchanges, will benefit investors by
attracting more order flow as well as
increasing the frequency that
8 The Exchange notes that an unrelated public
customer market or marketable limit order on the
opposite side of the market from the Agency Order
that is received during an Auction will end the
Auction and trade against the Agency Order at the
midpoint of the best RFR response and the NBBO
on the other side of the market from the RFR
responses. See Rule 6.51(b)(3)(D). For example,
assume that the NBBO is $1.00–$1.20. An Initiating
Participant submits a matched Agency Order to sell
100 options contracts at in the series at $1.10. The
Auction begins and during the Auction, one
competing Participant submits an Auction response
to buy 100 contracts at $1.15. Assume that after the
first response is received, an unrelated public
customer order to buy 100 contracts at $1.20 is
received. This would conclude the auction early
after which the public customer order would trade
100 contracts with the Agency Order at $1.17 (i.e.
the midpoint between the best RFR response ($1.15)
and the NBBO on the other side of the market from
the RFR responses ($1.20)).
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Participants initiate Auctions, which
may result in greater opportunities for
customer order price improvement.
Moreover, as discussed above, the
proposed rule change is consistent with
the rules of other exchanges, including
CBOE.9
The Exchange also proposes to add
text to Rules 6.51(b)(3)(F) and (G) to
describe the manner in which remaining
contracts would be allocated at the
conclusion of an Auction under the
scenarios therein. Specifically, the
Exchange proposes to amend paragraphs
(F) and (G) to provide that (subject to
public customer priority), after the
Initiating Participant has received an
allocation of up to 40% of the Agency
Order (or 50% of the Agency Order if
there is only one other RFR response),
contracts shall be allocated among
remaining quotes, orders, and auction
responses (i.e. interests other than the
Initiating Participant) at the final
auction price in accordance with the
matching algorithm in effect for the
subject class. If all RFR Responses are
filled (i.e. no other interests remain),
any remaining contracts will be
allocated to the Initiating Participant at
the single-price submission price for
single-price submissions or, for automatch submissions, to the Initiating
Participant at the auction start price as
specified under Rule 6.51(b)(1)(A). The
Exchange believes that this additional
language would add clarity in the Rules
with respect to how remaining odd-lots
will be allocated at the conclusion of an
Auction.10
For example, suppose that the NBBO
for a particular option is $1.00–$1.20.
The minimum increment for the series
is $0.01 and the matching algorithm in
effect for the option class is pro rata. An
Initiating Participant submits a matched
Agency Order to sell 5 contracts at
$1.10. The Auction begins and, during
the auction, one competing Participant
(‘‘P1’’) submits an Auction response to
buy 5 contracts at $1.10, followed by
9 See, e.g., BOX Rule 7150(h); NYSE MKT Rule
9.71.1NY(c)(5)(B). See also Securities and Exchange
Act Release No. 74864 (May 4, 2015), 80 FR 26601
(May 8, 2015) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change Relating to
Automated Improvement Mechanism Order
Allocation) (SR–CBOE–2015–043); CBOE Rule
6.74A.
10 The Exchange notes that such remaining
contracts are currently allocated to the Initiating
Participant in excess of the up to 40% (50% if there
is only one other Market-Marker or Participant
representing an Agency Order) of the order that the
Initiating Participant may receive under the
Exchange’s existing Rules pursuant to the provision
that the Initiating Participant will be allocated the
greater of one contract or up to 40% (50% if there
is only one other Market-Marker or Participant
representing an Agency Order) at the final Auction
price.
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another Participant (‘‘P2’’) submitting an
Auction response to buy 5 contracts at
$1.10. The Auction concludes. In this
case, under proposed Rule 6.51(b)(3)(F),
the Initiating Participant would receive
an allocation up to 40%, or, in this case,
2 contracts at $1.10. P1 and P2 would
then receive 1 contract each at $1.10
according to the pro rata allocation
algorithm in place for the class with P1,
as the first responder, receiving the final
1 contract at the final auction price of
$1.10.11
Similarly, suppose that the NBBO for
a particular option is $1.00–$1.20. The
minimum increment for the series is
$0.01 and the matching algorithm in
effect for the option class is pro rata. An
Initiating Participant submits a matched
Agency Order to sell 5 contracts at
$1.10. The Auction begins and, during
the auction, one competing Participant
(‘‘P1’’) submits an Auction response to
buy 1 contract at $1.10, followed by
another Participant (‘‘P2’’) submitting an
Auction response to buy 1 contract at
$1.10. The Auction concludes. In this
case, under proposed Rule 6.51(b)(3)(F),
the Initiating Participant would receive
an allocation up to 40%, or, in this case,
2 contracts at $1.10. P1 and P2 would
then receive 1 contract each at $1.10
according to the pro rata allocation
algorithm in place for the class. With no
other RFR responder interest for the
Auction, however, proposed Rule
6.51(b)(3)(F) will simply make clear that
if all RFR Responses are filled (i.e. no
other interests remain), any remaining
contracts will be allocated to the
Initiating Participant at the single-price
submission price. In this case, the final
1 contract would be allocated to the
Initiating Participant at $1.10.
Remaining odd-lots for auto-match
submissions would be similarly
allocated under proposed Rule
6.51(b)(3)(G), except that if all RFR
Responses are filled (i.e. no other
interests remain), any remaining
contracts will be allocated to the
Initiating Participant at the auction start
price as specified under Rule
6.51(b)(1)(A). Accordingly, suppose that
the NBBO for a particular option is
$1.00–$1.20. The minimum increment
for the series is $0.01 and the matching
algorithm in effect for the option class
is pro rata. An Initiating Participant
submits an auto-matched Agency Order
to sell 5 contracts. In this case, because
no Auction stop price is specified, the
Auction would begin at the NBBO, or
$1.20.12 Assume that the Auction begins
and, during the auction, one competing
Participant (‘‘P1’’) submits an Auction
11 See
12 See
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Rules 6.12(a).
Rule 6.51(b)(1)(A).
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34469
response to buy 1 contracts at $1.18,
followed by another Participant (‘‘P2’’)
submitting an Auction response to buy
1 contract at $1.17. The Auction
concludes. In this case, P2 and the
Initiating Participant would each
receive 1 contract at $1.17 and P1 and
the Initiating Participant would each
receive 1 contract at $1.18. Because all
RFR Responses would then be filled (i.e.
no other interests remain), any
remaining contracts will be allocated to
the Initiating Participant at the Auction
start price or, in this case, 1 contract at
$1.20.
The Exchange notes that the proposed
amendments are based on, and
consistent with, the rules of other
competitor exchanges as well as a recent
filing of CBOE.13 The Exchange believes
that the value added from Initiating
Participants guaranteeing execution of
Agency Orders at a price equal to or
better than the NBBO warrants (to the
extent that the Initiating Participants is
on the final Auction price), an Auction
allocation priority of at least the same
percentage of the order as any
competing Auction responses. The
Exchange also believes that the
proposed rule change, like other price
improvement allocation programs
currently offered by competitor
exchanges, will benefit investors by
attracting more order flow as well as
increasing the frequency that
Participants initiate Auctions, which
may result in greater opportunities for
customer order price improvement.
Additionally, the Exchange is
proposing to add additional clarifying
language to Rule 6.51. Specifically, the
Exchange proposes correct a
typographical error in the second
sentence of Rule 6.51(b)(3)(F), deleting
the term ‘‘Market-Maker’’ and replacing
it with the term ‘‘competing
Participant’’ to make clear that all
Participants that subscribe to receive
auction messages on the Exchange may
respond to Auctions and thus, may be
present at the final Auction price. The
Exchange notes that the proposed
language is consistent with the current
Rule and would also be consistent with
the rule text of Rule 6.51(b)(1)(D), which
provides that ‘‘[r]esponses to RFRs may
be submitted by Participants.’’ The
Exchange also proposes to add a comma
after the word submission in the second
sentence of Rule 6.51(b)(3)(F) for
13 See, e.g., NYSE MKT Rule 9.71.1NY(c)(5);
PHLX Rule 1080(n)(ii)(E). See also Securities and
Exchange Act Release No. 74864 (May 4, 2015), 80
FR 26601 (May 8, 2015) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
Relating to Automated Improvement Mechanism
Order Allocation) (SR–CBOE–2015–043); CBOE
Rule 6.74A.
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grammatical purposes. The Exchange
strives for transparency in its Rules and
believes these non-substantive changes
will provide greater clarity for market
participants. The Exchange believes that
these changes are non-controversial as
they simply clarify the Exchange’s
already existing AIM rules.
additions to Rule 6.51, the Exchange
believes that the proposed changes will
benefit market participants by adding
additional transparency and clarity to
the Rules.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.14 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 15 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
proposed rule change is consistent with
the Section 6(b)(5) 16 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed rule changes protect
investors by fairly distributing the
allocation of the AIM order between the
Initiating Participant and Participants
that respond to price improvement
auctions, and clarifying the Rules with
respect to the distribution of AIM orders
when only there are only two
counterparties to an Auction and/or the
number of contracts remaining at the
final Auction price cannot be evenly
distributed at the end of an Auction.
The Exchange believes that the
proposed rule changes, like other price
improvement programs currently
offered by competing exchanges, will
benefit investors by attracting more
order flow as well as increasing the
frequency that Participants submit
orders to Auction, which may result in
greater opportunity for price
improvement for customers. Moreover,
the proposed rule change is consistent
with the Rules of other exchanges. With
respect to the proposed clarifying
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. The
proposed changes are meant to more
fairly distribute the order allocation
when there are only two counterparties
to an Auction auto-match order. The
Exchange does not believe that this
change will discourage any market
participants from entering into the AIM,
as the auto-match option of the AIM is
more aggressive in terms of risk and
therefore, increasing the allocation to up
to 50% of the remainder for the
Initiating Participant when there is only
one competing order at the final price
level is a more fair and reasonable
allocation mechanism and would likely
only increase the number of Participants
that select the auto-match option to
initiate Auctions.
Furthermore, the Exchange notes that
the proposed rule change is a
competitive response to similar
provisions in the price improvement
auction rules of BOX, PHLX, and NYSE
MKT.17 The Exchange believes this
proposed rule change is necessary to
permit fair competition among the
options exchanges and to establish more
uniform price improvement auction
rules on the various exchanges. The
Exchange is also seeking the proposed
rule change to align the allocation
priorities for AIM single-price and automatch submissions for Initiating
Participants when there is only one
competing order at the final price level
within its rules. As mentioned earlier,
auto-match submissions carry more risk
than single-price submissions and as a
result, should be given at least the same
allocation priority as single-price
submissions. The Exchange believes this
proposed rule change is necessary to
permit fair competition among the
options exchanges and to establish more
uniform price improvement auction
rules on the various exchanges.
14 15
15 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change 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, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 18 and Rule 19b–4(f)(6) 19
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.
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–
C2–2015–013 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–C2–2015–013. This file
number should be included on the
subject line if email is used. To help the
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such short time as designated by the
Commission. The Exchange has satisfied this
requirement.
19 17
17 See BOX Rule 7150; NYSE MKT Rule 971.1NY,
PHLX Rule 1080.
16 Id.
VerDate Sep<11>2014
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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 written comments on the
proposed rule change.
PO 00000
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Sfmt 4703
E:\FR\FM\16JNN1.SGM
16JNN1
Federal Register / Vol. 80, No. 115 / Tuesday, June 16, 2015 / Notices
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–C2–
2015–013 and should be submitted on
or before July 7, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–14672 Filed 6–15–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75141; File No. SR–
NASDAQ–2015–060]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Chapter VI, Section 18 of the
Exchange’s Options Rules
asabaliauskas on DSK5VPTVN1PROD with NOTICES
June 10, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that, on June 4,
2015, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:18 Jun 15, 2015
Jkt 235001
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Chapter VI, Section 18 of the Exchange’s
options rules.
The text of the proposed rule change
is below; proposed new language is
italicized; proposed deletions are in
brackets.
*
*
*
*
*
NASDAQ Stock Market Rules
*
*
*
*
*
*
*
Options Rules
*
*
*
Chapter VI Trading Systems
*
*
*
*
*
Sec. 18 Order Price Protection
Order Price Protection (‘‘OPP’’) is a
feature of the System that prevents
certain day limit, good til cancelled, and
immediate or cancel orders at prices
outside of pre-set standard limits from
being accepted by the System. OPP
applies to all options but does not apply
to market orders or Intermarket Sweep
Orders.
(a) OPP is operational each trading
day after the opening until the close of
trading, except during trading halts.
[The Exchange may also temporarily
deactivate OPP from time to time on an
intraday basis at its discretion if it
determines that volatility warrants
deactivation. Participants will be
notified of intraday OPP deactivation
due to volatility and any subsequent
intraday reactivation by the Exchange
through the issuance of system status
messages.]
(b) OPP will reject incoming orders
that exceed certain parameters
according to the following algorithm:
(i) If the better of the NBBO or the
internal market BBO (the ‘‘Reference
BBO’’) on the contra-side of an incoming
order is greater than $1.00, orders with
a limit more than 50% through such
contra-side [NBBO] Reference BBO will
be rejected by the System upon receipt.
For example, if the [NBBO] Reference
BBO on the offer side is $1.10, an order
to buy options for more than $1.65
would be rejected. Similarly, if the
[NBBO] Reference BBO on the bid side
is $1.10, an order to sell options for less
than $0.55 will be rejected.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
34471
(ii) If the [NBBO] Reference BBO on
the contra-side of an incoming order is
less than or equal to $1.00, orders with
a limit more than 100% through such
contra-side [NBBO] Reference BBO will
be rejected by the System upon receipt.
For example, if the [NBBO] Reference
BBO on the offer side is $1.00, an order
to buy options for more than $2.00
would be rejected. However, if the
[NBBO] Reference BBO of the bid side
of an incoming order to sell is less than
or equal to $1.00, the OPP limits set
forth above will result in all incoming
sell orders being accepted regardless of
their limit.
*
*
*
*
*
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 purpose of the proposed rule
change is to amend and correct Chapter
VI, Section 18 of the NOM Rulebook
which describes Order Price Protection
(‘‘OPP’’), a feature of the NOM trading
system that prevents certain day limit,
good till cancelled, and immediate or
cancel orders at prices outside of pre-set
standard limits from being accepted by
the System. The amendments also
remove language providing for the
temporary deactivation of OPP from
time to time on an intraday basis at the
Exchange’s discretion if the Exchange
determines that volatility warrants
deactivation.
OPP applies to all options but does
not apply to market orders or
Intermarket Sweep Orders. OPP is
operational each trading day after the
opening until the close of trading,
except during trading halts. Chapter VI,
Section 18 also currently provides that
the Exchange may temporarily
deactivate OPP from time to time on an
intraday basis at its discretion if it
determines that volatility warrants
deactivation. Participants are notified of
E:\FR\FM\16JNN1.SGM
16JNN1
]]>Agencies
[Federal Register Volume 80, Number 115 (Tuesday, June 16, 2015)]
[Notices]
[Pages 34467-34471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14672]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75143; File No. SR-C2-2015-013]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Automated Improvement Mechanism Order Allocations
June 10, 2015.
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 June 3, 2015, C2 Options Exchange, Incorporated (the
``Exchange'' or ``C2'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.51 relating to the
functionality of its Automated Improvement Mechanism (``AIM''). 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 its AIM auction Rule 6.51 to provide
that in instances where an Initiating Participant electronically
submits an order that it represents as agent (``Agency Order'') into an
AIM Auction (``Auction''), which the Initiating Participant is willing
to automatically match (``auto-match'') as principal the price and size
of all Auction responses up to an optional designated limit price and
there is only one competing Participant at the final Auction price
level, the Initiating Participant may be allocated up to fifty percent
(50%) of the size of the order. The Exchange also proposes to add
language in Rule 6.51 to more fully describe the manner in which any
remaining contracts will be allocated at the conclusion of an Auction
and make other non-substantive changes to Rule 6.51 to update
terminology in the Rule. This is a competitive filing that is
substantially and materially based on the price improvement auction
rules of BOX Options Exchange, LLC (``BOX''),\3\ Nasdaq PHLX MKT
(``PHLX''),\4\ and NYSE MKT LLC (``NYSE MKT'').\5\ Also, the filing is,
in all material respects, substantially similar to Chicago Board
Options Exchange, Incorporated (``CBOE'') filing, SR-CBOE-2015-043,
which was recently filed with the Securities and Exchange Commission
(the ``Commission'').\6\
---------------------------------------------------------------------------
\3\ See BOX Rule 7150(h).
\4\ See PHLX Rule 1080(n).
\5\ See NYSE MKT Rule 9.71.1NY(c).
\6\ See Securities and Exchange Act Release No. 74864 (May 4,
2015), 80 FR 26601 (May 8, 2015) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change Relating to Automated
Improvement Mechanism Order Allocation) (SR-CBOE-2015-043); see also
CBOE Rule 6.74A.
---------------------------------------------------------------------------
Pursuant to Rule 6.51(b)(3), upon conclusion of an Auction, an
Initiating Participant will retain certain priority and trade
allocation privileges for both Agency Orders that the Initiating
Participant seeks to cross at a single price (``single-price
submissions'') and Agency Orders that the Initiating Participant \7\ is
willing to automatically
[[Page 34468]]
match, as principal, the price and size of all Auction responses
(``auto-match submissions''). Under current Rule 6.51(b)(3)(F), if the
best competing Auction response price equals the Initiating
Participant's single-price submission, the Initiating Participant's
single-price submission shall be allocated the greater of one contract
or a certain percentage of the order, which percentage will be
determined by the Exchange and may not be larger than 40%. However, if
only one competing Participant matches the Initiating Participant's
single price submission then the Initiating Participant may be
allocated up to 50% of the order.
---------------------------------------------------------------------------
\7\ Rule 6.51(b)(3)(F) currently contains a typographical error
in that it provides that if only one Market-Maker matches the
Initiating Participant's single price submission then the Initiating
Participant may be allocated up to 50% of the order. Under Rule
6.51(b)(1)(D), however, responses to RFRs may be submitted by all
Participant that have subscribed to receive auction messages, not
only Market-Makers. As described below, this typographical error
would be changed upon the operability of the instant filing.
---------------------------------------------------------------------------
Similarly, current Rule 6.51(b)(3)(G) provides that if the
Initiating Participant selects the auto-match option for the Auction,
the Initiating Participant shall be allocated its full size at each
price point until a price point is reached where the balance of the
order can be fully executed. At such price point, the Initiating
Participant shall be allocated the greater of one contract or a certain
percentage of the remainder of the order, which percentage will be
determined by the Exchange and may not be larger than 40%. Notably,
unlike the single-price submission rules in Rule 6.51(b)(3)(F), current
Rule 6.51(b)(3)(G) provides that an Initiating Participant would only
receive an allocation of up to 40% for orders that are matched at the
final price level by only one competing Participant when the auto-match
option is selected for the Agency Order. The Exchange believes this
result to be inconsistent within the Rules and that Initiating
Participants that price orders more aggressively using the auto-match
option should receive allocations at least equal to Participants that
select the single-price submission option for an Auction.
Accordingly, the Exchange proposes to amend Rule 6.51(b)(3)(G) to
provide that if only one competing Participant is present at the final
Auction price, then the Initiating Participant may be allocated up to
50% of the remainder of the Agency Order at the final Auction price
level. As discussed above, current Rule 6.51(b)(3)(G) provides that an
Initiating Participant will receive an allocation of up to 40% for
orders that are matched at the final price level by only one competing
Participant when the auto-match option is selected by the Initiating
Participant for the Auction. The Exchange believes this result to be
inconsistent within the Rules and believes that Initiating Participants
that price orders more aggressively using the auto-match option should
receive allocations at least equal to those that select the single-
price submission option. The Exchange also believes proposed rule
change will more closely align the language in Rule 6.51(b)(3)(G) with
the language in Rule 6.51(b)(3)(F) and will thus, provide additional
internal consistency within the Rules by harmonizing order allocations
of single-price submissions and auto-match Auction orders in instances
where there is only one competing order at the final Auction price
level. Furthermore, the proposed rule change will bring the Exchange's
AIM rules in line with the Rules of other competitor exchanges with
which the Exchange competes for order flow.
The Exchange notes that the proposed rule change would not affect
the priority of public customer orders under Rule 6.51(b)(3)(B). Public
customer orders in the book would continue to have priority even in
cases in which a public customer order is resting in the book at the
final Auction price. For example, suppose that the national best bid
(``NBB'') for a particular option is $1.00 and the national best offer
(``NBO'') for the option is $1.20 and that the NBB is an order to buy
10 contracts resting in the book on C2. The minimum increment in the
option series is $0.01. An Initiating Participant at C2 submits an
auto-match Agency Order to sell 100 options contracts in the series.
The Auction begins and, during the auction, one competing Participant
submits an Auction response to buy 50 contracts at $1.00. The Auction
then concludes. In this case, the public customer order resting in the
book would have priority and be allocated 10 contracts with the
remaining 90 contracts being allocated 50/50 to the responding
Participant and the Initiating Participant, 45 contracts each.
Similarly, a public customer order resting in the book at a final
Auction price level worse than the best Auction response will also
retain priority in the book. Accordingly, assume again that the
national best bid (``NBB'') for a particular option is $1.00 and the
national best offer (``NBO'') for the option is $1.20 and that the NBB
is an order to buy 10 contracts resting in the book on C2. The minimum
increment in the option series is $0.01. An Initiating Participant at
C2 submits an auto-match Agency Order to sell 100 options contracts in
the series. The Auction begins and during the Auction, one competing
Participant (``P1'') submits an Auction response to buy 20 contracts at
$1.02, a second Participant (``P2'') submits an Action response to buy
20 contracts at $1.01, and a third Participant (``P3'') submits an
Auction response to buy 20 contracts at $1.00. The Auction then
concludes. In this case, P1 and the Initiating Participant would each
be allocated 20 contracts at $1.02 and P2 and the Initiating
Participant would each be allocated 20 contracts at $1.01 since the
Initiating Participant is willing to match the price and size at each
improved price level. The remaining 20 contracts would be allocated 10
to the public customer order resting in the book at $1.00 because the
public customer would retain priority at that price level with the
remaining 10 contracts being allocated 50/50 to P3 and the Initiating
Participant, 5 contracts each.\8\
---------------------------------------------------------------------------
\8\ The Exchange notes that an unrelated public customer market
or marketable limit order on the opposite side of the market from
the Agency Order that is received during an Auction will end the
Auction and trade against the Agency Order at the midpoint of the
best RFR response and the NBBO on the other side of the market from
the RFR responses. See Rule 6.51(b)(3)(D). For example, assume that
the NBBO is $1.00-$1.20. An Initiating Participant submits a matched
Agency Order to sell 100 options contracts at in the series at
$1.10. The Auction begins and during the Auction, one competing
Participant submits an Auction response to buy 100 contracts at
$1.15. Assume that after the first response is received, an
unrelated public customer order to buy 100 contracts at $1.20 is
received. This would conclude the auction early after which the
public customer order would trade 100 contracts with the Agency
Order at $1.17 (i.e. the midpoint between the best RFR response
($1.15) and the NBBO on the other side of the market from the RFR
responses ($1.20)).
---------------------------------------------------------------------------
The Exchange believes that increasing the Initiating Participant's
allocation priority for auto-match submissions that only have one
competing order at the final price level fairly distributes the order
when there are only two counterparties to the Agency Order involved in
the Auction at the final Auction price, and that doing so is reasonable
because of the value that Initiating Participants provide to the
market. Initiating Participants selecting the auto-match option for
Agency Orders guarantee an execution at the NBBO or at a better price,
and are subject to a greater market risk than single-price submissions
while the order is exposed to other AIM participants. As such, the
Exchange believes that the value added from Initiating Participants,
guaranteeing execution of Agency Orders at a price equal to or better
than the NBBO in combination with the additional market risk of
initiating auto-match submissions warrants an allocation priority of at
least the same percentage as Initiating Participants that submit
single-price orders into AIM. The Exchange also believes that the
proposed rule change, like other price improvement allocation programs
currently offered by competitor exchanges, will benefit investors by
attracting more order flow as well as increasing the frequency that
[[Page 34469]]
Participants initiate Auctions, which may result in greater
opportunities for customer order price improvement. Moreover, as
discussed above, the proposed rule change is consistent with the rules
of other exchanges, including CBOE.\9\
---------------------------------------------------------------------------
\9\ See, e.g., BOX Rule 7150(h); NYSE MKT Rule
9.71.1NY(c)(5)(B). See also Securities and Exchange Act Release No.
74864 (May 4, 2015), 80 FR 26601 (May 8, 2015) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Relating to
Automated Improvement Mechanism Order Allocation) (SR-CBOE-2015-
043); CBOE Rule 6.74A.
---------------------------------------------------------------------------
The Exchange also proposes to add text to Rules 6.51(b)(3)(F) and
(G) to describe the manner in which remaining contracts would be
allocated at the conclusion of an Auction under the scenarios therein.
Specifically, the Exchange proposes to amend paragraphs (F) and (G) to
provide that (subject to public customer priority), after the
Initiating Participant has received an allocation of up to 40% of the
Agency Order (or 50% of the Agency Order if there is only one other RFR
response), contracts shall be allocated among remaining quotes, orders,
and auction responses (i.e. interests other than the Initiating
Participant) at the final auction price in accordance with the matching
algorithm in effect for the subject class. If all RFR Responses are
filled (i.e. no other interests remain), any remaining contracts will
be allocated to the Initiating Participant at the single-price
submission price for single-price submissions or, for auto-match
submissions, to the Initiating Participant at the auction start price
as specified under Rule 6.51(b)(1)(A). The Exchange believes that this
additional language would add clarity in the Rules with respect to how
remaining odd-lots will be allocated at the conclusion of an
Auction.\10\
---------------------------------------------------------------------------
\10\ The Exchange notes that such remaining contracts are
currently allocated to the Initiating Participant in excess of the
up to 40% (50% if there is only one other Market-Marker or
Participant representing an Agency Order) of the order that the
Initiating Participant may receive under the Exchange's existing
Rules pursuant to the provision that the Initiating Participant will
be allocated the greater of one contract or up to 40% (50% if there
is only one other Market-Marker or Participant representing an
Agency Order) at the final Auction price.
---------------------------------------------------------------------------
For example, suppose that the NBBO for a particular option is
$1.00-$1.20. The minimum increment for the series is $0.01 and the
matching algorithm in effect for the option class is pro rata. An
Initiating Participant submits a matched Agency Order to sell 5
contracts at $1.10. The Auction begins and, during the auction, one
competing Participant (``P1'') submits an Auction response to buy 5
contracts at $1.10, followed by another Participant (``P2'') submitting
an Auction response to buy 5 contracts at $1.10. The Auction concludes.
In this case, under proposed Rule 6.51(b)(3)(F), the Initiating
Participant would receive an allocation up to 40%, or, in this case, 2
contracts at $1.10. P1 and P2 would then receive 1 contract each at
$1.10 according to the pro rata allocation algorithm in place for the
class with P1, as the first responder, receiving the final 1 contract
at the final auction price of $1.10.\11\
---------------------------------------------------------------------------
\11\ See Rules 6.12(a).
---------------------------------------------------------------------------
Similarly, suppose that the NBBO for a particular option is $1.00-
$1.20. The minimum increment for the series is $0.01 and the matching
algorithm in effect for the option class is pro rata. An Initiating
Participant submits a matched Agency Order to sell 5 contracts at
$1.10. The Auction begins and, during the auction, one competing
Participant (``P1'') submits an Auction response to buy 1 contract at
$1.10, followed by another Participant (``P2'') submitting an Auction
response to buy 1 contract at $1.10. The Auction concludes. In this
case, under proposed Rule 6.51(b)(3)(F), the Initiating Participant
would receive an allocation up to 40%, or, in this case, 2 contracts at
$1.10. P1 and P2 would then receive 1 contract each at $1.10 according
to the pro rata allocation algorithm in place for the class. With no
other RFR responder interest for the Auction, however, proposed Rule
6.51(b)(3)(F) will simply make clear that if all RFR Responses are
filled (i.e. no other interests remain), any remaining contracts will
be allocated to the Initiating Participant at the single-price
submission price. In this case, the final 1 contract would be allocated
to the Initiating Participant at $1.10.
Remaining odd-lots for auto-match submissions would be similarly
allocated under proposed Rule 6.51(b)(3)(G), except that if all RFR
Responses are filled (i.e. no other interests remain), any remaining
contracts will be allocated to the Initiating Participant at the
auction start price as specified under Rule 6.51(b)(1)(A). Accordingly,
suppose that the NBBO for a particular option is $1.00-$1.20. The
minimum increment for the series is $0.01 and the matching algorithm in
effect for the option class is pro rata. An Initiating Participant
submits an auto-matched Agency Order to sell 5 contracts. In this case,
because no Auction stop price is specified, the Auction would begin at
the NBBO, or $1.20.\12\ Assume that the Auction begins and, during the
auction, one competing Participant (``P1'') submits an Auction response
to buy 1 contracts at $1.18, followed by another Participant (``P2'')
submitting an Auction response to buy 1 contract at $1.17. The Auction
concludes. In this case, P2 and the Initiating Participant would each
receive 1 contract at $1.17 and P1 and the Initiating Participant would
each receive 1 contract at $1.18. Because all RFR Responses would then
be filled (i.e. no other interests remain), any remaining contracts
will be allocated to the Initiating Participant at the Auction start
price or, in this case, 1 contract at $1.20.
---------------------------------------------------------------------------
\12\ See Rule 6.51(b)(1)(A).
---------------------------------------------------------------------------
The Exchange notes that the proposed amendments are based on, and
consistent with, the rules of other competitor exchanges as well as a
recent filing of CBOE.\13\ The Exchange believes that the value added
from Initiating Participants guaranteeing execution of Agency Orders at
a price equal to or better than the NBBO warrants (to the extent that
the Initiating Participants is on the final Auction price), an Auction
allocation priority of at least the same percentage of the order as any
competing Auction responses. The Exchange also believes that the
proposed rule change, like other price improvement allocation programs
currently offered by competitor exchanges, will benefit investors by
attracting more order flow as well as increasing the frequency that
Participants initiate Auctions, which may result in greater
opportunities for customer order price improvement.
---------------------------------------------------------------------------
\13\ See, e.g., NYSE MKT Rule 9.71.1NY(c)(5); PHLX Rule
1080(n)(ii)(E). See also Securities and Exchange Act Release No.
74864 (May 4, 2015), 80 FR 26601 (May 8, 2015) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Relating to
Automated Improvement Mechanism Order Allocation) (SR-CBOE-2015-
043); CBOE Rule 6.74A.
---------------------------------------------------------------------------
Additionally, the Exchange is proposing to add additional
clarifying language to Rule 6.51. Specifically, the Exchange proposes
correct a typographical error in the second sentence of Rule
6.51(b)(3)(F), deleting the term ``Market-Maker'' and replacing it with
the term ``competing Participant'' to make clear that all Participants
that subscribe to receive auction messages on the Exchange may respond
to Auctions and thus, may be present at the final Auction price. The
Exchange notes that the proposed language is consistent with the
current Rule and would also be consistent with the rule text of Rule
6.51(b)(1)(D), which provides that ``[r]esponses to RFRs may be
submitted by Participants.'' The Exchange also proposes to add a comma
after the word submission in the second sentence of Rule 6.51(b)(3)(F)
for
[[Page 34470]]
grammatical purposes. The Exchange strives for transparency in its
Rules and believes these non-substantive changes will provide greater
clarity for market participants. The Exchange believes that these
changes are non-controversial as they simply clarify the Exchange's
already existing AIM rules.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\14\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \15\ 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 proposed rule change is consistent with the
Section 6(b)(5) \16\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
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In particular, the Exchange believes the proposed rule changes
protect investors by fairly distributing the allocation of the AIM
order between the Initiating Participant and Participants that respond
to price improvement auctions, and clarifying the Rules with respect to
the distribution of AIM orders when only there are only two
counterparties to an Auction and/or the number of contracts remaining
at the final Auction price cannot be evenly distributed at the end of
an Auction. The Exchange believes that the proposed rule changes, like
other price improvement programs currently offered by competing
exchanges, will benefit investors by attracting more order flow as well
as increasing the frequency that Participants submit orders to Auction,
which may result in greater opportunity for price improvement for
customers. Moreover, the proposed rule change is consistent with the
Rules of other exchanges. With respect to the proposed clarifying
additions to Rule 6.51, the Exchange believes that the proposed changes
will benefit market participants by adding additional transparency and
clarity to the Rules.
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. The proposed changes are
meant to more fairly distribute the order allocation when there are
only two counterparties to an Auction auto-match order. The Exchange
does not believe that this change will discourage any market
participants from entering into the AIM, as the auto-match option of
the AIM is more aggressive in terms of risk and therefore, increasing
the allocation to up to 50% of the remainder for the Initiating
Participant when there is only one competing order at the final price
level is a more fair and reasonable allocation mechanism and would
likely only increase the number of Participants that select the auto-
match option to initiate Auctions.
Furthermore, the Exchange notes that the proposed rule change is a
competitive response to similar provisions in the price improvement
auction rules of BOX, PHLX, and NYSE MKT.\17\ The Exchange believes
this proposed rule change is necessary to permit fair competition among
the options exchanges and to establish more uniform price improvement
auction rules on the various exchanges. The Exchange is also seeking
the proposed rule change to align the allocation priorities for AIM
single-price and auto-match submissions for Initiating Participants
when there is only one competing order at the final price level within
its rules. As mentioned earlier, auto-match submissions carry more risk
than single-price submissions and as a result, should be given at least
the same allocation priority as single-price submissions. The Exchange
believes this proposed rule change is necessary to permit fair
competition among the options exchanges and to establish more uniform
price improvement auction rules on the various exchanges.
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\17\ See BOX Rule 7150; NYSE MKT Rule 971.1NY, PHLX Rule 1080.
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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 written 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:
(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, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \18\ and
Rule 19b-4(f)(6) \19\ thereunder.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such short time as designated by the Commission. The
Exchange has satisfied this requirement.
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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.
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-C2-2015-013 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-C2-2015-013. This file
number should be included on the subject line if email is used. To help
the
[[Page 34471]]
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-C2-2015-013 and should be
submitted on or before July 7, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14672 Filed 6-15-15; 8:45 am]
BILLING CODE 8011-01-P
