Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Rules Related to Equipment and Communication on the Exchange's Trading Floor, 48365-48369 [2015-19756]
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Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Notices
For the Commission, pursuant to delegated
authority.124
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–19758 Filed 8–11–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75623; File No. SR–CBOE–
2015–061]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amend Its
Rules Related to Equipment and
Communication on the Exchange’s
Trading Floor
August 6, 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 July 23,
2015, 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 Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 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 seeks to amend its rules
related to equipment and
communication on the Exchange’s
trading floor. The text of the proposed
rule change is provided below.
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(additions are italicized; deletions are
[bracketed])
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Chicago Board Options Exchange,
Incorporated Rules
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124 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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Rule 6.23. [Trading Permit Holder
Wires From Floor] Equipment and
Communications on the Trading
Floor
(a) Subject to the requirements of this
Rule Trading Permit Holders may use
any communication device (e.g., any
hardware or software related to a phone,
system or other device, including an
instant messaging system, email system
or similar device) on the floor of the
Exchange and in any trading crowd of
the Exchange. Prior to using a
communications device for business
purposes on the floor of the Exchange,
Trading Permit Holders must register
the communications device by
identifying (in a form and manner
prescribed by the Exchange) the
hardware (i.e., headset; cellular
telephone; tablet; or other similar
hardware). The Exchange reserves the
right to designate certain portions of this
rule (except for the registration
requirement of paragraph (a) or
paragraphs (f) and (g)) as not applicable
to certain classes on a class by class
basis.
(b) The Exchange may deny, limit or
revoke the use of any communication
device whenever it determines that use
of such communication device: (1)
Interferes with the normal operation of
the Exchange’s own systems or facilities
or with the Exchange’s regulatory
duties, (2) is inconsistent with the public
interest, the protection of investors or
just and equitable principles of trade, or
(3) interferes with the obligations of a
Trading Permit Holder to fulfill its
duties under, or is used to facilitate any
violation of, the Securities Exchange Act
or rules thereunder, or Exchange rules.
(c) Any communication device may be
used on the floor of the Exchange and
in any trading crowd of the Exchange to
receive orders, provided that audit trail
and record retention requirements of the
Exchange are met; however, no person
in a trading crowd or on the floor of the
Exchange may use any communication
device for the purpose of recording
activities in the trading crowd or
maintaining an open line of continuous
communication whereby a nonassociated person not located in the
trading crowd may continuously
monitor the activities in the trading
crowd. This prohibition covers digital
recorders, intercoms, walkie-talkies and
any similar devices.
(d) After providing notice to an
affected Trading Permit Holder and
complying with applicable laws, the
Exchange may provide for the recording
of any telephone line on the floor of the
Exchange or may require Trading Permit
Holders at any time to provide for the
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48365
recording of a fixed phone line on the
floor of the Exchange. Trading Permit
Holders, and their clerks, using the
telephones consent to the Exchange
recording any telephone or line.
(e) Trading Permit Holders may not
use communication devices to
disseminate quotes and/or last sale
reports originating on the floor of the
Exchange in any manner that would
serve to provide a continuous or
running state of the market for any
particular series or class of options over
any period of time; provided, however,
that an associated person of a Trading
Permit Holder on the floor of the
Exchange may use a communication
device to communicate quotes that have
been disseminated pursuant to Rule
6.43 and/or last sale reports to other
associated persons of the same Trading
Permit Holder business unit. An
associated person of a Trading Permit
Holder may also use a communications
device to communicate an occasional,
specific quote that has been
disseminated pursuant to Rule 6.43 or
last sale report to a person who is not
an associated person of the same
Trading Permit Holder.
(f) Use of any communications device
for order routing or handling must
comply with all applicable laws, rules,
policies and procedures of the Securities
and Exchange Commission and the
Exchange including related to record
retention and audit trail requirements.
Orders must be systemized using
Exchange systems or proprietary
systems approved by the Exchange in
accordance with Rule 6.24.
(g) Trading Permit Holders must
maintain records of the use of
communication devices, including, but
not limited to, logs of calls placed;
emails; and chats, for a period of not
less than three years, the first two years
in an easily accessible place. The
Exchange reserves the right to inspect
such records pursuant to Rule 17.2.
(h) The Exchange may designate, via
circular, specific communication
devices that will not be permitted on the
floor of the Exchange or Exchange
trading crowds. In addition, the
Exchange may designate other
operational requirements regarding the
installation of any communication
devices via circular.
[(a) No Trading Permit Holder shall
establish or maintain any telephone or
other wire communications between his
or its office and the Exchange without
prior approval by the Exchange. The
Exchange may direct discontinuance of
any communication facility terminating
on the floor of the Exchange.
(b) Equity Option Telephone Policy.
Persons in the equity option trading
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Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Notices
crowds (including DPM crowds which
trade equity options) may have access to
outside telephone lines and may receive
telephone orders directly at equity
options posts from locations outside the
Exchange, subject to certain
requirements. The Exchange will review
and may approve any applications to
install or to use telephones in the equity
option crowds.
(1) Requirements and conditions that
apply to the use of telephone services at
the equity option posts shall include the
following:
(A) Only those quotations that have
been publicly disseminated pursuant to
Rule 6.43 may be provided over
telephones at the post.
(B) Trading Permit Holders may give
their clerks their PIN access code.
Although both Trading Permit Holders
and clerks may use telephones, Trading
Permit Holders will have priority. Each
Trading Permit Holder will be
responsible for all calls made using that
Trading Permit Holder’s PIN access
code.
(C) Clerks will not be permitted to
establish a base of operation utilizing
general use telephones at the equity
option posts. This means, for example,
that a clerk may not monopolize the use
of a telephone receiver on a telephone
that has multiple lines if all of those
lines are not dedicated to the Trading
Permit Holder for whom the clerk
works.
(D) The Exchange may provide for the
taping of any telephone line into the
equity option posts or may require
Trading Permit Holders to provide for
the tape recording of a dedicated line at
the equity option posts at any time.
Trading Permit Holders and their clerks
using the telephones consent to the
Exchange tape recording any telephone
or line.
(E) The telephones may be used for
voice service only, unless they have
been specifically approved for other
uses.
(F) The Exchange may prohibit the
use of any telephone technology that
interferes with the normal operation of
the Exchange’s own systems or facilities
or that the Exchange determines
interferes with its regulatory duties.
(G) Orders transmitted by registered
Exchange market-makers may be
entered over the outside telephone lines
directly to the equity option posts. All
other orders may be entered over the
outside telephone lines to the equity
option posts only during outgoing
telephone calls that are initiated at the
equity option posts.
(H) Only those individuals that are
properly qualified in accordance with
Chapter IX of the Rules of the Exchange,
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and all other applicable rules and
regulations, may accept orders from
public customers pursuant to this Rule.
. . . Interpretations and Policies
.01 A Trading Permit Holder or TPH
organization which has been granted
approval of any means of
communication under this rule shall be
responsible for assuring compliance
with all Exchange rules and
requirements in connection with any
business conducted by means of such
electronic or telephonic
communication.]
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The text of the proposed rule change
is also 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
its rules regarding equipment and
communication on the Exchange trading
floor. More specifically, the Exchange is
proposing to delete the current rule on
the topic, Exchange Rule 6.23, and
introduce more relevant rules governing
the use of communication devices 5 on
the Exchange trading floor.6 Exchange
and Trading Permit Holder (‘‘TPH’’)
systems have become much more
electronic since the adoption of CBOE
Rule 6.23; however, the rule has not
been updated to reflect the electronic
5 As proposed, ‘‘communication device’’ will
include ‘‘e.g., any hardware or software related to
a phone, system or other device, including an
instant messaging system, email system or similar
device[.]’’
6 Although the Exchange seeks to replace Rule
6.23 in its entirety, portions of the current rule are
included in proposed Rule 6.23. The relevant
holdover language is identified where applicable.
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environment. The Exchange believes it
is in the interest of TPHs to allow
electronic communications to and from
the Exchange trading floor and that
these amendments will eliminate
confusion that may arise from outdated
Exchange rules. As such, the Exchange
believes that eliminating the current
rule in its entirety and promulgating
language that contemplates modern
rules is appropriate.7 First, Rule 6.23 is
currently applicable to ‘‘telephone or
other wire communications.’’ 8 Proposed
Rule 6.23(a) expands the applicability of
Rule 6.23 and provides that TPHs may
use any communication device 9 on the
Exchange trading floor and in any
Exchange trading crowd subject to the
restrictions in proposed Rule 6.23. The
Exchange is also proposing to apply
certain restrictions on a class by class
basis; however, the registration
requirement of paragraph (a), and
paragraphs (f) and (g) in their entirety,
will always be applicable. The Exchange
believes the discretion afforded in
paragraph (a) is appropriate as different
classes of options on the trading floor
behave differently, and, as such,
different means of communication
might be more appropriate in one
options class but not in another. The
Exchange is also instituting a
registration provision that will require
TPHs, prior to using a communications
device for business purposes on the
floor of the Exchange, to register the
communications device by identifying
(in a form and manner prescribed by the
Exchange) the hardware (i.e., headset;
cellular telephone; tablet; or other
similar hardware).10
Next, proposed Rule 6.23(b)
specifically states that the Exchange will
retain the authority to deny, limit or
revoke the use of any communication
device.11 Under the proposed rule, the
Exchange may take such actions
whenever it determines that use of such
communication device: (1) Interferes
with the normal operation of the
Exchange’s own systems or facilities or
with the Exchange’s regulatory duties,12
(2) is inconsistent with the public
interest, the protection of investors or
just and equitable principles of trade, or
(3) interferes with the obligations of a
7 Many of the provisions of proposed Rule 6.23
are modeled after NYSE Amex LLC (‘‘Amex’’) Rule
902NY(i)—Telephones on the Trading Floor and
NYSE Arca, Inc. (‘‘Arca’’) Rule 6.2(h)—Telephones
on the Options Floor.
8 See CBOE Rule 6.23(a).
9 See supra note 1 [sic].
10 The registration requirement of proposed Rule
6.23(a) is similar to Arca Rule 6.2(h)(1).
11 Proposed Rule 6.23(c) is similar to Amex Rule
902NY(i)(6) and Arca Rule 6.2(h)(6).
12 This language remains from the current CBOE
Rule 6.23. See CBOE Rule 6.23(b)(1)(F).
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TPH to fulfill its duties under, or is used
to facilitate any violation of, the
Securities Exchange Act of 1934 (‘‘the
Act’’) or rules thereunder, or the
Exchange rules. This authorization will
allow the Exchange to regulate the
equipment and communications on the
Exchange trading floor and in the
Exchange trading crowds to ensure they
are not disruptive to the operation of the
Exchange or in violation of the Act. The
Exchange believes this will allow the
Exchange to better protect investors and
the integrity of the market. The
Exchange notes, however, that current
Rule 6.23(a) requires TPHs to receive
prior approval from the Exchange before
establishing or maintaining a telephone
or other wire communications.13 In
addition, the Exchange recognizes that
Amex and Arca rules require the
registration of all new telephones 14 and
approval prior to the use of a
communication device other than a
telephone. The Exchange believes the
combination of the record retention
requirements of proposed Rule 6.23(g)
and the power to revoke the use of a
communication device pursuant to
proposed Rule 6.23(b) negates the
necessity for prior approval and
registration. If an issue with a particular
device is discovered, the Exchange will
work with TPHs to ensure the devices
are no longer utilized.
Next, proposed Rule 6.23(c) codifies
the current policy that allows any
communication device to be utilized to
receive orders in and out of the trading
crowd, provided that audit trail and
record retention requirements of the
Exchange are met.15 Formerly, CBOE
Regulatory Circular RG10–20 prohibited
TPH’s from receiving orders in the
trading crowd via instant messaging or
email; 16 however, TPHs were not
restricted from receiving orders via
instant messaging and email while not
in a trading crowd. The Exchange
believes the difference caused inequity
between TPHs because TPHs near the
edge of the trading crowd can more
quickly correspond with their clerks
and trading desks that are outside of the
trading crowd. The Exchange believes
that removing the restriction on
receiving orders via IM and email levels
the playing field in the trading crowds
and reflects the electronic nature of the
current marketplace. In addition,
proposed Rule 6.23(c) specifically
prohibits the use of any communication
13 See
CBOE Rule 6.23(a).
Amex Rule 902NY(i)(1) and Arca Rule
6.2(h)(1).
15 See CBOE Regulatory Circular RG14–162
(November 19, 2014).
16 See CBOE Regulatory Circular RG10–20
(January 29, 2010).
14 See
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device to record activities in the trading
crowd or to maintain an open line of
continuous communication that would
allow a non-associated person off of the
Exchange floor to continuously monitor
the activities in the trading crowd. As
proposed, this prohibition covers digital
recorders, intercoms, walkie-talkies and
any similar devices. The addition of this
text will preserve the integrity of the
Exchange trading floor while monitoring
TPHs to ensure they have the required
authorization to operate on the
Exchange trading floor should that be
their intent.17
Further, proposed Rule 6.23(d)
specifies that, after providing notice to
an affected Trading Permit Holder and
complying with the applicable laws, the
Exchange may provide for the recording
of any telephone line on the floor of the
Exchange or require TPHs to provide for
the recording of a fixed phone line on
the floor of the Exchange, and that TPHs
utilizing telephones consent to the
Exchange recording any telephone or
line.18 This added provision will not
require but allow the Exchange to record
any communications via telephone
connections to the trading floor if a
situation were to arise where this may
be necessary. In addition, this proposed
provision would allow the Exchange to
provide necessary equipment for the
recording of communications on the
Exchange trading floor.19
Next, proposed Rule 6.23(e) prohibits
the use of communication devices to
disseminate quotes and/or last sale
reports originating on the Exchange
trading floor in any manner that would
serve to provide a continuous or
running state of the market; however,
the proposed rule specifically states
that, ‘‘an associated person of a TPH
may use a communications device to
communicate quotes that have been
disseminated pursuant to Rule 6.43 and/
or last sale reports to other associated
persons of the same TPH business unit.’’
Further, as proposed, an associated
person of a TPH may use a
communications device to communicate
an ‘‘occasional, specific, quote that has
been disseminated pursuant to Rule
6.43 20 or last sale report or quote to a
person who is not an associated person
of the same TPH.’’ The Exchange
17 Proposed Rule 6.23(c) is similar to Amex Rule
902NY(i)(2) and Arca Rule 6.2(h)(2).
18 This language remains from the current CBOE
Rule 6.23. See CBOE Rule 6.23 (b)(1)(D).
19 Proposed Rule 6.23(d) is similar to Amex Rule
902NY(i)(3)(C) and Arca Rule 6.2(h)(3)(C).
20 Proposed Rule 6.23(e) referring to quotes
disseminated pursuant to Rule 6.43 is similar to
Amex Rule 902NY(i)(3)(A) and Arca Rule
6.2(h)(3)(A). See CBOE Rule 6.43—Manner of
Bidding and Offering.
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48367
believes this proposed addition is
necessary to allow the use of instant
messaging or email as the industry has
grown to become more and more reliant
upon technology. The Exchange,
however, also thinks it is important that
any communications made within TPH
organizations should be within the same
business unit so that TPHs are not
abusing the privilege and allowing for
communication of the activity on the
Exchange trading floor to be
disseminated to unrelated areas of the
TPH.
Next, proposed Rule 6.23(f) requires
that any use of any communications
device on the trading floor shall comply
with applicable laws, rules, policies,
and procedures of the Commission and
Exchange including all record retention
and audit trail requirements. Proposed
Rule 6.23(f) would also require that
orders are systemized using Exchange
systems or proprietary systems
approved by the Exchange in
accordance with Exchange Rule 6.24.21
This proposed addition would ensure
that any communications device on the
Exchange’s trading floor or in the
Exchange trading crowds will follow
any and all other applicable statues
including the Act along with ensure that
orders are properly systematized. In
addition, proposed Rule 6.23(f) will
allow misconduct to be investigated if
regulatory issues arise after the adoption
of a new communication device.
Next, proposed Rule 6.23(g) requires
TPHs to maintain records related to the
‘‘use of communication devices,
including, but not limited to, logs of
calls placed; emails; and chats, for a
period of not less than three years, the
first two years in an easily accessible
place.’’ Although similar to Amex and
Arca Rules on the subject,22 the
Exchange added language referring to
emails and chats to reflect the current
electronic environment. In addition,
proposed rule 6.23(g) states that ‘‘[t]he
Exchange reserves the right to inspect
such records pursuant to Rule 17.2.’’ 23
21 Orders must be systematized in accordance
with Rule 6.24 (Required Order Information).
Generally, subject to certain exceptions, each order,
cancellation of, or change to an order transmitted
to the Exchange must be ‘‘systematized,’’ in a
format approved by the Exchange, either before it
is sent to the Exchange or upon receipt on the floor
of the Exchange. An order is systematized if: (i) The
order is sent electronically to the Exchange; or (ii)
the order that is sent to the Exchange nonelectronically (e.g., telephone orders) is input
electronically into the Exchange’s systems
contemporaneously upon receipt on the Exchange,
and prior to representation of the order.
22 Proposed Rule 6.23(g) is similar to Amex Rule
902NY(i)(5) and Arca NYSE Arca Rule 6.2(h)(5).
23 CBOE Rule 17.2 (b)—Requirements to Furnish
Information. Rule 17.2(b) requires TPHs and
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As previously noted, the proposed Rule
will allow misconduct to be investigated
if regulatory issues arise after the
adoption of a new communication
device. This requirement is consistent
with the retention period of Securities
and Exchange Commission Rule 17a–
4.24
Finally, proposed Rule 6.23(h)
authorizes the Exchange to designate
more specific communication devices
that will not be permitted on the
Exchange trading floor or other
operational requirements via circular.
Given the propensity for technology to
continue to evolve, the Exchange
believes this proposed text will allow
the Exchange to change the exact
requirements from time to time as
needed while continuing to provide
TPHs specifications on the allowed
technology and communication
mechanism.
The Exchange will announce the
implementation date of the proposed
rule change in a Regulatory Circular to
be published no later than 30 days
following the effective date of this filing.
The implementation date will be no
later than 60 days following the
effective date of the proposed changes.
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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.25 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 26 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) 27 requirement that
the rules of an exchange not be designed
persons associated with TPHs to, among other
things, ‘‘furnish documentary materials and other
information requested by the Exchange in
connection with (i) an investigation initiated
pursuant to paragraph (a) of this Rule[.]’’
24 17 CFR 240.17a–4.
25 15 U.S.C. 78f(b).
26 15 U.S.C. 78f(b)(5).
27 Id.
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to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange does not
believe the proposed changes are
unfairly discriminatory as they are
applied to all TPHs trading on the
Exchange trading floor, a similarly
situated group, equally. In addition, the
Exchange believes the proposed changes
designed to prevent fraudulent and
manipulative acts and practices because
they are more appropriately designed to
monitor the equipment and
communications on a modern trading
floor. Without the proposed changes,
the current Exchange rules do not
adequately address the relevant
communication tools. Finally, the
Exchange believes that the proposed
rules intend to foster cooperation and
coordination by introducing new means
of communication to the Exchange
trading floor. Finally, the Exchange
believes that the proposed changes
protect investors and the public interest
by ensuring that all equipment and
communication on the Exchange trading
floor will adhere to all other applicable
statutes and the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. More
specifically, the Exchange does not
believe that the proposed rule changes
will impose any intramarket
competition because it will be
applicable to all TPHs trading on the
Exchange trading floor. In addition, the
Exchange does not believe the proposed
changes will impose any intermarket
burden because the Exchange trading
floor will operate in a similar manner
only with more relevant equipment and
communication requirements.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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, the
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proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 28 and Rule 19b–4(f)(6)
thereunder.29
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission believes that
waiver of the operative delay is
consistent with the protection of
investors and the public interest. Waiver
of the operative delay will provide TPHs
guidance regarding the use of
equipment and communications on the
Exchange floor that is more relevant to
the current electronic marketplace than
that provided by the current rule and
thereby prevent confusion by TPHs and
investors. Moreover, the proposed rule
requires TPHs to register a
communication device before using it
for business purposes on the Exchange
floor, and prohibits the Exchange from
designating the registration requirement
as not applicable to any TPHs. The
Commission believes that the proposed
rule’s registration requirement will
enable the Exchange to track the use of
communication devices on the
Exchange floor and to more effectively
identify any communication device
records to inspect pursuant to CBOE
Rule 17.2. The Commission notes that
the proposal is patterned after several
provisions of the proposed rule after
Amex Rule 902NY(i)—Telephones on
the Trading Floor and Arca Rule
6.2(h)—Telephones on the Options
Floor, and that the substance of this
proposal was published in a prior
proposed rule change which was
published for the entire 21 day
comment period.30 Therefore, the
Commission designates the proposed
rule change to be operative upon
filing.31
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
28 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
30 See Securities Exchange Act Release No. 74438
(March 4, 2015), 80 FR 12671 (March 10, 2015). The
Commission received no comments on the prior
proposal. The Exchange withdrew that prior
proposal on May 26, 2015. See Securities Exchange
Act Release No. 75073 (May 29, 2015), 80 FR 31943
(June 4, 2015).
31 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
29 17
E:\FR\FM\12AUN1.SGM
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Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Notices
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 32 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2015–061 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2015–061. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2015–061 and should be submitted on
or before September 2, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–19756 Filed 8–11–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75624; File No. SR–ICEEU–
2015–013]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
of Proposed Rule Change Relating to
CDS End-of-Day Price Discovery
Policy
August 6, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2
notice is hereby given that on July 24,
2015, ICE Clear Europe Limited (‘‘ICE
Clear Europe’’ or ‘‘Clearing House’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been primarily prepared by ICE
Clear Europe. 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
ICE Clear Europe proposes to amend
its end-of-day price discovery policies
and procedures for credit default swap
(‘‘CDS’’) contracts to incorporate certain
enhancements.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, ICE
Clear Europe included statements
concerning the purpose of and basis for
the proposed rule change. The text of
these statements may be examined at
the places specified in Item IV below.
ICE Clear Europe has prepared
summaries, set forth in sections A, B,
33 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
32 15
U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
18:16 Aug 11, 2015
Jkt 235001
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
48369
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
ICE Clear Europe proposes to amend
its CDS End-of-Day Price Discovery
Policy (the ‘‘EOD Price Discovery
Policy’’) to make certain enhancements
to the end-of-day submission and firm
trade process for CDS contracts. ICE
Clear Europe also proposes to adopt a
new Price Submission Disciplinary
Framework (the ‘‘Disciplinary
Framework’’) that addresses missed
price submissions by Clearing Members
for CDS contracts. ICE Clear Europe
does not otherwise propose to change its
Clearing Rules or Procedures in
connection with these amendments.
Under the EOD Price Discovery
Policy, ICE Clear Europe currently
utilizes a ‘‘cross and lock’’ algorithm as
part of its CDS price discovery process.
Under this algorithm, standardized bids
and offers derived from Clearing
Member submissions are matched by
sorting them from highest to lowest and
lowest to highest levels, respectively.
This sorting process pairs the Clearing
Member submitting the highest bid
price with the Clearing Member
submitting the lowest offer price, the
Clearing Member submitting the second
highest bid price with the Clearing
Member submitting the second-lowest
offer price, and so on. The algorithm
then identifies crossed and/or locked
markets. Crossed markets are the
Clearing Member pairs generated by the
sorting and ranking process for which
the bid price of one Clearing Member is
above the offer price of the matched
Clearing Member. The algorithm
identifies locked markets, where the bid
and the offer are equal, in a similar
fashion.
Whenever there are crossed and/or
locked matched markets, the algorithm
applies a set of rules designed to
identify standardized submissions that
are ‘‘obvious errors.’’ The algorithm sets
a high bid threshold equal to the
preliminary end-of-day (‘‘EOD’’) level
plus one bid-offer width (‘‘BOW’’), and
a low offer threshold equal to the
preliminary EOD level minus one BOW.
The algorithm considers a Clearing
Member’s standardized submission to
be an ‘‘obvious error’’ if the bid is higher
than the high bid threshold, or the offer
is lower than the low offer threshold.
Clearing Member pairs identified by
the algorithm as crossed or locked
markets may be required from time to
E:\FR\FM\12AUN1.SGM
12AUN1
]]>Agencies
[Federal Register Volume 80, Number 155 (Wednesday, August 12, 2015)]
[Notices]
[Pages 48365-48369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19756]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75623; File No. SR-CBOE-2015-061]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating To Amend Its Rules Related to Equipment
and Communication on the Exchange's Trading Floor
August 6, 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 July 23, 2015, 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 Exchange filed the proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange seeks to amend its rules related to equipment and
communication on the Exchange's trading floor. The text of the proposed
rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 6.23. [Trading Permit Holder Wires From Floor] Equipment and
Communications on the Trading Floor
(a) Subject to the requirements of this Rule Trading Permit Holders
may use any communication device (e.g., any hardware or software
related to a phone, system or other device, including an instant
messaging system, email system or similar device) on the floor of the
Exchange and in any trading crowd of the Exchange. Prior to using a
communications device for business purposes on the floor of the
Exchange, Trading Permit Holders must register the communications
device by identifying (in a form and manner prescribed by the Exchange)
the hardware (i.e., headset; cellular telephone; tablet; or other
similar hardware). The Exchange reserves the right to designate certain
portions of this rule (except for the registration requirement of
paragraph (a) or paragraphs (f) and (g)) as not applicable to certain
classes on a class by class basis.
(b) The Exchange may deny, limit or revoke the use of any
communication device whenever it determines that use of such
communication device: (1) Interferes with the normal operation of the
Exchange's own systems or facilities or with the Exchange's regulatory
duties, (2) is inconsistent with the public interest, the protection of
investors or just and equitable principles of trade, or (3) interferes
with the obligations of a Trading Permit Holder to fulfill its duties
under, or is used to facilitate any violation of, the Securities
Exchange Act or rules thereunder, or Exchange rules.
(c) Any communication device may be used on the floor of the
Exchange and in any trading crowd of the Exchange to receive orders,
provided that audit trail and record retention requirements of the
Exchange are met; however, no person in a trading crowd or on the floor
of the Exchange may use any communication device for the purpose of
recording activities in the trading crowd or maintaining an open line
of continuous communication whereby a non-associated person not located
in the trading crowd may continuously monitor the activities in the
trading crowd. This prohibition covers digital recorders, intercoms,
walkie-talkies and any similar devices.
(d) After providing notice to an affected Trading Permit Holder and
complying with applicable laws, the Exchange may provide for the
recording of any telephone line on the floor of the Exchange or may
require Trading Permit Holders at any time to provide for the recording
of a fixed phone line on the floor of the Exchange. Trading Permit
Holders, and their clerks, using the telephones consent to the Exchange
recording any telephone or line.
(e) Trading Permit Holders may not use communication devices to
disseminate quotes and/or last sale reports originating on the floor of
the Exchange in any manner that would serve to provide a continuous or
running state of the market for any particular series or class of
options over any period of time; provided, however, that an associated
person of a Trading Permit Holder on the floor of the Exchange may use
a communication device to communicate quotes that have been
disseminated pursuant to Rule 6.43 and/or last sale reports to other
associated persons of the same Trading Permit Holder business unit. An
associated person of a Trading Permit Holder may also use a
communications device to communicate an occasional, specific quote that
has been disseminated pursuant to Rule 6.43 or last sale report to a
person who is not an associated person of the same Trading Permit
Holder.
(f) Use of any communications device for order routing or handling
must comply with all applicable laws, rules, policies and procedures of
the Securities and Exchange Commission and the Exchange including
related to record retention and audit trail requirements. Orders must
be systemized using Exchange systems or proprietary systems approved by
the Exchange in accordance with Rule 6.24.
(g) Trading Permit Holders must maintain records of the use of
communication devices, including, but not limited to, logs of calls
placed; emails; and chats, for a period of not less than three years,
the first two years in an easily accessible place. The Exchange
reserves the right to inspect such records pursuant to Rule 17.2.
(h) The Exchange may designate, via circular, specific
communication devices that will not be permitted on the floor of the
Exchange or Exchange trading crowds. In addition, the Exchange may
designate other operational requirements regarding the installation of
any communication devices via circular.
[(a) No Trading Permit Holder shall establish or maintain any
telephone or other wire communications between his or its office and
the Exchange without prior approval by the Exchange. The Exchange may
direct discontinuance of any communication facility terminating on the
floor of the Exchange.
(b) Equity Option Telephone Policy. Persons in the equity option
trading
[[Page 48366]]
crowds (including DPM crowds which trade equity options) may have
access to outside telephone lines and may receive telephone orders
directly at equity options posts from locations outside the Exchange,
subject to certain requirements. The Exchange will review and may
approve any applications to install or to use telephones in the equity
option crowds.
(1) Requirements and conditions that apply to the use of telephone
services at the equity option posts shall include the following:
(A) Only those quotations that have been publicly disseminated
pursuant to Rule 6.43 may be provided over telephones at the post.
(B) Trading Permit Holders may give their clerks their PIN access
code. Although both Trading Permit Holders and clerks may use
telephones, Trading Permit Holders will have priority. Each Trading
Permit Holder will be responsible for all calls made using that Trading
Permit Holder's PIN access code.
(C) Clerks will not be permitted to establish a base of operation
utilizing general use telephones at the equity option posts. This
means, for example, that a clerk may not monopolize the use of a
telephone receiver on a telephone that has multiple lines if all of
those lines are not dedicated to the Trading Permit Holder for whom the
clerk works.
(D) The Exchange may provide for the taping of any telephone line
into the equity option posts or may require Trading Permit Holders to
provide for the tape recording of a dedicated line at the equity option
posts at any time. Trading Permit Holders and their clerks using the
telephones consent to the Exchange tape recording any telephone or
line.
(E) The telephones may be used for voice service only, unless they
have been specifically approved for other uses.
(F) The Exchange may prohibit the use of any telephone technology
that interferes with the normal operation of the Exchange's own systems
or facilities or that the Exchange determines interferes with its
regulatory duties.
(G) Orders transmitted by registered Exchange market-makers may be
entered over the outside telephone lines directly to the equity option
posts. All other orders may be entered over the outside telephone lines
to the equity option posts only during outgoing telephone calls that
are initiated at the equity option posts.
(H) Only those individuals that are properly qualified in
accordance with Chapter IX of the Rules of the Exchange, and all other
applicable rules and regulations, may accept orders from public
customers pursuant to this Rule.
. . . Interpretations and Policies
.01 A Trading Permit Holder or TPH organization which has been
granted approval of any means of communication under this rule shall be
responsible for assuring compliance with all Exchange rules and
requirements in connection with any business conducted by means of such
electronic or telephonic communication.]
* * * * *
The text of the proposed rule change is also 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend its rules regarding equipment
and communication on the Exchange trading floor. More specifically, the
Exchange is proposing to delete the current rule on the topic, Exchange
Rule 6.23, and introduce more relevant rules governing the use of
communication devices \5\ on the Exchange trading floor.\6\ Exchange
and Trading Permit Holder (``TPH'') systems have become much more
electronic since the adoption of CBOE Rule 6.23; however, the rule has
not been updated to reflect the electronic environment. The Exchange
believes it is in the interest of TPHs to allow electronic
communications to and from the Exchange trading floor and that these
amendments will eliminate confusion that may arise from outdated
Exchange rules. As such, the Exchange believes that eliminating the
current rule in its entirety and promulgating language that
contemplates modern rules is appropriate.\7\ First, Rule 6.23 is
currently applicable to ``telephone or other wire communications.'' \8\
Proposed Rule 6.23(a) expands the applicability of Rule 6.23 and
provides that TPHs may use any communication device \9\ on the Exchange
trading floor and in any Exchange trading crowd subject to the
restrictions in proposed Rule 6.23. The Exchange is also proposing to
apply certain restrictions on a class by class basis; however, the
registration requirement of paragraph (a), and paragraphs (f) and (g)
in their entirety, will always be applicable. The Exchange believes the
discretion afforded in paragraph (a) is appropriate as different
classes of options on the trading floor behave differently, and, as
such, different means of communication might be more appropriate in one
options class but not in another. The Exchange is also instituting a
registration provision that will require TPHs, prior to using a
communications device for business purposes on the floor of the
Exchange, to register the communications device by identifying (in a
form and manner prescribed by the Exchange) the hardware (i.e.,
headset; cellular telephone; tablet; or other similar hardware).\10\
---------------------------------------------------------------------------
\5\ As proposed, ``communication device'' will include ``e.g.,
any hardware or software related to a phone, system or other device,
including an instant messaging system, email system or similar
device[.]''
\6\ Although the Exchange seeks to replace Rule 6.23 in its
entirety, portions of the current rule are included in proposed Rule
6.23. The relevant holdover language is identified where applicable.
\7\ Many of the provisions of proposed Rule 6.23 are modeled
after NYSE Amex LLC (``Amex'') Rule 902NY(i)--Telephones on the
Trading Floor and NYSE Arca, Inc. (``Arca'') Rule 6.2(h)--Telephones
on the Options Floor.
\8\ See CBOE Rule 6.23(a).
\9\ See supra note 1 [sic].
\10\ The registration requirement of proposed Rule 6.23(a) is
similar to Arca Rule 6.2(h)(1).
---------------------------------------------------------------------------
Next, proposed Rule 6.23(b) specifically states that the Exchange
will retain the authority to deny, limit or revoke the use of any
communication device.\11\ Under the proposed rule, the Exchange may
take such actions whenever it determines that use of such communication
device: (1) Interferes with the normal operation of the Exchange's own
systems or facilities or with the Exchange's regulatory duties,\12\ (2)
is inconsistent with the public interest, the protection of investors
or just and equitable principles of trade, or (3) interferes with the
obligations of a
[[Page 48367]]
TPH to fulfill its duties under, or is used to facilitate any violation
of, the Securities Exchange Act of 1934 (``the Act'') or rules
thereunder, or the Exchange rules. This authorization will allow the
Exchange to regulate the equipment and communications on the Exchange
trading floor and in the Exchange trading crowds to ensure they are not
disruptive to the operation of the Exchange or in violation of the Act.
The Exchange believes this will allow the Exchange to better protect
investors and the integrity of the market. The Exchange notes, however,
that current Rule 6.23(a) requires TPHs to receive prior approval from
the Exchange before establishing or maintaining a telephone or other
wire communications.\13\ In addition, the Exchange recognizes that Amex
and Arca rules require the registration of all new telephones \14\ and
approval prior to the use of a communication device other than a
telephone. The Exchange believes the combination of the record
retention requirements of proposed Rule 6.23(g) and the power to revoke
the use of a communication device pursuant to proposed Rule 6.23(b)
negates the necessity for prior approval and registration. If an issue
with a particular device is discovered, the Exchange will work with
TPHs to ensure the devices are no longer utilized.
---------------------------------------------------------------------------
\11\ Proposed Rule 6.23(c) is similar to Amex Rule 902NY(i)(6)
and Arca Rule 6.2(h)(6).
\12\ This language remains from the current CBOE Rule 6.23. See
CBOE Rule 6.23(b)(1)(F).
\13\ See CBOE Rule 6.23(a).
\14\ See Amex Rule 902NY(i)(1) and Arca Rule 6.2(h)(1).
---------------------------------------------------------------------------
Next, proposed Rule 6.23(c) codifies the current policy that allows
any communication device to be utilized to receive orders in and out of
the trading crowd, provided that audit trail and record retention
requirements of the Exchange are met.\15\ Formerly, CBOE Regulatory
Circular RG10-20 prohibited TPH's from receiving orders in the trading
crowd via instant messaging or email; \16\ however, TPHs were not
restricted from receiving orders via instant messaging and email while
not in a trading crowd. The Exchange believes the difference caused
inequity between TPHs because TPHs near the edge of the trading crowd
can more quickly correspond with their clerks and trading desks that
are outside of the trading crowd. The Exchange believes that removing
the restriction on receiving orders via IM and email levels the playing
field in the trading crowds and reflects the electronic nature of the
current marketplace. In addition, proposed Rule 6.23(c) specifically
prohibits the use of any communication device to record activities in
the trading crowd or to maintain an open line of continuous
communication that would allow a non-associated person off of the
Exchange floor to continuously monitor the activities in the trading
crowd. As proposed, this prohibition covers digital recorders,
intercoms, walkie-talkies and any similar devices. The addition of this
text will preserve the integrity of the Exchange trading floor while
monitoring TPHs to ensure they have the required authorization to
operate on the Exchange trading floor should that be their intent.\17\
---------------------------------------------------------------------------
\15\ See CBOE Regulatory Circular RG14-162 (November 19, 2014).
\16\ See CBOE Regulatory Circular RG10-20 (January 29, 2010).
\17\ Proposed Rule 6.23(c) is similar to Amex Rule 902NY(i)(2)
and Arca Rule 6.2(h)(2).
---------------------------------------------------------------------------
Further, proposed Rule 6.23(d) specifies that, after providing
notice to an affected Trading Permit Holder and complying with the
applicable laws, the Exchange may provide for the recording of any
telephone line on the floor of the Exchange or require TPHs to provide
for the recording of a fixed phone line on the floor of the Exchange,
and that TPHs utilizing telephones consent to the Exchange recording
any telephone or line.\18\ This added provision will not require but
allow the Exchange to record any communications via telephone
connections to the trading floor if a situation were to arise where
this may be necessary. In addition, this proposed provision would allow
the Exchange to provide necessary equipment for the recording of
communications on the Exchange trading floor.\19\
---------------------------------------------------------------------------
\18\ This language remains from the current CBOE Rule 6.23. See
CBOE Rule 6.23 (b)(1)(D).
\19\ Proposed Rule 6.23(d) is similar to Amex Rule
902NY(i)(3)(C) and Arca Rule 6.2(h)(3)(C).
---------------------------------------------------------------------------
Next, proposed Rule 6.23(e) prohibits the use of communication
devices to disseminate quotes and/or last sale reports originating on
the Exchange trading floor in any manner that would serve to provide a
continuous or running state of the market; however, the proposed rule
specifically states that, ``an associated person of a TPH may use a
communications device to communicate quotes that have been disseminated
pursuant to Rule 6.43 and/or last sale reports to other associated
persons of the same TPH business unit.'' Further, as proposed, an
associated person of a TPH may use a communications device to
communicate an ``occasional, specific, quote that has been disseminated
pursuant to Rule 6.43 \20\ or last sale report or quote to a person who
is not an associated person of the same TPH.'' The Exchange believes
this proposed addition is necessary to allow the use of instant
messaging or email as the industry has grown to become more and more
reliant upon technology. The Exchange, however, also thinks it is
important that any communications made within TPH organizations should
be within the same business unit so that TPHs are not abusing the
privilege and allowing for communication of the activity on the
Exchange trading floor to be disseminated to unrelated areas of the
TPH.
---------------------------------------------------------------------------
\20\ Proposed Rule 6.23(e) referring to quotes disseminated
pursuant to Rule 6.43 is similar to Amex Rule 902NY(i)(3)(A) and
Arca Rule 6.2(h)(3)(A). See CBOE Rule 6.43--Manner of Bidding and
Offering.
---------------------------------------------------------------------------
Next, proposed Rule 6.23(f) requires that any use of any
communications device on the trading floor shall comply with applicable
laws, rules, policies, and procedures of the Commission and Exchange
including all record retention and audit trail requirements. Proposed
Rule 6.23(f) would also require that orders are systemized using
Exchange systems or proprietary systems approved by the Exchange in
accordance with Exchange Rule 6.24.\21\ This proposed addition would
ensure that any communications device on the Exchange's trading floor
or in the Exchange trading crowds will follow any and all other
applicable statues including the Act along with ensure that orders are
properly systematized. In addition, proposed Rule 6.23(f) will allow
misconduct to be investigated if regulatory issues arise after the
adoption of a new communication device.
---------------------------------------------------------------------------
\21\ Orders must be systematized in accordance with Rule 6.24
(Required Order Information). Generally, subject to certain
exceptions, each order, cancellation of, or change to an order
transmitted to the Exchange must be ``systematized,'' in a format
approved by the Exchange, either before it is sent to the Exchange
or upon receipt on the floor of the Exchange. An order is
systematized if: (i) The order is sent electronically to the
Exchange; or (ii) the order that is sent to the Exchange non-
electronically (e.g., telephone orders) is input electronically into
the Exchange's systems contemporaneously upon receipt on the
Exchange, and prior to representation of the order.
---------------------------------------------------------------------------
Next, proposed Rule 6.23(g) requires TPHs to maintain records
related to the ``use of communication devices, including, but not
limited to, logs of calls placed; emails; and chats, for a period of
not less than three years, the first two years in an easily accessible
place.'' Although similar to Amex and Arca Rules on the subject,\22\
the Exchange added language referring to emails and chats to reflect
the current electronic environment. In addition, proposed rule 6.23(g)
states that ``[t]he Exchange reserves the right to inspect such records
pursuant to Rule 17.2.'' \23\
[[Page 48368]]
As previously noted, the proposed Rule will allow misconduct to be
investigated if regulatory issues arise after the adoption of a new
communication device. This requirement is consistent with the retention
period of Securities and Exchange Commission Rule 17a-4.\24\
---------------------------------------------------------------------------
\22\ Proposed Rule 6.23(g) is similar to Amex Rule 902NY(i)(5)
and Arca NYSE Arca Rule 6.2(h)(5).
\23\ CBOE Rule 17.2 (b)--Requirements to Furnish Information.
Rule 17.2(b) requires TPHs and persons associated with TPHs to,
among other things, ``furnish documentary materials and other
information requested by the Exchange in connection with (i) an
investigation initiated pursuant to paragraph (a) of this Rule[.]''
\24\ 17 CFR 240.17a-4.
---------------------------------------------------------------------------
Finally, proposed Rule 6.23(h) authorizes the Exchange to designate
more specific communication devices that will not be permitted on the
Exchange trading floor or other operational requirements via circular.
Given the propensity for technology to continue to evolve, the Exchange
believes this proposed text will allow the Exchange to change the exact
requirements from time to time as needed while continuing to provide
TPHs specifications on the allowed technology and communication
mechanism.
The Exchange will announce the implementation date of the proposed
rule change in a Regulatory Circular to be published no later than 30
days following the effective date of this filing. The implementation
date will be no later than 60 days following the effective date of the
proposed changes.
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.\25\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \26\ 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) \27\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
\27\ Id.
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In particular, the Exchange does not believe the proposed changes
are unfairly discriminatory as they are applied to all TPHs trading on
the Exchange trading floor, a similarly situated group, equally. In
addition, the Exchange believes the proposed changes designed to
prevent fraudulent and manipulative acts and practices because they are
more appropriately designed to monitor the equipment and communications
on a modern trading floor. Without the proposed changes, the current
Exchange rules do not adequately address the relevant communication
tools. Finally, the Exchange believes that the proposed rules intend to
foster cooperation and coordination by introducing new means of
communication to the Exchange trading floor. Finally, the Exchange
believes that the proposed changes protect investors and the public
interest by ensuring that all equipment and communication on the
Exchange trading floor will adhere to all other applicable statutes and
the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. More specifically, the Exchange
does not believe that the proposed rule changes will impose any
intramarket competition because it will be applicable to all TPHs
trading on the Exchange trading floor. In addition, the Exchange does
not believe the proposed changes will impose any intermarket burden
because the Exchange trading floor will operate in a similar manner
only with more relevant equipment and communication requirements.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the 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, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \28\ and Rule 19b-4(f)(6)
thereunder.\29\
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest.
Waiver of the operative delay will provide TPHs guidance regarding the
use of equipment and communications on the Exchange floor that is more
relevant to the current electronic marketplace than that provided by
the current rule and thereby prevent confusion by TPHs and investors.
Moreover, the proposed rule requires TPHs to register a communication
device before using it for business purposes on the Exchange floor, and
prohibits the Exchange from designating the registration requirement as
not applicable to any TPHs. The Commission believes that the proposed
rule's registration requirement will enable the Exchange to track the
use of communication devices on the Exchange floor and to more
effectively identify any communication device records to inspect
pursuant to CBOE Rule 17.2. The Commission notes that the proposal is
patterned after several provisions of the proposed rule after Amex Rule
902NY(i)--Telephones on the Trading Floor and Arca Rule 6.2(h)--
Telephones on the Options Floor, and that the substance of this
proposal was published in a prior proposed rule change which was
published for the entire 21 day comment period.\30\ Therefore, the
Commission designates the proposed rule change to be operative upon
filing.\31\
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\30\ See Securities Exchange Act Release No. 74438 (March 4,
2015), 80 FR 12671 (March 10, 2015). The Commission received no
comments on the prior proposal. The Exchange withdrew that prior
proposal on May 26, 2015. See Securities Exchange Act Release No.
75073 (May 29, 2015), 80 FR 31943 (June 4, 2015).
\31\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if
[[Page 48369]]
it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \32\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\32\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2015-061 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2015-061. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2015-061 and should be
submitted on or before September 2, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-19756 Filed 8-11-15; 8:45 am]
BILLING CODE 8011-01-P
