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]

Download as PDF 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. mstockstill on DSK4VPTVN1PROD with NOTICES (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * 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 VerDate Sep<11>2014 18:16 Aug 11, 2015 Jkt 235001 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 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 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 E:\FR\FM\12AUN1.SGM 12AUN1 mstockstill on DSK4VPTVN1PROD with NOTICES 48366 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, VerDate Sep<11>2014 18:16 Aug 11, 2015 Jkt 235001 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 (http://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 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. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 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). E:\FR\FM\12AUN1.SGM 12AUN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Notices 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 VerDate Sep<11>2014 18:16 Aug 11, 2015 Jkt 235001 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. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 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 E:\FR\FM\12AUN1.SGM Continued 12AUN1 48368 Federal Register / Vol. 80, No. 155 / Wednesday, August 12, 2015 / Notices 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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. VerDate Sep<11>2014 18:16 Aug 11, 2015 Jkt 235001 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 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 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 12AUN1 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 (http://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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, 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]


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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 (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ Id.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, 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