Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, Relating to Rule 6.53C and Complex Orders on the Hybrid System, 51642-51644 [2015-20935]
Download as PDF
51642
Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices
The Exchange believes that this
amendment is equitable and not
unfairly discriminatory because the
Exchange is uniformly assessing the FIX
Drop Copy Port Fees on all users that
wish to subscribe to it.
The Exchange further believes that the
proposed FIX Drop Copy Port Fee is
reasonable because it is within the range
of similar fees charged by other
exchanges, and because the FIX Drop
Copy Port is offered as an optional
service for those users who wish to
subscribe to it.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The proposed fees for services provided
to its Members and others using its
facilities will not have an impact on
competition. In fact, MIAX’s proposed
FIX Drop Copy Port Fee is comparable
to fees charged by other options
exchanges for the same or similar
services.8
The FIX Drop Copy Port is offered as
an additional service for users at a price
that is within the range of prices for
similar ports offered by other exchanges,
and therefore the Exchange believes that
the price of the port fee does not impose
a burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 9 and
subparagraph (f)(2) of Rule 19b–4
thereunder.10 At any time within 60
days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
8 See
supra note 5.
U.S.C. 78s(b)(3)(A)(ii).
10 17 CFR 240.19b–4(f)(2).
9 15
VerDate Sep<11>2014
18:54 Aug 24, 2015
Jkt 235001
to determine whether the proposed rule
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:
• 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–
MIAX–2015–52 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–MIAX–2015–52. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
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–MIAX–
2015–52, and should be submitted on or
before September 15, 2015.
Frm 00112
Fmt 4703
[FR Doc. 2015–20932 Filed 8–24–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75736; File No. SR–CBOE–
2015–045]
Electronic Comments
PO 00000
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Jill M. Peterson,
Assistant Secretary.
Sfmt 4703
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendment No. 1, Relating to Rule
6.53C and Complex Orders on the
Hybrid System
August 19, 2015.
I. Introduction
On May 12, 2015, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’), pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ‘‘Exchange
Act’’ or ‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change to
modify CBOE Rule 6.53C, Complex
Orders on the Hybrid System, regarding
eligibility for participation in the
Complex Order Book (‘‘COB’’) and the
Complex Order Auction (‘‘COA’’). The
proposed rule change was published for
comment in the Federal Register on
May 27, 2015.3 On June 3, 2015, CBOE
filed Amendment No.1 to the proposed
rule change.4 On July 6, 2015, the
Commission extended the time period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change, to August 25,
2015.5 The Commission has received no
comments on the proposed rule change.
This order institutes proceedings under
Section 19(b)(2)(B) of the Act 6 to
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 75003
(May 20, 2015), 80 FR 30306 (‘‘Notice’’).
4 Amendment No. 1 to the proposed rule change
amended the statutory basis and burden on
competition sections regarding distinguishing
between Professional and non-Professional orders
for purposes of determining eligibility for COA.
5 See Securities Exchange Act Release No. 75359
(July 6, 2015), 80 FR 39821 (July 10, 2015).
6 15 U.S.C. 78s(b)(2)(B).
1 15
E:\FR\FM\25AUN1.SGM
25AUN1
Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices
determine whether to approve or
disapprove the proposed rule change.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
II. Description of the Proposal
The Exchange seeks to modify CBOE
Rule 6.53C to allow the Exchange to
further distinguish between the complex
order origin types that are eligible for
the COB and COA.7 Currently, under
CBOE Rule 6.53C, the Exchange may
determine whether orders from nonbroker dealer public customers, brokerdealers that are not Market-Makers or
specialists on an options exchange, and/
or Market-Makers or specialists on an
options exchange are eligible for entry
into the COB or COA. Under these
current COA and COB eligibility
parameters, there is no distinction
between professional public customers
and non-professional public customers.
The Exchange proposes to modify
CBOE Rule 6.53C so that it could
determine whether the following two
additional types of market participants
are eligible for entry into the COB and
the COA: (i) Non-broker-dealer public
customers that are Voluntary
Professional Customers or Professional
Customers (herein, ‘‘Professionals’’) and
(ii) non-broker-dealer public customers
that are not Voluntary Professional
Customers or Professional Customers.
CBOE states that it is proposing this
change so that it may prevent orders
from Professionals from triggering a
COA. According to the Exchange, CBOE
participants currently may cancel and
replace their complex orders as often as
they wish without incurring any
cancellation fees. Each order that meets
the eligibility requirements detailed in
CBOE Rule 6.53C,8 including
cancellations and replacements,
generates a new COA. The Exchange
states that few of the complex orders
entered by Professional Customers that
trigger a COA actually execute in the
auction process.9 Accordingly, CBOE
7 The COA is a feature within CBOE’s Hybrid
System that exposes eligible complex orders for
price improvement. In classes where the COA is
activated, eligible orders are electronically exposed
for an exposure period. At the conclusion of the
COA process, the order is then allocated or, to the
extent not executed, sent to the COB or routed. See
Notice, 80 FR at 15264.
8 A COA-eligible order is a complex order that, as
determined by the Exchange on a class-by-class
basis, is eligible for COA considering the order’s
marketability (defined as a number of ticks away
from the current market), size, complex order type,
and complex order origin type. See Rule
6.53C(d)(1). This proposed rule change would
change the term ‘‘complex order origin type’’ to
‘‘complex order origin code.’’
9 For example, in Amendment No. 1, the
Exchange notes that orders for Professionals made
up 52% of COA auctions but resulted in 0.62% of
COA executions in the month of February 2015.
The Exchange states that this is a representative
example of Professional orders participation and
execution rates in the COA.
VerDate Sep<11>2014
17:10 Aug 24, 2015
Jkt 235001
believes that allowing COA eligibility to
be determined by origin code (e.g., by
whether the order comes from a
Professional), which permits CBOE to
prevent orders from Professionals from
triggering a COA, will ‘‘eliminate the
clutter of unnecessary Professional COA
messages, as well as increase the
likelihood of executions for public
customers.’’ 10 The Exchange further
believes that allowing Professionals to
participate in the COA can be
detrimental to non-professional public
customer order flow.11 The Exchange
also believes that ‘‘removing
unnecessary Professional COA messages
may encourage more participants to
provide auction responses (ultimately
increasing the likelihood of executions
for public customers . . .) because
fewer unnecessary COA messages will
most likely increase the proportion of
responses that lead to an execution.’’ 12
III. Proceedings To Determine Whether
To Approve or Disapprove SR–CBOE–
2015–045 and Grounds for Disapproval
Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 13 to determine
whether the proposed rule change, as
modified by Amendment No. 1, should
be approved or disapproved. Institution
of such proceedings is appropriate at
this time in view of the legal and policy
issues raised by the proposed rule
change, as discussed below. Institution
of proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved.
Pursuant to Section 19(b)(2)(B) of the
Act,14 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of, and comment on,
whether the proposed rule change is
consistent with: Section 6(b)(5) of the
Act,15 which requires that the rules of
a national securities exchange be
designed, among other things, to
prevent fraudulent and manipulative
acts and practices, to promote just and
10 See
Notice, 80 FR at 30307.
id.
12 See Amendment No. 1 at 4.
13 15 U.S.C. 78s(b)(2)(B).
14 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
Exchange Act also provides that proceedings to
determine whether to disapprove a proposed rule
change must be concluded within 180 days of the
date of publication of notice of the filing of the
proposed rule change. See id. The time for
conclusion of the proceedings may be extended for
up to 60 days if the Commission finds good cause
for such extension and publishes its reasons for so
finding. See id.
15 15 U.S.C. 78f(b)(5).
11 See
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
51643
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest, and are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers;
and Section 6(b)(8) of the Act,16 which
requires that the rules of a national
securities exchange not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
The Exchange’s proposed rule change
would provide the Exchange discretion
to determine whether two additional
groups of market participants are
eligible for entry into the COA and COB:
(i) Professionals and (ii) non-brokerdealer public customers that are not
Professionals.17 The Commission
believes that the proposal raises
important issues that warrant further
public comment and Commission
consideration regarding whether the
proposal would result in unfair
discrimination or would impose an
unnecessary and or inappropriate
burden on competition to the extent the
Exchange exercises its proposed
discretion and excludes either of the
two categories of market participants
discussed above from the COA and
COB.
In light of these issues and concerns,
the Commission believes that questions
arise regarding whether the proposal is
consistent with the requirements of
Sections 6(b)(5) and 6(b)(8) of the Act.
As the Commission continues to
evaluate the issues presented by the
proposal, the Commission solicits
comment on whether the proposal is
consistent with the Act and whether the
Exchange has met its burden in
presenting a statutory analysis of how
its proposal is consistent with the Act.
In particular, the grounds for
disapproval under consideration
include whether the Exchange’s
proposal is consistent with Sections
6(b)(5) 18 and 6(b)(8) 19 of the Act.
In addition, under the Commission’s
rules of procedure, a self-regulatory
organization that proposes to amend its
rules bears the burden of demonstrating
16 15
U.S.C. 78f(b)(8).
the current Rule, CBOE already may
determine that Broker-dealers that are not MarketMakers or specialists on an options exchange and
Market-Makers or specialists on an options
exchange are not eligible for entry into the COA and
COB pursuant to CBOE Rule 6.53C.
18 15 U.S.C. 78f(b)(5).
19 15 U.S.C. 78f(b)(8).
17 Under
E:\FR\FM\25AUN1.SGM
25AUN1
51644
Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices
that its proposal is consistent with the
Act.20 In this regard:
the description of the proposed rule change,
its purpose and operation, its effect, and a
legal analysis of its consistency with
applicable requirements must all be
sufficiently detailed and specific to support
an affirmative Commission finding. Any
failure of the self-regulatory organization to
provide the information elicited by Form
19b–4 may result in the Commission not
having a sufficient basis to make an
affirmative finding that a proposed rule
change is consistent with the Exchange Act
and the rules and regulations thereunder that
are applicable to the self-regulatory
organization.21
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data and
arguments with respect to the concerns
identified above, as well as any other
concerns they may have with the
proposed rule change. In particular, the
Commission invites the written views of
interested persons concerning whether
the proposal is consistent with Sections
6(b)(5) and 6(b)(8) 22 or any other
provision of the Act, or the rules and
regulations thereunder. Although there
do not appear to be any issues relevant
to approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4 under the Act,23 any request
for an opportunity to make an oral
presentation.24
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by September 15, 2015.
Any person who wishes to file a rebuttal
to any other person’s submission must
file that rebuttal by September 29, 2015.
In light of the concerns raised by the
proposed rule change, as discussed
above, the Commission invites
additional comment on the proposed
rule change as the Commission
continues its analysis of whether the
proposed rule change is consistent with
20 Rule
700(b)(3), 17 CFR 201.700(b)(3).
21 Id.
22 15
U.S.C. 78f(b)(5) and (b)(8).
CFR 240.19b–4.
24 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants to the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
asabaliauskas on DSK5VPTVN1PROD with NOTICES
23 17
VerDate Sep<11>2014
17:10 Aug 24, 2015
Jkt 235001
Section 6(b)(5),25 Section 6(b)(8),26 and
all other provision of the Act, or the
rules and regulations thereunder. The
Commission asks that commenters
address the sufficiency and merit of the
Exchange’s statements in support of the
proposed rule change, in addition to any
other comments they may wish to
submit about the proposed rule change.
In particular, the Commission invites
comment on the following:
1. Would excluding orders submitted
by Professionals from entry into the
COA or COB adversely affect the ability
of Professionals to execute their orders?
Why or why not?
2. Do commenters agree with the
Exchange that there are an excessive
number of Professional COA messages
that adversely affect the likelihood of
executions for non-broker-dealer public
customers that are not Professionals?
Would excluding Professionals orders
from the COA increase the likelihood of,
or otherwise impact, executions for nonbroker-dealer public customers that are
not Professionals? If so, how?
3. Is the volume of auction messages
generated by Professionals disruptive to
the auction process? If so, how?
4. Are there other methods that
involve less potential for unfair
discrimination that could be used to
reduce the volume of messages?
5. Do Professionals want their orders
to be eligible for entry into the COA or
the COB? Why or why not?
6. Although the Exchange states that
the proposal is intended to allow the
Exchange to prevent Professionals from
entry into the COB or COA, the
proposed rule change, as drafted, would
also allow the Exchange to determine
that non-broker-dealer public customers
that are not Professionals Customers are
not eligible for entry into both the COA
and the COB. Do commenters believe
that excluding non-broker-dealer public
customers that are not Professionals
from the COA and COB is consistent
with the Act? Is so, why? If not, why
not?
Comments may be submitted by any
of the following methods:
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2015–045. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2015–045 and should be submitted by
September 15, 2015. Rebuttal comments
should be submitted by September 29,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015–20935 Filed 8–24–15; 8:45 am]
BILLING CODE 8011–01–P
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–2015–045 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
25 15
26 15
PO 00000
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(8).
Frm 00114
Fmt 4703
27 17
Sfmt 9990
E:\FR\FM\25AUN1.SGM
CFR 200.30–3(a)(57).
25AUN1
Agencies
[Federal Register Volume 80, Number 164 (Tuesday, August 25, 2015)]
[Notices]
[Pages 51642-51644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20935]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75736; File No. SR-CBOE-2015-045]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change, as Modified by Amendment
No. 1, Relating to Rule 6.53C and Complex Orders on the Hybrid System
August 19, 2015.
I. Introduction
On May 12, 2015, Chicago Board Options Exchange, Incorporated (the
``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the ``Exchange Act'' or ``Act''),\1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to modify CBOE
Rule 6.53C, Complex Orders on the Hybrid System, regarding eligibility
for participation in the Complex Order Book (``COB'') and the Complex
Order Auction (``COA''). The proposed rule change was published for
comment in the Federal Register on May 27, 2015.\3\ On June 3, 2015,
CBOE filed Amendment No.1 to the proposed rule change.\4\ On July 6,
2015, the Commission extended the time period within which to approve
the proposed rule change, disapprove the proposed rule change, or
institute proceedings to determine whether to disapprove the proposed
rule change, to August 25, 2015.\5\ The Commission has received no
comments on the proposed rule change. This order institutes proceedings
under Section 19(b)(2)(B) of the Act \6\ to
[[Page 51643]]
determine whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 75003 (May 20,
2015), 80 FR 30306 (``Notice'').
\4\ Amendment No. 1 to the proposed rule change amended the
statutory basis and burden on competition sections regarding
distinguishing between Professional and non-Professional orders for
purposes of determining eligibility for COA.
\5\ See Securities Exchange Act Release No. 75359 (July 6,
2015), 80 FR 39821 (July 10, 2015).
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange seeks to modify CBOE Rule 6.53C to allow the Exchange
to further distinguish between the complex order origin types that are
eligible for the COB and COA.\7\ Currently, under CBOE Rule 6.53C, the
Exchange may determine whether orders from non-broker dealer public
customers, broker-dealers that are not Market-Makers or specialists on
an options exchange, and/or Market-Makers or specialists on an options
exchange are eligible for entry into the COB or COA. Under these
current COA and COB eligibility parameters, there is no distinction
between professional public customers and non-professional public
customers.
---------------------------------------------------------------------------
\7\ The COA is a feature within CBOE's Hybrid System that
exposes eligible complex orders for price improvement. In classes
where the COA is activated, eligible orders are electronically
exposed for an exposure period. At the conclusion of the COA
process, the order is then allocated or, to the extent not executed,
sent to the COB or routed. See Notice, 80 FR at 15264.
---------------------------------------------------------------------------
The Exchange proposes to modify CBOE Rule 6.53C so that it could
determine whether the following two additional types of market
participants are eligible for entry into the COB and the COA: (i) Non-
broker-dealer public customers that are Voluntary Professional
Customers or Professional Customers (herein, ``Professionals'') and
(ii) non-broker-dealer public customers that are not Voluntary
Professional Customers or Professional Customers.
CBOE states that it is proposing this change so that it may prevent
orders from Professionals from triggering a COA. According to the
Exchange, CBOE participants currently may cancel and replace their
complex orders as often as they wish without incurring any cancellation
fees. Each order that meets the eligibility requirements detailed in
CBOE Rule 6.53C,\8\ including cancellations and replacements, generates
a new COA. The Exchange states that few of the complex orders entered
by Professional Customers that trigger a COA actually execute in the
auction process.\9\ Accordingly, CBOE believes that allowing COA
eligibility to be determined by origin code (e.g., by whether the order
comes from a Professional), which permits CBOE to prevent orders from
Professionals from triggering a COA, will ``eliminate the clutter of
unnecessary Professional COA messages, as well as increase the
likelihood of executions for public customers.'' \10\ The Exchange
further believes that allowing Professionals to participate in the COA
can be detrimental to non-professional public customer order flow.\11\
The Exchange also believes that ``removing unnecessary Professional COA
messages may encourage more participants to provide auction responses
(ultimately increasing the likelihood of executions for public
customers . . .) because fewer unnecessary COA messages will most
likely increase the proportion of responses that lead to an
execution.'' \12\
---------------------------------------------------------------------------
\8\ A COA-eligible order is a complex order that, as determined
by the Exchange on a class-by-class basis, is eligible for COA
considering the order's marketability (defined as a number of ticks
away from the current market), size, complex order type, and complex
order origin type. See Rule 6.53C(d)(1). This proposed rule change
would change the term ``complex order origin type'' to ``complex
order origin code.''
\9\ For example, in Amendment No. 1, the Exchange notes that
orders for Professionals made up 52% of COA auctions but resulted in
0.62% of COA executions in the month of February 2015. The Exchange
states that this is a representative example of Professional orders
participation and execution rates in the COA.
\10\ See Notice, 80 FR at 30307.
\11\ See id.
\12\ See Amendment No. 1 at 4.
---------------------------------------------------------------------------
III. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2015-045 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \13\ to determine whether the proposed rule
change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change, as discussed below. Institution of proceedings does not
indicate that the Commission has reached any conclusions with respect
to any of the issues involved.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\14\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and comment on, whether the proposed rule change is
consistent with: Section 6(b)(5) of the Act,\15\ which requires that
the rules of a national securities exchange be designed, among other
things, to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system and, in general, to protect investors and the public
interest, and are not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers; and Section 6(b)(8) of the
Act,\16\ which requires that the rules of a national securities
exchange not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.
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\14\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Exchange
Act also provides that proceedings to determine whether to
disapprove a proposed rule change must be concluded within 180 days
of the date of publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the proceedings may
be extended for up to 60 days if the Commission finds good cause for
such extension and publishes its reasons for so finding. See id.
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b)(8).
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The Exchange's proposed rule change would provide the Exchange
discretion to determine whether two additional groups of market
participants are eligible for entry into the COA and COB: (i)
Professionals and (ii) non-broker-dealer public customers that are not
Professionals.\17\ The Commission believes that the proposal raises
important issues that warrant further public comment and Commission
consideration regarding whether the proposal would result in unfair
discrimination or would impose an unnecessary and or inappropriate
burden on competition to the extent the Exchange exercises its proposed
discretion and excludes either of the two categories of market
participants discussed above from the COA and COB.
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\17\ Under the current Rule, CBOE already may determine that
Broker-dealers that are not Market-Makers or specialists on an
options exchange and Market-Makers or specialists on an options
exchange are not eligible for entry into the COA and COB pursuant to
CBOE Rule 6.53C.
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In light of these issues and concerns, the Commission believes that
questions arise regarding whether the proposal is consistent with the
requirements of Sections 6(b)(5) and 6(b)(8) of the Act. As the
Commission continues to evaluate the issues presented by the proposal,
the Commission solicits comment on whether the proposal is consistent
with the Act and whether the Exchange has met its burden in presenting
a statutory analysis of how its proposal is consistent with the Act. In
particular, the grounds for disapproval under consideration include
whether the Exchange's proposal is consistent with Sections 6(b)(5)
\18\ and 6(b)(8) \19\ of the Act.
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\18\ 15 U.S.C. 78f(b)(5).
\19\ 15 U.S.C. 78f(b)(8).
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In addition, under the Commission's rules of procedure, a self-
regulatory organization that proposes to amend its rules bears the
burden of demonstrating
[[Page 51644]]
that its proposal is consistent with the Act.\20\ In this regard:
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\20\ Rule 700(b)(3), 17 CFR 201.700(b)(3).
the description of the proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements must all be sufficiently detailed and
specific to support an affirmative Commission finding. Any failure
of the self-regulatory organization to provide the information
elicited by Form 19b-4 may result in the Commission not having a
sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Exchange Act and the rules and
regulations thereunder that are applicable to the self-regulatory
organization.\21\
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\21\ Id.
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposed rule change. In particular, the Commission invites
the written views of interested persons concerning whether the proposal
is consistent with Sections 6(b)(5) and 6(b)(8) \22\ or any other
provision of the Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval which would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4 under the Act,\23\ any request for an opportunity to make an
oral presentation.\24\
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\22\ 15 U.S.C. 78f(b)(5) and (b)(8).
\23\ 17 CFR 240.19b-4.
\24\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Act Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by September 15, 2015. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
September 29, 2015. In light of the concerns raised by the proposed
rule change, as discussed above, the Commission invites additional
comment on the proposed rule change as the Commission continues its
analysis of whether the proposed rule change is consistent with Section
6(b)(5),\25\ Section 6(b)(8),\26\ and all other provision of the Act,
or the rules and regulations thereunder. The Commission asks that
commenters address the sufficiency and merit of the Exchange's
statements in support of the proposed rule change, in addition to any
other comments they may wish to submit about the proposed rule change.
In particular, the Commission invites comment on the following:
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\25\ 15 U.S.C. 78f(b)(5).
\26\ 15 U.S.C. 78f(b)(8).
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1. Would excluding orders submitted by Professionals from entry
into the COA or COB adversely affect the ability of Professionals to
execute their orders? Why or why not?
2. Do commenters agree with the Exchange that there are an
excessive number of Professional COA messages that adversely affect the
likelihood of executions for non-broker-dealer public customers that
are not Professionals? Would excluding Professionals orders from the
COA increase the likelihood of, or otherwise impact, executions for
non-broker-dealer public customers that are not Professionals? If so,
how?
3. Is the volume of auction messages generated by Professionals
disruptive to the auction process? If so, how?
4. Are there other methods that involve less potential for unfair
discrimination that could be used to reduce the volume of messages?
5. Do Professionals want their orders to be eligible for entry into
the COA or the COB? Why or why not?
6. Although the Exchange states that the proposal is intended to
allow the Exchange to prevent Professionals from entry into the COB or
COA, the proposed rule change, as drafted, would also allow the
Exchange to determine that non-broker-dealer public customers that are
not Professionals Customers are not eligible for entry into both the
COA and the COB. Do commenters believe that excluding non-broker-dealer
public customers that are not Professionals from the COA and COB is
consistent with the Act? Is so, why? If not, why not?
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-2015-045 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2015-045. 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 the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2015-045 and should be
submitted by September 15, 2015. Rebuttal comments should be submitted
by September 29, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-20935 Filed 8-24-15; 8:45 am]
BILLING CODE 8011-01-P