Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Complex Orders, 62125-62129 [2015-26156]
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Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
‘‘conditionally or unconditionally
exempt any person or transaction . . .
from any provision or provisions of [the
Advisers Act] or of any rule or
regulation thereunder, if and to the
extent that such exemption is necessary
or appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
[the Advisers Act].’’
3. Rule 206(4)–5(e) provides that the
Commission may exempt an investment
adviser from the prohibition under rule
206(4)–5(a)(1) upon consideration of the
factors listed below, among others:
(1) Whether the exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Advisers Act;
(2) Whether the investment adviser:
(i) Before the contribution resulting in
the prohibition was made, adopted and
implemented policies and procedures
reasonably designed to prevent
violations of the rule; and (ii) prior to or
at the time the contribution which
resulted in such prohibition was made,
had no actual knowledge of the
contribution; and (iii) after learning of
the contribution: (A) Has taken all
available steps to cause the contributor
involved in making the contribution
which resulted in such prohibition to
obtain a return of the contribution; and
(B) has taken such other remedial or
preventive measures as may be
appropriate under the circumstances;
(3) Whether, at the time of the
contribution, the contributor was a
covered associate or otherwise an
employee of the investment adviser, or
was seeking such employment;
(4) The timing and amount of the
contribution which resulted in the
prohibition;
(5) The nature of the election (e.g.,
federal, state or local); and
(6) The contributor’s apparent intent
or motive in making the contribution
which resulted in the prohibition, as
evidenced by the facts and
circumstances surrounding such
contribution.
4. Applicants request an order
pursuant to section 206A and rule
206(4)–5(e), exempting them from the
two-year prohibition on compensation
imposed by rule 206(4)–5(a)(1) with
respect to investment advisory services
provided to the Clients within the twoyear period following the Contribution
(the ‘‘Order’’).
5. Applicants submit that the
exemption is necessary and appropriate
in the public interest and consistent
with the protection of investors and the
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purposes fairly intended by the policy
and provisions of the Act.
6. Applicants represent that the
Clients determined to invest with
Applicants and established those
advisory relationships on an arm’s
length basis free from any improper
influence as a result of the Contribution,
and there was no connection between
the Contribution and any past or
potential business between the Clients
and the Applicants.
7. Applicants note that causing the
Applicants to provide advisory services
without compensation for a two-year
period would result in a financial loss
to the Applicants of approximately $2.7
million—an amount that is 5,400 times
the amount of the Contribution.
Applicants contend that such a result is
greatly disproportionate to the violation
and is not consistent with the protection
of investors or a purpose fairly intended
by the policies and provisions of the
Act.
8. Applicants note that they had
adopted and implemented the Policies
at the time of the Contribution and had
the Policies in place at all times since
the adoption of rule 205(4)–5.
Applicants represent that they perform
compliance testing and they have a
rigorous and robust screening of
prospective hires and internal
employees being considered for covered
associate positions.
9. Applicants represent that at no time
did any employees or covered associates
of the Applicants, or any executive or
employee of the Applicants’ affiliates,
other than the Contributor, know of the
Contribution prior to the Contributor’s
self-report to Applicants’ compliance
personnel.
10. Applicants represent that the
Applicants and the Contributor took all
available steps to promptly obtain a
return of the Contribution after the
Contributor’s self-report to Applicants’
compliance personnel, and the full
amount of the Contribution was fully
refunded within one week of the refund
request. Applicants established an
escrow account for all compensation for
advisory services attributable to the
Clients’ assets under management of the
Applicants for the two-year period
beginning on the Contribution Date.
Applicants’ Conditions:
Applicants agree that the Order will
be subject to the following conditions:
1. The Contributor will be prohibited
from soliciting investments from any
‘‘government entity’’ client or
prospective ‘‘government entity’’ client
for which the Recipient is an ‘‘official’’
as defined in rule 206(4)–5(f)(6) until
December 21, 2015 (the ‘‘Restricted
Period’’).
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62125
2. Notwithstanding Condition 1, the
Contributor will be (i) permitted to
respond to inquiries from, and make
presentations to, any government entity
client described in Condition 1
regarding accounts already managed by
the Applicants as of December 21, 2013
and (ii) permitted to respond to
inquiries from any government entity
client regarding an account established
with the Applicants by such
government entity client after December
21, 2013. The Applicants will maintain
a log of such interactions, which will be
maintained and presented in an easily
accessible place for a period of not less
than five years, the first two years in an
appropriate office of the Applicants, and
will be available for inspection by the
staff of the Commission.
3. The Contributor will receive
written notification of these conditions
and will provide a quarterly
certification of compliance through the
Restricted Period. Copies of the
certifications will be maintained and
preserved by the Applicants in an easily
accessible place for a period of not less
than five years, the first two years in an
appropriate office of the Applicants and
will be available for inspection by the
Staff of the Commission.
4. The Applicants will conduct testing
reasonably designed to prevent
violations of the conditions of the Order
and maintain records regarding such
testing, which will be maintained and
preserved in an easily accessible place
for a period of not less than five years,
the first two years in an appropriate
office of the Applicants, and will be
available for inspection by staff of the
Commission.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26146 Filed 10–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76106; File No. SR–CBOE–
2015–081]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Complex
Orders
October 8, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
2, 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, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ 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 complex orders. The text of
the proposed rule change is provided
below.
(additions are in italics; deletions are
[bracketed])
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated Rules
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*
*
*
*
*
Rule 6.53C. Complex Orders on the Hybrid
System
(a) Definition: No change.
(b) Types of Complex Orders: No change.
(c) Complex Order Book
No change.
(d) Process for Complex Order RFR
Auction: Prior to routing to the COB or once
on PAR, eligible complex orders may be
subject to an automated request for responses
(‘‘RFR’’) auction process.
(i) For purposes of paragraph (d):
(1) ‘‘COA’’ is the automated complex order
RFR auction process.
(2) A ‘‘COA-eligible order’’ means a
complex order that, as determined by the
Exchange on a class-by-class basis, is eligible
for a COA considering the order’s
marketability (defined as a number of ticks
away from the current market), size, complex
order type (as defined in paragraphs (a) and
(b) above) and complex order origin types (as
defined in subparagraph (c)(i) above).
Complex orders processed through a COA
may be executed without consideration to
prices of the same complex orders that might
be available on other exchanges.
(ii) Initiation of a COA: On receipt of (1)
a COA-eligible order with two legs and
request from the Trading Permit Holder
representing the order or the PAR operator
handling the order, as applicable, that it be
COA’d or (2) a complex order with three or
more legs that (A) meets the class,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
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marketability, size, and complex order type
parameters of subparagraph (d)(i)(2) or (B) is
designated as immediate or cancel and meets
the class, marketability, and size parameters
of subparagraph (d)(i)(2), in both cases
regardless of the order’s routing parameters
or handling instructions (except for orders
routed for manual handling), the System will
send an RFR message to all Trading Permit
Holders who have elected to receive RFR
messages. Notwithstanding clause (2) of this
subparagraph (ii), the System will reject back
to a Trading Permit Holder any complex
order with three or more legs that includes
a request pursuant to Interpretation and
Policy .04 that the order not COA. Any
complex order described in subparagraph
(d)(ii)(2) [with three or more legs] on PAR
will COA even if the PAR operator requests
that the order not COA. The RFR message
will identify the component series, the size
and side of the market of the COA-eligible
order and any contingencies, if applicable.
(iii)–(ix) No change.
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s Web
site (https://www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Introduction
On September 4, 2014, the Securities
and Exchange Commission (the
‘‘Commission’’) approved a proposal to
amend Exchange rules related to
complex orders (‘‘SR–CBOE–2014–
017’’).5 SR–CBOE–2014–017 was
5 The Exchange filed the proposed rule change
with the Securities and Exchange Commission (the
‘‘Commission’’) on February 19, 2014. On March 3,
2014, the Exchange filed Amendment No. 1 to the
proposed rule change. The proposed rule change, as
modified by Amendment No. 1 thereto, was
published for comment in the Federal Register on
March 10, 2014. See Securities Exchange Act
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intended to limit a potential source of
unintended Market-Maker risk related to
how the Exchange’s Hybrid Trading
System (the ‘‘System’’) 6 calculates risk
parameters under Rule 8.18 when
complex orders leg into the market.7
SR–CBOE–2014–017 accomplished this
by, among other things, providing that
a COA 8 would be initiated ‘‘[o]n receipt
of (1) a COA-eligible order with two legs
and request from the Trading Permit
Holder representing the order or the
PAR operator handling the order, as
applicable, that it be COA’d or (2) a
complex order with three or more legs,
regardless of the order’s routing
parameters or handling instructions
(except for orders routed for manual
handling), the System will send an RFR
message to all Trading Permit Holders
who have elected to receive RFR
messages.’’ 9 However, the System was
designed to filter complex orders
Release No. 71648 (March 5, 2014), 79 FR 13359
(March 10, 2014) (SR–CBOE–2014–017) (‘‘Notice’’).
On June 5, 2014, the Commission instituted
proceedings to determine whether to approve or
disapprove the proposed rule change. After
receiving two comment letters in support of the
proposal, the Commission approved the proposed
rule change on September 4, 2014. See Securities
Exchange Act Release No. 72986, 79 FR 53798
(September 10, 2014) (SR–CBOE–2014–017).
6 The System is a trading platform that allows
automatic executions to occur electronically and
open outcry trades to occur on the floor of the
Exchange. To operate in this ‘‘hybrid’’ environment,
the Exchange has a dynamic order handling system
that has the capability to route orders to the trade
engine for automatic execution and book entry, to
Trading Permit Holder and PAR Official
workstations located in the trading crowds for
manual handling, and/or to other order
management terminals generally located in booths
on the trading floor for manual handling. Where an
order is routed for processing by the Exchange order
handling system depends on various parameters
configured by the Exchange and the order entry
firm itself.
7 As noted by the Amendment, Rule
6.53C(c)(ii)(1) provides that complex orders in the
complex order book (‘‘COB’’) may execute against
individual orders or quotes in the book provided
the complex order can be executed in full (or a
permissible ratio) by the orders and quotes in the
book. Rule 6.53C(d)(v)(1) provides that orders that
are eligible for the complex order auction (‘‘COA’’)
may trade with individual orders and quotes in the
book provided the COA-eligible order can be
executed in full (or a permissible ratio) by the
orders and quotes in the book. COA is an automated
request for responses (‘‘RFR’’) auction process.
Upon initiation of a COA, the Exchange sends an
RFR message to all Trading Permit Holders who
have elected to receive RFR messages, which RFR
message identifies the series, size and side of the
market of the COA-eligible order and any
contingencies. Eligible market participants may
submit responses during a response time interval.
At the conclusion of the response time interval,
COA-eligible orders are allocated in accordance
with Rule 6.53C(d)(v), including against individual
orders and quotes in the book.
8 COA is the automated complex order RFR
auction process. See Rule 6.53C(d)(i)(1).
9 See Securities Exchange Act Release No. 71648
(March 5, 2014), 79 FR 13359 (March 10, 2014) (SR–
CBOE–2014–017) (‘‘Notice’’)
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through the COA eligibility
requirements of subparagraph (d)(i)(2)
prior to initiating a COA pursuant to
paragraph (d)(ii). Therefore, the rule
change from SR–CBOE–2014–017 was
not implemented; instead, the Exchange
immediately began drafting this
corrective filing, which proposes to
amend Rule 6.53C(d)(ii) to provide that
a COA will be initiated upon receipt of
a complex order with three or more legs
that (A) meets the class, marketability,
size, and complex order type parameters
of subparagraph (d)(i)(2) or (B) is
designated as immediate or cancel and
meets the class, marketability, and size
parameters of subparagraph (d)(i)(2), in
both cases (i.e., both (A) or (B))
regardless of the order’s routing
parameters or handling instructions
(except for orders routed for manual
handling).
Proposal
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Prior to implementing SR–CBOE–
2014–017, it was discovered that the
filing did not reference certain System
requirements that must be met before a
COA would be initiated (e.g., the
marketability and size requirements of
Rule 6.53C(d)(i)(2), which are
determined by the Exchange on a classby-class basis). This was not the
Exchange’s intent. In fact, the Exchange
stated in SR–CBOE–2014–017 that the
Exchange may determine on a class-byclass basis which complex orders are
eligible for COA, including by complex
order type and origin type.10 The
Exchange simply failed to reference the
size and marketability parameters also
set forth in Rule 6.53C(d)(i)(2). In
addition, the System was not designed
to initiate a COA even if a complex
order did not meet the marketability and
size requirements determined by the
exchange in accordance with paragraph
(d)(i)(2). The System was designed to
filter complex orders through the COA
eligibility requirements of paragraph
(d)(i)(2) prior to initiating a COA
pursuant to paragraph (d)(ii).11 As it was
never the intention of the Exchange to
COA all complex orders with three or
more legs irrespective of the COA
eligibility requirements of paragraph
(d)(i)(2), the Exchange proposes to
10 See SR–CBOE–2014–017 at 29 (referencing
some of the parameters that determine whether a
complex order is eligible for COA, including order
type and origin code).
11 As noted in SR–CBOE–2014–017, Rule
6.53C(d)(i)(2) provides that the Exchange may
determine on a class-by-class basis which complex
orders are eligible for COA, including by complex
order type and origin type; however, SR–CBOE–
2014–017 inadvertently failed to reference the
marketability and size of a complex order which is
also a parameter under paragraph (d)(i)(2). Id.
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amend Rule 6.53(d)(ii) to provide that a
COA will be initiated:
On receipt of (1) a COA-eligible order with
two legs and request from the Trading Permit
Holder representing the order or the PAR
operator handling the order, as applicable,
that it be COA’d or (2) a complex order with
three or more legs that (A) meets the class,
marketability, size, and complex order type
parameters of subparagraph (d)(i)(2) or (B) is
designated as immediate or cancel and meets
the class, marketability, and size parameters
of subparagraph (d)(i)(2), in both cases
regardless of the order’s routing parameters
or handling instructions (except for orders
routed for manual handling), the System will
send an RFR message to all Trading Permit
Holders who have elected to receive RFR
messages. Notwithstanding clause (2) of this
subparagraph (ii), the System will reject back
to a Trading Permit Holder any complex
order with three or more legs that includes
a request pursuant to Interpretation and
Policy .04 that the order not COA. Any
complex order described in subparagraph
(d)(ii)(2) on PAR will COA even if the PAR
operator requests that the order not COA. The
RFR message will identify the component
series, the size and side of the market of the
COA-eligible order and any contingencies, if
applicable.12
The Exchange notes that complex
orders that are not COA-eligible are
either routed to the Public Automatic
Routing System (‘‘PAR’’) (e.g., orders
that do not meet the size, order type,
and origin type parameters are routed to
PAR) or routed to COB (e.g., orders that
do not meet the marketability
parameter).
As noted in the rule text above, the
Exchange is proposing to hardcode the
complex order type parameter as it
relates to complex orders with three or
more legs that are entered as immediate
or cancel (‘‘IOC’’). Currently, the
Exchange does not COA complex orders
that are entered as IOC. The effect of
this proposed rule will be that complex
orders with three or more legs that are
designated as IOC and meet the class,
marketability, and size parameters will
always be eligible to COA. Complex
orders with three or more legs that are
entered as IOC are the orders that
primarily create the Market-Maker risk
described in SR–CBOE–2014–017.13
12 This proposed change applies to Hybrid classes
only, and not Hybrid 3.0 classes. The Exchange
does not believe the risk discussed in this rule filing
is present in Hybrid 3.0 classes. The proposed rule
change amends Rule 6.53C, Interpretation and
Policy .10 to indicate that complex orders in Hybrid
3.0 classes, regardless of the number of legs, will
COA in the same manner they currently do.
13 The Exchange notes that the rule text provided
for in SR–CBOE–2014–017 essentially required all
complex orders with three or more legs to COA
(including orders entered as IOC), but the Exchange
never implemented the requirement with regards to
complex orders with three or more legs because, as
previously noted, it was not the Exchange’s
intention to COA all complex orders with three or
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62127
Therefore, the Exchange believes it is
appropriate for complex orders with
three or more legs that are entered as
IOC to COA. The Exchange notes that
the class, marketability, size, and
complex order type parameters will
have the same settings whether the
complex order has two or three or more
legs, except, as noted, complex orders
with three or more legs will not be
prohibited from accessing COA based
on an IOC designation. The Exchange
notes that all market participants
submitting complex orders with three or
more legs that are marked IOC are
treated the same—that is, assuming the
complex orders with three or more legs
that are marked IOC meet the class,
marketability and size parameters, the
orders shall COA. The Exchange also
notes that market participants determine
whether an order is marked IOC; thus,
it is market participants that decide
whether an order with three or more
legs will COA.
Additionally, the proposed rule does
not affect the outcome of SR–CBOE–
2014–017 as it relates to complex orders
with three or more legs that are entered
as IOC because neither SR–CBOE–2014–
017 nor this proposal allow the
Exchange to limit access to COA for
orders with three or more legs based on
the IOC designation. In other words, a
market participant entering a complex
order with three or more legs designated
as IOC would expect (based on SR–
CBOE–2014–017 providing that all
complex orders with three or more legs
shall COA) the order to COA. This
proposed rule does not change that
expectation. The only difference is that
this proposed rule specifies that the
complex order with three or more legs
that is marked IOC must also meet the
class, marketability, and size parameters
in order to COA.
Further, the proposed rule does not
materially affect the outcome or purpose
of SR–CBOE–2014–017; rather, the
proposed rule seeks to clarify that a
complex order must meet the eligibility
requirements of Rule 6.53C(d)(i)(2) prior
to the Exchange initiating a COA. The
Exchange still believes the proposed
rule will allow Market-Makers to better
manage their risk in their appointments
and that the reduced risk will encourage
Market-Makers to quote larger size,
which will increase liquidity and
enhance competition in those classes.
The Exchange also notes that regardless
of marketability requirements of
paragraph (d)(i)(2), an order that is not
more legs irrespective of the COA eligibility
requirements. As soon as the Exchange realized SR–
CBOE–2014–017 did not accurately reflect the
Exchange’s intentions, the Exchange began drafting
this rule filing.
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marketable will not be executed. The
proposed rule change is simply
intended to clarify when a COA will be
initiated and to reflect the design of the
System, which is set-up to filter
complex orders through the COA
eligibility requirements prior to the
initiation of a COA. Additionally, the
Exchange believes the proposed rule is
non-controversial because, as with the
current rule, all market participants
submitting orders with three or more
legs will be treated equally (i.e., for
orders with three or more legs the
Exchange will not have the flexibility to
limit COA-eligibility to certain origin
types; rather, the Exchange will, by rule,
accept all origin types for complex
orders with three or more legs).
The Exchange will announce the
implementation date of the proposed
rule change in a Regulatory Circular to
be published no later than 90 days
following the effective date of this filing.
The implementation date will be no
later than 180 days following the
effective date of this filing.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.14 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 15 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5)16 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed rule change serves to
clarify SR–CBOE–2014–017 and does
not materially affect the outcome of SR–
CBOE–2014–017. As noted above, it was
not the intent of SR–CBOE–2014–017 to
COA all complex orders irrespective of
14 15
15 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
16 Id.
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the eligibility parameters of Rule
6.53C(d)(i)(2); rather, the filing was
intended to reflect the System’s design,
which filters complex orders through
the COA eligibility requirements of
paragraph (d)(i)(2) prior to initiating a
COA. Therefore, under the proposed
rule, complex orders with three or more
legs will need to meet the class,
marketability, size, and order type
parameters of subparagraph (d)(i)(2) in
order to COA, except the Exchange, by
rule, will not be able to limit COAeligibility based on a complex order
with three or more legs being entered as
IOC. Additionally, complex Orders with
three or more legs will filter through the
origin type parameter of subparagraph
(d)(i)(2); however, for complex orders
with three or more legs the Exchange, by
rule, will not have the flexibility to limit
COA-eligibility to certain origin types.
This is consistent with SR–CBOE–2014–
017 because SR–CBOE–2014–017 also
did not provide the Exchange the
flexibility to limit COA-eligibility for
complex orders with three or more legs
to certain origin types.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on intramarket or intermarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act because the rule
change does not materially affect the
outcome or purpose of SR–CBOE–2014–
017. SR–CBOE–2014–017 was designed
to reduce risk to Market-Makers that are
quoting in the regular market, and this
proposed rule change will not affect that
outcome. In addition, Rule 6.53C(d)(ii),
as amended by SR–CBOE–2014–017,
clearly provides that the origin type of
a complex order with three or more legs
has no bearing on whether the complex
order will COA, and this proposed rule
does not modify how different origin
types will be treated for purposes of
COA. This proposed rule also does not
affect the outcome of SR–CBOE–2014–
017 as it relates to complex orders with
three or more legs that are entered as
IOC because neither SR–CBOE–2014–
017 nor this proposal allow the
Exchange to limit access to COA for
orders with three or more legs based on
the IOC designation. In other words, a
market participant entering a complex
order with three or more legs designated
as IOC would expect (based on SR–
CBOE–2014–017 providing that all
complex orders with three or more legs
shall COA) the order to COA. This
proposed rule does not change that
expectation. The only difference is that
this proposed rule specifies that the
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
complex order with three or more legs
that is marked IOC must also meet the
class, marketability, and size parameters
in order to COA. This proposed rule
simply seeks to apply the class,
marketability, size, and complex order
type parameters of Rule 6.53C(d)(i)(2) to
complex orders with three or more legs.
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 foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 17 and Rule 19b–4(f)(6) 18
thereunder. At any time within 60 days
of the filing of the proposed rule change,
the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
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:
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–2015–081 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
17 15
18 17
E:\FR\FM\15OCN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
15OCN1
Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2015–081. 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–
2015–081 and should be submitted on
or before November 5, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26156 Filed 10–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
mstockstill on DSK4VPTVN1PROD with NOTICES
[Release No. 34–76108; File No. SR–OCC–
2015–015]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change
Concerning the Requirement for
Clearing Members To Participate in
Operation Testing
October 8, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
19 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:19 Oct 14, 2015
Jkt 238001
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2
notice is hereby given that on October
2, 2015, The Options Clearing
Corporation (‘‘OCC’’) 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 prepared
by OCC. The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
This proposed rule change by OCC
codifies the requirement for clearing
members to participate in operational
testing, including testing of OCC’s
business continuity and disaster
recovery plans (‘‘BCP Testing’’).
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
OCC 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. OCC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
This proposed rule change would
codify OCC’s current requirement for
clearing members to participate in
operational testing, including testing of
OCC’s BCP Testing. Article V of OCC’s
By-Laws sets forth OCC’s initial
membership requirements. Pursuant to
Interpretation and Policy .02(b) of
Article V, Section 1 of OCC’s By-Laws,
an applicant for clearing membership
must demonstrate that it is operationally
capable of: (i) Processing expected
volumes and values of transactions
cleared by the clearing member within
required time frames, including at peak
times and on peak days; (ii) fulfilling
collateral, payment, and delivery
obligations as required by OCC; and (iii)
participating in applicable default
management activities, as may be
required by OCC and in accordance
with applicable laws and regulations.3
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See OCC’s By-Laws, Article V, Section 1,
Interpretation and Policy .02(b).
2 17
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
62129
Once a firm becomes a member of
OCC, Chapter II of OCC’s Rules sets
forth additional operational
requirements. In particular, OCC Rule
214(d) requires clearing members to
maintain their operational capabilities
as a continuing obligation of
membership.4 In accordance with such
requirements, OCC annually conducts
BCP Testing with certain clearing
members through coordinated testing.
Recently, the Commission promulgated
Regulation System Compliance and
Integrity (‘‘Reg. SCI’’), which would
require OCC to establish standards to
designate members 5 and require
participation by such designated
members in scheduled BCP Testing with
OCC on an annual basis.6 OCC is
proposing to adopt Rule 218 so that
OCC’s Rules clearly articulate OCC’s
requirement with respect to BCP
Testing.
Proposed Rule 218 would increase
transparency regarding and ensure
OCC’s practice with respect to BCP
Testing is consistent with Reg. SCI by
articulating OCC’s right to: (i) Designate
clearing members required to participate
in BCP Testing; (ii) determine the scope
of such BCP Testing; and (iii) require
clearing members to comply with the
subject BCP Testing within specified
timeframes. In connection therewith,
OCC is planning to refine the criteria
that it currently uses to designate firms
for BCP Testing. For example, while
OCC will continue to rely on volume
thresholds to mandate participation in
annual BCP Testing, OCC will also take
into account additional factors when
designating firms for BCP Testing,
including but not limited to: (i) The
nature of interconnectedness based on a
firm’s approved business activities; (ii)
the existence of significant operational
issues during the past twelve months,
and (iii) past performance with respect
to BCP Testing. Clearing members will
be informed of the specific standards
that will be used by OCC, along with
4 See OCC Rule 214(d). OCC Rule 214(d) requires
clearing members to maintain their ability to,
among other things: (i) Process expected volumes
and values of transactions cleared by the clearing
member within required time frames, including at
peak times and on peak days; (ii) fulfill collateral,
payment, and delivery obligations as required by
OCC; and (iii) participate in applicable default
management activities, as may be required by OCC
and in accordance with applicable laws and
regulations.
5 17 CFR 242.1004(a). In adopting Reg. SCI, the
Commission determined not to require covered
entities to notify the Commission of its designations
or the standards that will be used in designating its
members, recognizing instead that each entity’s
standards, designations, and updates, if applicable,
would be part of its records and, therefore, available
to the Commission and its staff upon request. See
79 FR 72350.
6 17 CFR 242.1004(a) and (b).
E:\FR\FM\15OCN1.SGM
15OCN1
]]>Agencies
[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Notices]
[Pages 62125-62129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26156]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76106; File No. SR-CBOE-2015-081]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Complex Orders
October 8, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 62126]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 2, 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, II, and III 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 complex orders.
The text of the proposed rule change is provided below.
(additions are in italics; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 6.53C. Complex Orders on the Hybrid System
(a) Definition: No change.
(b) Types of Complex Orders: No change.
(c) Complex Order Book
No change.
(d) Process for Complex Order RFR Auction: Prior to routing to
the COB or once on PAR, eligible complex orders may be subject to an
automated request for responses (``RFR'') auction process.
(i) For purposes of paragraph (d):
(1) ``COA'' is the automated complex order RFR auction process.
(2) A ``COA-eligible order'' means a complex order that, as
determined by the Exchange on a class-by-class basis, is eligible
for a COA considering the order's marketability (defined as a number
of ticks away from the current market), size, complex order type (as
defined in paragraphs (a) and (b) above) and complex order origin
types (as defined in subparagraph (c)(i) above). Complex orders
processed through a COA may be executed without consideration to
prices of the same complex orders that might be available on other
exchanges.
(ii) Initiation of a COA: On receipt of (1) a COA-eligible order
with two legs and request from the Trading Permit Holder
representing the order or the PAR operator handling the order, as
applicable, that it be COA'd or (2) a complex order with three or
more legs that (A) meets the class, marketability, size, and complex
order type parameters of subparagraph (d)(i)(2) or (B) is designated
as immediate or cancel and meets the class, marketability, and size
parameters of subparagraph (d)(i)(2), in both cases regardless of
the order's routing parameters or handling instructions (except for
orders routed for manual handling), the System will send an RFR
message to all Trading Permit Holders who have elected to receive
RFR messages. Notwithstanding clause (2) of this subparagraph (ii),
the System will reject back to a Trading Permit Holder any complex
order with three or more legs that includes a request pursuant to
Interpretation and Policy .04 that the order not COA. Any complex
order described in subparagraph (d)(ii)(2) [with three or more legs]
on PAR will COA even if the PAR operator requests that the order not
COA. The RFR message will identify the component series, the size
and side of the market of the COA-eligible order and any
contingencies, if applicable.
(iii)-(ix) No change.
* * * * *
The text of the proposed rule change is also available on the
Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Introduction
On September 4, 2014, the Securities and Exchange Commission (the
``Commission'') approved a proposal to amend Exchange rules related to
complex orders (``SR-CBOE-2014-017'').\5\ SR-CBOE-2014-017 was intended
to limit a potential source of unintended Market-Maker risk related to
how the Exchange's Hybrid Trading System (the ``System'') \6\
calculates risk parameters under Rule 8.18 when complex orders leg into
the market.\7\ SR-CBOE-2014-017 accomplished this by, among other
things, providing that a COA \8\ would be initiated ``[o]n receipt of
(1) a COA-eligible order with two legs and request from the Trading
Permit Holder representing the order or the PAR operator handling the
order, as applicable, that it be COA'd or (2) a complex order with
three or more legs, regardless of the order's routing parameters or
handling instructions (except for orders routed for manual handling),
the System will send an RFR message to all Trading Permit Holders who
have elected to receive RFR messages.'' \9\ However, the System was
designed to filter complex orders
[[Page 62127]]
through the COA eligibility requirements of subparagraph (d)(i)(2)
prior to initiating a COA pursuant to paragraph (d)(ii). Therefore, the
rule change from SR-CBOE-2014-017 was not implemented; instead, the
Exchange immediately began drafting this corrective filing, which
proposes to amend Rule 6.53C(d)(ii) to provide that a COA will be
initiated upon receipt of a complex order with three or more legs that
(A) meets the class, marketability, size, and complex order type
parameters of subparagraph (d)(i)(2) or (B) is designated as immediate
or cancel and meets the class, marketability, and size parameters of
subparagraph (d)(i)(2), in both cases (i.e., both (A) or (B))
regardless of the order's routing parameters or handling instructions
(except for orders routed for manual handling).
---------------------------------------------------------------------------
\5\ The Exchange filed the proposed rule change with the
Securities and Exchange Commission (the ``Commission'') on February
19, 2014. On March 3, 2014, the Exchange filed Amendment No. 1 to
the proposed rule change. The proposed rule change, as modified by
Amendment No. 1 thereto, was published for comment in the Federal
Register on March 10, 2014. See Securities Exchange Act Release No.
71648 (March 5, 2014), 79 FR 13359 (March 10, 2014) (SR-CBOE-2014-
017) (``Notice''). On June 5, 2014, the Commission instituted
proceedings to determine whether to approve or disapprove the
proposed rule change. After receiving two comment letters in support
of the proposal, the Commission approved the proposed rule change on
September 4, 2014. See Securities Exchange Act Release No. 72986, 79
FR 53798 (September 10, 2014) (SR-CBOE-2014-017).
\6\ The System is a trading platform that allows automatic
executions to occur electronically and open outcry trades to occur
on the floor of the Exchange. To operate in this ``hybrid''
environment, the Exchange has a dynamic order handling system that
has the capability to route orders to the trade engine for automatic
execution and book entry, to Trading Permit Holder and PAR Official
workstations located in the trading crowds for manual handling, and/
or to other order management terminals generally located in booths
on the trading floor for manual handling. Where an order is routed
for processing by the Exchange order handling system depends on
various parameters configured by the Exchange and the order entry
firm itself.
\7\ As noted by the Amendment, Rule 6.53C(c)(ii)(1) provides
that complex orders in the complex order book (``COB'') may execute
against individual orders or quotes in the book provided the complex
order can be executed in full (or a permissible ratio) by the orders
and quotes in the book. Rule 6.53C(d)(v)(1) provides that orders
that are eligible for the complex order auction (``COA'') may trade
with individual orders and quotes in the book provided the COA-
eligible order can be executed in full (or a permissible ratio) by
the orders and quotes in the book. COA is an automated request for
responses (``RFR'') auction process. Upon initiation of a COA, the
Exchange sends an RFR message to all Trading Permit Holders who have
elected to receive RFR messages, which RFR message identifies the
series, size and side of the market of the COA-eligible order and
any contingencies. Eligible market participants may submit responses
during a response time interval. At the conclusion of the response
time interval, COA-eligible orders are allocated in accordance with
Rule 6.53C(d)(v), including against individual orders and quotes in
the book.
\8\ COA is the automated complex order RFR auction process. See
Rule 6.53C(d)(i)(1).
\9\ See Securities Exchange Act Release No. 71648 (March 5,
2014), 79 FR 13359 (March 10, 2014) (SR-CBOE-2014-017) (``Notice'')
---------------------------------------------------------------------------
Proposal
Prior to implementing SR-CBOE-2014-017, it was discovered that the
filing did not reference certain System requirements that must be met
before a COA would be initiated (e.g., the marketability and size
requirements of Rule 6.53C(d)(i)(2), which are determined by the
Exchange on a class-by-class basis). This was not the Exchange's
intent. In fact, the Exchange stated in SR-CBOE-2014-017 that the
Exchange may determine on a class-by-class basis which complex orders
are eligible for COA, including by complex order type and origin
type.\10\ The Exchange simply failed to reference the size and
marketability parameters also set forth in Rule 6.53C(d)(i)(2). In
addition, the System was not designed to initiate a COA even if a
complex order did not meet the marketability and size requirements
determined by the exchange in accordance with paragraph (d)(i)(2). The
System was designed to filter complex orders through the COA
eligibility requirements of paragraph (d)(i)(2) prior to initiating a
COA pursuant to paragraph (d)(ii).\11\ As it was never the intention of
the Exchange to COA all complex orders with three or more legs
irrespective of the COA eligibility requirements of paragraph
(d)(i)(2), the Exchange proposes to amend Rule 6.53(d)(ii) to provide
that a COA will be initiated:
---------------------------------------------------------------------------
\10\ See SR-CBOE-2014-017 at 29 (referencing some of the
parameters that determine whether a complex order is eligible for
COA, including order type and origin code).
\11\ As noted in SR-CBOE-2014-017, Rule 6.53C(d)(i)(2) provides
that the Exchange may determine on a class-by-class basis which
complex orders are eligible for COA, including by complex order type
and origin type; however, SR-CBOE-2014-017 inadvertently failed to
reference the marketability and size of a complex order which is
also a parameter under paragraph (d)(i)(2). Id.
On receipt of (1) a COA-eligible order with two legs and request
from the Trading Permit Holder representing the order or the PAR
operator handling the order, as applicable, that it be COA'd or (2)
a complex order with three or more legs that (A) meets the class,
marketability, size, and complex order type parameters of
subparagraph (d)(i)(2) or (B) is designated as immediate or cancel
and meets the class, marketability, and size parameters of
subparagraph (d)(i)(2), in both cases regardless of the order's
routing parameters or handling instructions (except for orders
routed for manual handling), the System will send an RFR message to
all Trading Permit Holders who have elected to receive RFR messages.
Notwithstanding clause (2) of this subparagraph (ii), the System
will reject back to a Trading Permit Holder any complex order with
three or more legs that includes a request pursuant to
Interpretation and Policy .04 that the order not COA. Any complex
order described in subparagraph (d)(ii)(2) on PAR will COA even if
the PAR operator requests that the order not COA. The RFR message
will identify the component series, the size and side of the market
of the COA-eligible order and any contingencies, if applicable.\12\
---------------------------------------------------------------------------
\12\ This proposed change applies to Hybrid classes only, and
not Hybrid 3.0 classes. The Exchange does not believe the risk
discussed in this rule filing is present in Hybrid 3.0 classes. The
proposed rule change amends Rule 6.53C, Interpretation and Policy
.10 to indicate that complex orders in Hybrid 3.0 classes,
regardless of the number of legs, will COA in the same manner they
currently do.
The Exchange notes that complex orders that are not COA-eligible
are either routed to the Public Automatic Routing System (``PAR'')
(e.g., orders that do not meet the size, order type, and origin type
parameters are routed to PAR) or routed to COB (e.g., orders that do
not meet the marketability parameter).
As noted in the rule text above, the Exchange is proposing to
hardcode the complex order type parameter as it relates to complex
orders with three or more legs that are entered as immediate or cancel
(``IOC''). Currently, the Exchange does not COA complex orders that are
entered as IOC. The effect of this proposed rule will be that complex
orders with three or more legs that are designated as IOC and meet the
class, marketability, and size parameters will always be eligible to
COA. Complex orders with three or more legs that are entered as IOC are
the orders that primarily create the Market-Maker risk described in SR-
CBOE-2014-017.\13\ Therefore, the Exchange believes it is appropriate
for complex orders with three or more legs that are entered as IOC to
COA. The Exchange notes that the class, marketability, size, and
complex order type parameters will have the same settings whether the
complex order has two or three or more legs, except, as noted, complex
orders with three or more legs will not be prohibited from accessing
COA based on an IOC designation. The Exchange notes that all market
participants submitting complex orders with three or more legs that are
marked IOC are treated the same--that is, assuming the complex orders
with three or more legs that are marked IOC meet the class,
marketability and size parameters, the orders shall COA. The Exchange
also notes that market participants determine whether an order is
marked IOC; thus, it is market participants that decide whether an
order with three or more legs will COA.
---------------------------------------------------------------------------
\13\ The Exchange notes that the rule text provided for in SR-
CBOE-2014-017 essentially required all complex orders with three or
more legs to COA (including orders entered as IOC), but the Exchange
never implemented the requirement with regards to complex orders
with three or more legs because, as previously noted, it was not the
Exchange's intention to COA all complex orders with three or more
legs irrespective of the COA eligibility requirements. As soon as
the Exchange realized SR-CBOE-2014-017 did not accurately reflect
the Exchange's intentions, the Exchange began drafting this rule
filing.
---------------------------------------------------------------------------
Additionally, the proposed rule does not affect the outcome of SR-
CBOE-2014-017 as it relates to complex orders with three or more legs
that are entered as IOC because neither SR-CBOE-2014-017 nor this
proposal allow the Exchange to limit access to COA for orders with
three or more legs based on the IOC designation. In other words, a
market participant entering a complex order with three or more legs
designated as IOC would expect (based on SR-CBOE-2014-017 providing
that all complex orders with three or more legs shall COA) the order to
COA. This proposed rule does not change that expectation. The only
difference is that this proposed rule specifies that the complex order
with three or more legs that is marked IOC must also meet the class,
marketability, and size parameters in order to COA.
Further, the proposed rule does not materially affect the outcome
or purpose of SR-CBOE-2014-017; rather, the proposed rule seeks to
clarify that a complex order must meet the eligibility requirements of
Rule 6.53C(d)(i)(2) prior to the Exchange initiating a COA. The
Exchange still believes the proposed rule will allow Market-Makers to
better manage their risk in their appointments and that the reduced
risk will encourage Market-Makers to quote larger size, which will
increase liquidity and enhance competition in those classes. The
Exchange also notes that regardless of marketability requirements of
paragraph (d)(i)(2), an order that is not
[[Page 62128]]
marketable will not be executed. The proposed rule change is simply
intended to clarify when a COA will be initiated and to reflect the
design of the System, which is set-up to filter complex orders through
the COA eligibility requirements prior to the initiation of a COA.
Additionally, the Exchange believes the proposed rule is non-
controversial because, as with the current rule, all market
participants submitting orders with three or more legs will be treated
equally (i.e., for orders with three or more legs the Exchange will not
have the flexibility to limit COA-eligibility to certain origin types;
rather, the Exchange will, by rule, accept all origin types for complex
orders with three or more legs).
The Exchange will announce the implementation date of the proposed
rule change in a Regulatory Circular to be published no later than 90
days following the effective date of this filing. The implementation
date will be no later than 180 days following the effective date of
this filing.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\14\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \15\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5)\16\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
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In particular, the Exchange believes the proposed rule change
serves to clarify SR-CBOE-2014-017 and does not materially affect the
outcome of SR-CBOE-2014-017. As noted above, it was not the intent of
SR-CBOE-2014-017 to COA all complex orders irrespective of the
eligibility parameters of Rule 6.53C(d)(i)(2); rather, the filing was
intended to reflect the System's design, which filters complex orders
through the COA eligibility requirements of paragraph (d)(i)(2) prior
to initiating a COA. Therefore, under the proposed rule, complex orders
with three or more legs will need to meet the class, marketability,
size, and order type parameters of subparagraph (d)(i)(2) in order to
COA, except the Exchange, by rule, will not be able to limit COA-
eligibility based on a complex order with three or more legs being
entered as IOC. Additionally, complex Orders with three or more legs
will filter through the origin type parameter of subparagraph
(d)(i)(2); however, for complex orders with three or more legs the
Exchange, by rule, will not have the flexibility to limit COA-
eligibility to certain origin types. This is consistent with SR-CBOE-
2014-017 because SR-CBOE-2014-017 also did not provide the Exchange the
flexibility to limit COA-eligibility for complex orders with three or
more legs to certain origin types.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on intramarket or intermarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act because the
rule change does not materially affect the outcome or purpose of SR-
CBOE-2014-017. SR-CBOE-2014-017 was designed to reduce risk to Market-
Makers that are quoting in the regular market, and this proposed rule
change will not affect that outcome. In addition, Rule 6.53C(d)(ii), as
amended by SR-CBOE-2014-017, clearly provides that the origin type of a
complex order with three or more legs has no bearing on whether the
complex order will COA, and this proposed rule does not modify how
different origin types will be treated for purposes of COA. This
proposed rule also does not affect the outcome of SR-CBOE-2014-017 as
it relates to complex orders with three or more legs that are entered
as IOC because neither SR-CBOE-2014-017 nor this proposal allow the
Exchange to limit access to COA for orders with three or more legs
based on the IOC designation. In other words, a market participant
entering a complex order with three or more legs designated as IOC
would expect (based on SR-CBOE-2014-017 providing that all complex
orders with three or more legs shall COA) the order to COA. This
proposed rule does not change that expectation. The only difference is
that this proposed rule specifies that the complex order with three or
more legs that is marked IOC must also meet the class, marketability,
and size parameters in order to COA. This proposed rule simply seeks to
apply the class, marketability, size, and complex order type parameters
of Rule 6.53C(d)(i)(2) to complex orders with three or more legs.
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 foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \17\ and
Rule 19b-4(f)(6) \18\ thereunder. At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2015-081 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 62129]]
Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2015-081. 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-2015-081 and should be
submitted on or before November 5, 2015.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26156 Filed 10-14-15; 8:45 am]
BILLING CODE 8011-01-P
