Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Disaster Recovery, 65258-65263 [2015-27086]
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65258
Federal Register / Vol. 80, No. 206 / Monday, October 26, 2015 / Notices
First-Class Package International
Service. Overall, prices for First-Class
Package International Service (FCPIS)
increase by 21.6 percent. Commercial
Plus prices will be equivalent to
Commercial Base prices and deeper
discounting may be available to
customers through negotiated service
agreements. Id.
International Ancillary Services and
Special Services. Overall, International
Postal Money Orders prices increase by
5.6 percent. The International Money
Order Inquiry Fee increases by 3.5
percent. The International Money
Transfer Service prices increase up to
3.7 percent. Id. at 6.
Further details of these changes may
be found in the attachment to
Governors’ Decision No. 15–1, which is
included as part of the Notice and
contains proposed changes to the MCS
in legislative format.
The Notice also includes three
additional attachments:
• A redacted table showing FY 2016
projected volumes, revenues,
attributable costs, contribution, and cost
coverage for each product, assuming
implementation of the new prices on
January 17, 2016.
• A redacted table showing FY 2016
projected volumes, revenues,
attributable costs, contribution, and cost
coverage for each product, assuming a
hypothetical implementation of the new
prices on October 1, 2015.
• An application for non-public
treatment of the attributable costs,
contribution, and cost coverage data in
the unredacted version of the annex to
Governors’ Decision No. 15–1, as well as
the supporting materials for the data.
The table referenced above shows that
the share of institutional cost generated
by competitive products, assuming
implementation of new prices on
January 17, 2016, is expected to be 15.8
percent.
Notice. The Commission establishes
Docket No. CP2016–9 to consider the
Postal Service’s Notice. Interested
persons may express views and offer
comments on whether the planned
changes are consistent with 39 U.S.C.
3632, 3633, 3642, 39 CFR part 3015, and
39 CFR 3020 subparts B and E.
Comments are due no later than October
29, 2015. For specific details of the
planned price and classification
changes, interested persons are
encouraged to review the Notice, which
is available on the Commission’s Web
site, www.prc.gov.
Pursuant to 39 U.S.C. 505, Tracy N.
Ferguson is appointed to serve as Public
Representative to represent the interests
of the general public in this docket.
It is ordered:
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1. The Commission establishes Docket
No. CP2016–9 to provide interested
persons an opportunity to express views
and offer comments on whether the
planned changes are consistent with 39
U.S.C. 3632, 3633, 3642, 39 CFR part
3015, and 39 CFR 3020 subparts B and
E.
2. Comments are due no later than
October 29, 2015.
3. The Commission appoints Tracy N.
Ferguson to serve as Public
Representative to represent the interests
of the general public in this proceeding.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2015–27096 Filed 10–23–15; 8:45 am]
BILLING CODE 7710–FW–P
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.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76203; File No. SR–CBOE–
2015–088]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Disaster
Recovery
October 20, 2015.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
8, 2015, Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, and II below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 6.18 relating to disaster recovery.
The text of the proposed rule change is
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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The Exchange proposes to amend
Rule 6.18 relating to disaster recovery.
Specifically, the Exchange proposes to
update Rule 6.18 to further describe the
Exchange’s back-up systems, the
circumstances under which they may be
used, and the testing that the Exchange
may conduct to ensure the availability,
functionality and performance of such
systems. Additionally, the Exchange
proposes certain updates to Rule 6.18 in
response to new disaster recovery
regulations and business resumption
standards recently adopted by the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) as
promulgated in Regulation Systems
Compliance and Integrity (‘‘Regulation
SCI’’) under the Act.5
Background
The Exchange adopted Rule 6.18 in
2006 for the limited purpose of
providing alternative means of
operation in the event of a physical
disaster. In particular, Rule 6.18, as
originally adopted, was intended to deal
with trading floor closures, providing
for the operation of a ‘‘Disaster Recovery
Facility’’ (‘‘DRF’’) in the event that a
disaster or other unusual circumstance
rendered the trading floor inoperable.6
5 See Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR 72252 (December 5,
2014) (Regulation Systems Compliance and
Integrity) (File No. S7–01–13).
6 See Securities Exchange Act Release No. 54171
(July 19, 2006), 71 FR 42427 (July 26, 2006) (Order
Approving Proposed Rule Change and Amendment
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Under original Rule 6.18, if the
Exchange were forced to halt trading
due to a disaster or other physical
impairment of its trading floor, the
Exchange and its members 7 could
operate remotely in a screen-based only
environment from the DRF while the
trading floor was unavailable. While
operating from the DRF, open outcry
trading would be suspended.
In 2012, Rule 6.18 was amended in
connection with the Exchange’s
relocation of its primary data center to
the East Coast and the consequent
conversion of its former primary data
center to a back-up data center in
Chicago.8 Specifically, Rule 6.18 was
amended to deal with newly possible
situations in which the primary data
center could continue to operate despite
the trading floor being rendered
inoperable or in which the back-up data
center might be used despite the trading
floor being operational. Specifically, as
amended, Rule 6.18 provided that in the
event that the Exchange were forced to
switch operations to the back-up data
center, the Exchange’s trading floor
could still be used and that in the event
that the trading floor were inoperable,
the Exchange could still operate using a
floorless configuration or screen-based
only environment on the Exchange’s
primary data center. References to the
DRF and other irrelevant portions of the
original rule were eliminated or
replaced with references to [sic]
Exchange’s primary and back-up data
centers as appropriate.
In addition to adding greater detail to
the Exchange’s disaster recovery rules in
Rule 6.18, the Exchange proposes to
make updates to Rule 6.18 to harmonize
its disaster recovery rules with the
newly implemented disaster recoveryrelated regulatory imperatives of
Regulation SCI. Regulation SCI
supersedes and replaces the SEC’s
voluntary Automation Review Policy
(‘‘ARP’’), established by the
Commission’s two policy statements
each titled ‘‘Automated Systems of SelfRegulatory Organizations,’’ issued in
1989 and 1991, expanding existing
No. 1 Thereto Regarding a Disaster Recovery
Facility) (SR–CBOE–2006–001[sic]).
7 Prior to its demutualization in 2010, the
Exchange was a member-owned organization. See
Securities Exchange Act Release No. 62382 (June
25, 2010), 75 FR 38164 (July 1, 2010) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Conforming Changes in
Connection With Demutualization) (SR–CBOE–
2010–058).
8 See Securities Exchange Act Release No. 68301
(November 27, 2012), 77 FR 71650 (December 3,
2012) (Notice of Filing and Order Granting
Accelerated Approval of Proposed Rule Change To
Amend CBOE Rule 6.18 Concerning the Exchange’s
Disaster Recovery Facility) (SR–CBOE–2012–111).
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practices and making them mandatory.9
As part of Regulation SCI, the Exchange
is required to maintain back-up and
recovery capabilities with sufficient
resiliency and geographical diversity
and that are reasonably designed to
achieve next business-day resumption
of trading and two-hour resumption of
critical systems following a wide-scale
disruption.10 The Exchange must also
participate in at least annual testing of
its business continuity and disaster
recovery plans and, to that end, develop
and adopt standards to designate which
of its TPHs must participate in testing
in order to reasonably ensure the
maintenance of a fair and orderly
market if the Exchange’s disaster
recovery plan must be activated.11
Although the Exchange’s current Rules
provide the Exchange sufficient
authority to meet its disaster recoveryrelated obligations under Regulation
SCI, the Exchange believes that certain
clarifying updates to the Rules are
warranted in light of Regulation SCI.
Proposed Rule Changes
The Exchange proposes to make
changes to Rule 6.18 to provide
additional details regarding the
Exchange’s back-up trading systems and
business continuity and disaster
recovery plans activation and testing. As
discussed above, the Exchange also
seeks to update its disaster recovery
rules to ensure consistency with
Regulation SCI.
Current Rule 6.18 is divided into five
sections, (a) through (e). Rule 6.18(a)
authorizes the Exchange to maintain a
back-up data center to preserve the
Exchange’s ability to trade options in
the event the Exchange’s primary data
center becomes inoperable or otherwise
unavailable for use. Rule 6.18(a) also
authorizes the Exchange to operate in a
screen-based only environment using a
floorless configuration in the event that
the trading floor becomes inoperable.
Rule 6.18(b) describes the notice that
must be given prior to commencing
trading on back-up data center systems.
Rule 6.18(c) describes the rules that
would be in effect if the Exchange were
to switch its trading operations to the
back-up data center and the rules that
would be suspended if the Exchange
were to operate in a screen-based only
environment using a floorless
configuration in the event that the
trading floor becomes inoperable. Rule
6.18(d), prescribes that TPHs are
9 See Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR at 72252 (December 5,
2014) (Regulation Systems Compliance and
Integrity) (File No. S7–01–13).
10 17 CFR 242.1001(a)(2)(v).
11 Id. at 242.1004.
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required to take appropriate actions as
instructed by the Exchange to
accommodate the Exchange’s ability to
trade options via the back-up data
center. Finally, current Rule 6.18(e)
provides that nothing in 6.18 precludes
the Exchange from entering into
agreements to trade options elsewhere
in accordance with Rule 6.16 (Back-up
Trading Arrangements) in the event that
the Exchange’s trading floor is rendered
inoperable.
The Exchange proposes to make rule
changes to Rule 6.18 that would leave
the current rule largely intact, but
reorganized with detail added to each
section of the current rule. Under
proposed Rule 6.18(a) (General), rather
than explaining the Exchange’s back-up
data center and alternative disasterrelated trading configurations in the
introductory section, the Exchange
would adopt a general statement
regarding the purpose of its disaster
recovery rules, providing that the
Exchange maintains business continuity
and disaster recovery plans that may be
effected in the interests of the continued
operation of fair and orderly markets in
the event of a systems failure, disaster,
or other unusual circumstances that
might threaten the ability to conduct
business on the Exchange. The content
of current Rule 6.18(a) would be moved
from the general section of Rule 6.18(a)
to proposed Rule 6.18(b) regarding the
Exchange’s back-up data center.
Proposed Rule 6.18(b) (Back-up Data
Center), would mirror current Rule
6.18(a), but would include a definitive
statement that the Exchange maintains a
back-up data center in order to preserve
the Exchange’s ability to conduct
business in the event the Exchange’s
primary data center becomes inoperable
or otherwise unavailable for use, rather
than providing that the Exchange may
maintain such back-up facilities. The
Exchange also proposes to change the
text of current Rule 6.18(a) in proposed
Rule 6.18(b) to provide that the
Exchange maintains a back-up data
center in order to preserve the
Exchange’s ability to conduct business
in the event the Exchange’s primary
data center becomes inoperable or
otherwise unavailable for use, rather
than to preserve only the Exchange’s
ability to trade options. This proposed
rule change reflects the fact that the
Exchange is engaged in business
activities other than just the trading of
options, including, but not limited to
providing market data services and
conducting regulatory functions.
Whereas the Exchange’s current rules
provide that the Exchange may
determine to switch operations from the
primary data center to the back-up data
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center due to a disaster or other unusual
circumstances, proposed Rule 6.18(b)
would add the scenario of a significant
systems failure to the list of causes that
may trigger an operational switch to the
Exchange’s back-up data center. The
proposed addition of significant systems
failures to the list of scenarios that may
trigger an operational switch to the
Exchange’s back-up data center is
intended to more acutely reflect the
realities of electronic trading
environments and contemporary threats
posed to the operation of fair and
orderly markets. The statements in
current Rule 6.18(a) regarding
contingent alternative plans in the event
that the Exchange’s trading floor
becomes inoperable would be removed
from the section and relocated to
proposed Rule 6.18(c) (Loss of Trading
Floor), which would be dedicated to the
details of the Exchange’s authority in
the event that the Exchange trading floor
becomes inoperable. In addition to the
reformulation of the description of the
Exchange’s back-up data center in
proposed Rule 6.18(b), proposed Rule
6.18(b) would also contain subsections
setting forth the notice, applicable rules,
and Trading Permit Holder (‘‘TPH’’)
preparations provisions currently
contained in Rules 6.18(b) through (d).
Proposed Rule 6.18(b)(i) (Back-up
Data Center Functionality), would make
clear the functional and performance
standards that the back-up data center
must be reasonably designed to achieve.
Specifically, proposed Rule 6.18(b)(i)
would provide that the Exchange
maintains a back-up data center that the
Exchange has determined is reasonably
designed to achieve prompt resumption
of systems in [sic] manner consistent
with the Exchange’s obligations under
Regulation SCI.12 Proposed Rule
6.18(b)(i) would also provide that
nothing in the provisions of proposed
Rule 6.18(b) shall be interpreted to
require the Exchange to develop or
maintain a back-up data center designed
to fully replicate the capacity, latency,
and other features of the primary data
12 Among other things, Regulation SCI requires
that the Exchange ‘‘establish, maintain, and enforce
written policies and procedures reasonably
designed to ensure that its SCI systems . . . have
levels of capacity, integrity, resiliency, availability,
and security, adequate to maintain . . . [sic] [the
Exchange’s] operational capability and promote the
maintenance of fair and orderly markets.’’ See 17
CFR 242.1001(a)(1). With respect to business
continuity and disaster recovery plans, such
standards mean that, at a minimum, the Exchange
shall maintain ‘‘backup and recovery capabilities
sufficiently resilient and geographically diverse
[sic] that they [sic] are reasonably designed to
achieve next business day resumption of trading
and two-hour resumption of critical SCI systems
following a wide-scale disruption.’’ See id. at
§ 242.1001(a)(2)(v).
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center. This statement attempts to make
clear that in order to preserve the
Exchange’s ability to conduct business
in the event the Exchange’s primary
data center becomes inoperable or
otherwise unavailable for use, the
Exchange must maintain a back-up data
center that is reasonably designed
achieve resumption of systems in a
manner consistent with Regulation SCI
during a significant systems failure,
disaster or other unusual circumstances,
rather than replicate the Exchange’s
primary data center systems. The
Exchange believes that the standards set
forth in proposed Rule 6.18(b)(i) are
reasonable to help ensure the
maintenance of fair and orderly markets
in the event of a significant systems
failure, disaster or other unusual
circumstances and are consistent with
provisions in the release language of
Regulation SCI.13
Proposed Rule 6.18(b)(ii) (Notice),
would be the same as current Rule
6.18(b) and provide that prior to
commencing trading on the back-up
data center, the Exchange shall
announce publicly the classes that will
be available for trading. Proposed Rule
6.18(b)(iii) (Applicable Rules) would be
the same as current Rule 6.18(c) and
provide that the same rules that apply
to trading using primary data center
systems would be applicable to trading
on back-up data center systems. The
applicable rule exceptions with respect
to the suspension of open outcry trading
on the floor, however, would be
removed from proposed Rule 6.18(b)(iii)
and relocated to proposed Rule 6.18(c)
(Loss of Trading Floor). Accordingly,
proposed Rule 6.18(b)(iii) would
provide that in the event the primary
data center becomes inoperable, trading
will continue using the back-up data
center and all trading rules will remain
in effect. Consistent with current Rule
6.18(c), the proposed rule would also
contain the provisions that only conduct
permissible pursuant to trading rules
that are in force shall be allowed via the
back-up data center and that all nontrading rules of the Exchange shall
continue to apply.
Proposed Rule 6.18(b)(iv) (Trading
Permit Holder Participation) regarding
testing of the Exchange’s back-up data
center would contain provisions similar
to current Rule 6.18(d) (Trading Permit
Holder Preparations), but add
subparagraphs to more clearly articulate
the Exchange’s authority to conduct
testing of its back-up data center
13 See
Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR at 72353 (December 5,
2014) (Regulation Systems Compliance and
Integrity) (File No. S7–01–13).
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systems. Thus, similar to current Rule
6.18(d), proposed Rule 6.18(b)(iv) would
provide that TPHs are required to take
appropriate actions as instructed by the
Exchange to accommodate the
Exchange’s ability to trade options via
the back-up data center. Similar to the
proposed changes to the text of current
Rule 6.18(a) with respect to the purpose
for which the Exchange maintains a
back-up data center, for the reasons
discussed above, the Exchange also
proposes changing the rule text in
proposed Rule 6.18(b)(iv) to provide
that TPHs are required to take
appropriate actions as instructed by the
Exchange to accommodate the
Exchange’s ability to conduct business
via the back-up data center, rather than
solely to accommodate the Exchange’s
ability to conduct business [sic]. Under
the proposed rule change, the title of
current Rule 6.18(d) (Trading Permit
Holder Preparations) would also be
changed in proposed Rule 6.18(b)(iv)
(Trading Permit Holder Participation) to
better describe the purpose of the rule
provisions.
Subsections (A) through (C) of
proposed Rule 6.18(b)(iv) are designed
to harmonize the Exchange’s back-up
data center testing rules with certain
provisions of Regulation SCI. Under
proposed Rule 6.18(b)(iv)(A)
(Designated BCP/DR Participants), the
Exchange shall designate those Trading
Permit Holders that the Exchange
determines are, as a whole, necessary
for the maintenance of fair and orderly
markets in the event of the activation of
the Exchange’s business continuity and
disaster recovery plans (‘‘Designated
BCP/DR Participants’’). Under proposed
Rule 6.18(b)(iv)(A)(1), Designated BCP/
DR Participants will be identified based
on criteria determined by the Exchange
and announced via Regulatory Circular,
which may include whether the Trading
Permit Holder (‘‘TPH’’) is an appointed
Designated Primary Market-Maker
(‘‘DPM’’), Lead Market-Maker (‘‘LMM’’)
or Market-Maker in a class and the
quality of markets provided by the DPM,
LMM, or Market-Maker,14 the amount of
volume transacted by the market
participant in a class or on the Exchange
in general, operational capacity, trading
experience, and historical contribution
to fair and orderly markets on the
Exchange. Under proposed Rule
6.18(b)(iv)(A)(2), Designated BCP/DR
Participants shall include, at a
minimum, all Market-Makers in option
14 Among other things, quality of markets
provided refers to the average size quoted in a class,
percentage quoting on NBBO, how many series are
quoted in a class, and how many calendar months
out from present day a participant normally quotes.
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classes exclusively listed on the
Exchange that stream quotes in such
classes and all DPMs in multiply listed
option classes. Although under the
proposed rule, Designated BCP/DR
Participants would definitively include
all Market-Makers in option classes
exclusively listed on the Exchange that
stream quotes in such classes and all
DPMs in multiply listed option classes,
the proposed rule would leave open the
possibility that other market
participants might be designated by the
Exchange as Designated BCP/DR
Participants based on certain of the
criteria listed in proposed Rule
6.18(b)(iv)(A)(1) and announced via
Regulatory Circular. Any changes to the
standards by which a market participant
might be determined to be a Designated
BCP/DR Participant would be applied
prospectively with reasonable advance
notice as announced via Regulatory
Circular. The Exchange would first
announce the criteria by which market
participants would be determined to be
Designated BCP/DR Participants by
November 1, 2015.
The Exchange has attempted to model
the provisions of proposed Rule
6.18(b)(iv)(A) based on provisions of
Regulation SCI, which require the
Exchange to establish standards for the
designation of those members or
participants that the Exchange
reasonably determines are, taken as a
whole, the minimum number of
members or participants necessary for
the maintenance of fair and orderly
markets in the event of the activation of
its business continuity and disaster
recovery plans.15 Also consistent with
Regulation SCI, proposed Rule
6.18(b)(iv)(B) (Fair and Orderly Market
Conditions) would make clear that
nothing in proposed Rule 6.18(b) would
require the Exchange to assume that
average levels of liquidity, depth, or
other characteristics of a usual trading
session must be present in order to
achieve a fair and orderly market in the
event of the activation of the Exchange’s
business continuity and disaster
recovery plans.16
Proposed Rule 6.18(b)(iv)(C) (Business
Continuity and Disaster Recovery Plans
Testing), would provide that The [sic]
Exchange shall require Designated BCP/
DR Participants and may require other
market participants to participate in
scheduled business continuity and
disaster recovery plans tests in the
manner and frequency prescribed by the
17 CFR 242.1004(a)–(b).
Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR at 72353 (December 5,
2014) (Regulation Systems Compliance and
Integrity) (File No. S7–01–13).
Exchange. Proposed Rule 6.18(b)(iv)(C)
would set forth the Exchange’s authority
to conduct testing of business continuity
and disaster recovery plans and obtain
assistance from Designated BCP/DR
Participants and other market
participants in conducting such tests.
The Exchange notes that the provisions
of proposed Rule 6.18(b)(iv)(C) are
consistent with the Exchange’s current
rules 17 as well as provisions of
Regulation SCI pertaining to business
continuity and disaster recovery plan
testing.18 Proposed Rule
6.18(b)(iv)(C)(1) (Documentation and
Reports), would provide that the
Exchange may require Designated BCP/
DR Participants and/or other market
participants to provide documentation
and reports regarding tests conducted
pursuant to Rule 6.18, including related
data and information, as may be
requested by the Exchange, and in the
manner and frequency prescribed by the
Exchange. Proposed Rule
6.18(b)(iv)(C)(2) (Notice), would provide
that the Exchange will provide
reasonable prior notice of scheduled
business continuity and disaster
recovery plans tests to Trading Permit
Holders, which notice shall describe the
general nature of the test(s) and identify
the Trading Permit Holders required to
participate and shall be announced via
Regulatory Circular.
Proposed Rule 6.18(c) (Loss of
Trading Floor), would be substantially
similar to provisions in current Rule
6.18(a) (General), regarding loss of the
trading floor, which would be removed
from proposed Rule 6.18(b) (Back-up
Data Center) and more appropriately
placed in a separate section regarding
the Exchange’s trading floor facilities.
Under proposed Rule 6.18(c), if the
Exchange trading floor were to become
inoperable, the Exchange would have
the authority to continue to operate in
a screen-based only environment using
a floorless configuration of the Hybrid
Trading System located in the primary
data center that is operational while the
trading floor is inoperable. The
Exchange would operate using this
configuration only until the Exchange’s
trading floor facility is operational and
open outcry trading would not be
available in the event the trading floor
becomes inoperable, except in
accordance with Rule 6.16 (Back-up
Trading Arrangements), as applicable.
Proposed Rule 6.18(c)(i) (Applicable
Rules), would mirror current Rule
6.18(c) (Applicable Rules), except that
15 See
16 See
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17 See Rules 6.23A (Trading Permit Holder
Connectivity); 6.18(d) (Trading Permit Holder
Preparations).
18 See 17 CFR 242.1004(a)–(b).
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the current rule would be updated in
proposed Rule 6.18(c)(i) to include
additional rules pertaining to open
outcry trading, including, but not
limited to Rule 6.12A (Public
Automated Routing System (PAR)) and
Rule 7.12 (PAR Official). Thus, under
proposed Rule 6.18(c)(i), in the event
that the trading floor becomes
inoperable, trading would be conducted
pursuant to all applicable Hybrid
System rules, except that open-outcry
rules would not be in force. In these
circumstances, a non-exclusive list of
open outcry trading rules that would not
apply would include either all, or some
portion of, Rules 6.2, 6.2A, 6.8, 6.8B,
6.9, 6.12; 6.12A, 6.13A, 6.20, 6.22, 6.23,
6.45, 6.47, 6.54, 6.74, 7.12, 8.15, and
8.17.19 Proposed Rule 6.18(c)(ii) (Other
Back-up Trading Arrangements), would
be similar to current Rule 6.18(e),
making clear that proposed Rule 6.18
would not preclude the Exchange from
conducting business on the floor of
another exchange pursuant to Rule 6.16
(Back-up Trading Arrangements), in the
event the trading floor is rendered
inoperable.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
section 6(b) of the Act 20 and Regulation
SCI.21 Specifically, the Exchange
believes the proposed rule change is
consistent with the section 6(b)(5) 22
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
19 In an effort to shorten and simply [sic] the
Exchange’s disaster recovery rule, the Exchange
proposes to eliminate redundant parenthetical
information referencing the titles of each of the
rules cited in Rule 6.18. The rules and respective
titles of the rules cited in proposed Rule 6.18(c)(i)
include the following: 6.2 (Trading Rotations); 6.2A
(Rapid Opening System); 6.8 (RAES Operations);
6.8B (Automatic ORS Order Execution Against
Booked Orders); 6.9 (Solicited Transactions); 6.12
(CBOE Hybrid Order Handling System); 6.12A
(Public Automated Routing System (PAR)); 6.13A
(Simple Auction Liaison (SAL)); 6.20 (Admission to
and Conduct on the Trading Floor; Trading Permit
Holder Education); 6.22 (Trading by Trading Permit
Holders on the Floor); 6.23 (Trading Permit Holder
Wires from Floor [sic]); 6.45 (Priority of Bids and
Offers—Allocation of Trades); 6.47 (Priority on
Split-Price Transactions Occurring in Open Outcry);
6.54 (Accommodation Liquidations (Cabinet
Trades)); 6.74 (Crossing Orders); 7.12 (PAR
Official); 8.15 (Lead Market-Makers and
Supplemental Market-Makers in Hybrid 3.0
Classes); and 8.17 (Stopping of Option Orders).
20 15 U.S.C. 78f(b).
21 See 17 CFR 242.1001(a) and 1004.
22 15 U.S.C. 78f(b)(5).
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65262
Federal Register / Vol. 80, No. 206 / Monday, October 26, 2015 / Notices
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) 23 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
change is designed to promote the
Exchange’s ability to ensure the
continued operation of a fair and
orderly market in the event of a systems
failure, disaster, or other unusual
circumstances that might threaten the
ability to conduct business on the
Exchange. The Exchange recognizes that
switching operations to the back-up data
center may occur in times of uncertainty
or great volatility in the markets. It is at
these times that the investors may have
the greatest need for viable, trustworthy
marketplaces. The proposed rule
changes seek to ensure that such a
marketplace will exist when most
needed. Accordingly, the Exchange
believes that the proposed rule protects
investors in the most fundamental sense
by helping to ensure that a fair and
orderly market will exist at a time when
such a market may be most needed.
The Exchange also believes that the
proposed rule change promotes just and
equitable principles of trade by adding
detail and clarity to the Rules. The
proposed rule change seeks to provide
additional clarity to the Exchange’s
disaster recovery rules, putting all
market participants on notice as to how
the Exchange will function in case of
significant systems disruption or other
disaster situation. The Exchange is
continuously updating the Rules to
provide additional detail, clarity, and
transparency regarding its operations
and trading systems and regulatory
authority. The Exchange believes that
the adoption of detailed, clear, and
transparent rules reduces burdens on
competition and promotes just and
equitable principles of trade. The
Exchange also believes that adding
greater detail to the Rules regarding the
Exchange’s ability to ensure the
continuous operation of the market and
preserve the ability to conduct business
on the Exchange will increase
confidence in the markets and
encourage wider participation in the
markets and greater investment. Finally,
the Exchange notes that proposed Rule
23 Id.
VerDate Sep<11>2014
18:53 Oct 23, 2015
Jkt 238001
6.18 is designed to harmonize the
Exchange’s disaster recovery rules with
Regulation SCI under the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, the
proposed rule change will help ensure
that competitive markets remain
operative in the event of a systems
failure or other disaster event. The
Exchange notes that the proposed rule
change is designed to clarify the
Exchange’s authority to require market
participants to participate in, and
provide necessary liquidity to ensure
fair and orderly markets. The Exchange
further notes that the proposed rule
change is designed to ensure
competitive markets in that it is
designed around the mandates of
Regulation SCI, which each of the
national securities exchanges is required
to satisfy.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 24 and Rule 19b–4(f)(6)
thereunder.25
A proposed rule change filed under
Rule 19b–4(f)(6) 26 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
24 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
deems this requirement to have been met.
26 17 CFR 240.19b–4(f)(6).
25 17
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Sfmt 4703
Rule 19b–4(f)(6)(iii) 27 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. According to the Exchange, the
proposed rule change does not present
any novel or controversial issues.
Rather, the Exchange is merely
reorganizing its existing rule, updating
cross-references to incorporate
previously adopted rules, or adding
provisions that are consistent with or
required by Regulation SCI. In addition,
the Exchange has represented that much
of the proposed rule change is already
permitted under the Exchange’s existing
rule. Accordingly, the Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest as it will allow the Exchange to
incorporate changes required under
Regulation SCI, such as establishing
standards for designating BCP/DR
Participants, prior to the November 3,
2015 compliance date. Therefore, the
Commission designates the proposed
rule change to be operative upon
filing.28
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2015–088 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
27 17
CFR 240.19b–4(f)(6)(iii).
purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
28 For
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Federal Register / Vol. 80, No. 206 / Monday, October 26, 2015 / Notices
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2015–088. 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–CBOE–
2015–088, and should be submitted on
or before November 16, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Brent J. Fields,
Secretary.
[FR Doc. 2015–27086 Filed 10–23–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
asabaliauskas on DSK5VPTVN1PROD with NOTICES
[Release No. 34–76200; File No. SR–EDGX–
2015–48]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rule 19.3 To
Allow the Listing of Certain Options
Based on International Indexes
October 20, 2015.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
29 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:53 Oct 23, 2015
Jkt 238001
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
9, 2015, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6)(iii)
thereunder,4 which renders it effective
upon filing with the Commission. 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 the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
allow the listing of options overlying
portfolio depositary receipts and index
fund shares (collectively, ‘‘ETFs’’) that
are listed pursuant to generic listing
standards on equities exchanges for
series of ETFs based on international or
global indexes under which a
comprehensive surveillance sharing
agreement is not required.
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
Rule 19.3(i) to allow the Exchange’s
options platform (‘‘EDGX Options’’) to
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6)(iii).
2 17
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65263
list options overlying ETFs that are
listed pursuant to generic listing
standards on equities exchanges for
series of ETFs based on international or
global indexes under which a
comprehensive surveillance sharing
agreement (‘‘CSSA’’) is not required.5
This proposal will enable the Exchange
to list and trade options on ETFs
without a CSSA provided that the ETF
is listed on an equities exchange
pursuant to the generic listing standards
that do not require a CSSA pursuant to
Rule 19b–4(e) of the Exchange Act.6
Rule 19b–4(e) provides that the listing
and trading of a new derivative
securities product by a self-regulatory
organization (‘‘SRO’’) shall not be
deemed a proposed rule change,
pursuant to paragraph (c)(1) of Rule
19b–4, if the Commission has approved,
pursuant to section 19(b) of the
Exchange Act, the SRO’s trading rules,
procedures, and listing standards for the
product class that would include the
new derivatives securities product and
the SRO has a surveillance program for
the product class.7 In other words, the
proposal will amend the listing
standards to allow the Exchange to list
and trade options on ETFs based on
international or global indexes to a
similar degree that they are allowed to
be listed on several equities exchanges.8
Currently, EDGX Options rules allow
for the listing and trading of options on
Fund Shares. Rule 19.3(i)(1)–(3) provide
the listings standards for options on
Fund Shares with non-U.S. component
stocks, such as Fund Shares based on
international or global indexes. Rule
19.3(i)(1) requires that any non-U.S.
component stocks of an index or
portfolio of stocks on which the Fund
Shares are based that are not subject to
a CSSA do not in the aggregate represent
more than 50% of the weight of the
index or portfolio. Rule 19.3(i)(2)
requires stocks for which the primary
market is in any one country that is not
5 See, e.g., EDGX Rule 14.2(b)(3); BATS Exchange
Rule 14.11(b)(3)(A)(ii); NYSE MKT Rule 1000
Commentary .03(a)(B); NYSE Arca Equities Rule
5.2(j)(3) Commentary .01 (a)(B); and NASDAQ Rule
5705(a)(3)(A)(ii).
6 17 CFR 240.19b–4(e).
7 When relying on Rule 19b–4(e), the SRO must
submit Form 19b–4(e) to the Commission within
five business days after the SRO begins trading the
new derivative securities products. See Exchange
Act Release No. 40761 (December 8, 1998), 63 FR
70952 (December 22, 1998).
8 See EDGX Rule 14.2(b)(3); BATS Rules
14.11(b)(3)(A)(ii); NYSE MKT Rule 1000
Commentary .03(a)(B); NYSE Arca Equities Rule
5.2(j)(3) Commentary .01 (a)(B); and NASDAQ Rule
5705(a)(3)(A)(ii). See also Securities Exchange Act
Release Nos. 54739 (November 9, 2006), 71 FR
66993 (SR–Amex–2006–78); 55269 (February 9,
2007), 72 FR 7490 (February 15, 2007) (SR–
NASDAQ–2006–050); 55621 (April 12, 2007), 72 FR
19571 (April 18, 2007) (SR–NYSEArca–2006–86)
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]]>Agencies
[Federal Register Volume 80, Number 206 (Monday, October 26, 2015)]
[Notices]
[Pages 65258-65263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27086]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76203; File No. SR-CBOE-2015-088]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Disaster Recovery
October 20, 2015.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 8, 2015, Chicago Board Options Exchange, Incorporated
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, and II below, which Items have been prepared by the Exchange.
The Exchange filed the proposal as a ``non-controversial'' proposed
rule change pursuant to section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.18 relating to disaster
recovery. The text of the proposed rule change is available on the
Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 6.18 relating to disaster
recovery. Specifically, the Exchange proposes to update Rule 6.18 to
further describe the Exchange's back-up systems, the circumstances
under which they may be used, and the testing that the Exchange may
conduct to ensure the availability, functionality and performance of
such systems. Additionally, the Exchange proposes certain updates to
Rule 6.18 in response to new disaster recovery regulations and business
resumption standards recently adopted by the Securities and Exchange
Commission (``SEC'' or ``Commission'') as promulgated in Regulation
Systems Compliance and Integrity (``Regulation SCI'') under the Act.\5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72252 (December 5, 2014) (Regulation Systems Compliance
and Integrity) (File No. S7-01-13).
---------------------------------------------------------------------------
Background
The Exchange adopted Rule 6.18 in 2006 for the limited purpose of
providing alternative means of operation in the event of a physical
disaster. In particular, Rule 6.18, as originally adopted, was intended
to deal with trading floor closures, providing for the operation of a
``Disaster Recovery Facility'' (``DRF'') in the event that a disaster
or other unusual circumstance rendered the trading floor inoperable.\6\
[[Page 65259]]
Under original Rule 6.18, if the Exchange were forced to halt trading
due to a disaster or other physical impairment of its trading floor,
the Exchange and its members \7\ could operate remotely in a screen-
based only environment from the DRF while the trading floor was
unavailable. While operating from the DRF, open outcry trading would be
suspended.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 54171 (July 19,
2006), 71 FR 42427 (July 26, 2006) (Order Approving Proposed Rule
Change and Amendment No. 1 Thereto Regarding a Disaster Recovery
Facility) (SR-CBOE-2006-001[sic]).
\7\ Prior to its demutualization in 2010, the Exchange was a
member-owned organization. See Securities Exchange Act Release No.
62382 (June 25, 2010), 75 FR 38164 (July 1, 2010) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to
Conforming Changes in Connection With Demutualization) (SR-CBOE-
2010-058).
---------------------------------------------------------------------------
In 2012, Rule 6.18 was amended in connection with the Exchange's
relocation of its primary data center to the East Coast and the
consequent conversion of its former primary data center to a back-up
data center in Chicago.\8\ Specifically, Rule 6.18 was amended to deal
with newly possible situations in which the primary data center could
continue to operate despite the trading floor being rendered inoperable
or in which the back-up data center might be used despite the trading
floor being operational. Specifically, as amended, Rule 6.18 provided
that in the event that the Exchange were forced to switch operations to
the back-up data center, the Exchange's trading floor could still be
used and that in the event that the trading floor were inoperable, the
Exchange could still operate using a floorless configuration or screen-
based only environment on the Exchange's primary data center.
References to the DRF and other irrelevant portions of the original
rule were eliminated or replaced with references to [sic] Exchange's
primary and back-up data centers as appropriate.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 68301 (November 27,
2012), 77 FR 71650 (December 3, 2012) (Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change To Amend CBOE
Rule 6.18 Concerning the Exchange's Disaster Recovery Facility) (SR-
CBOE-2012-111).
---------------------------------------------------------------------------
In addition to adding greater detail to the Exchange's disaster
recovery rules in Rule 6.18, the Exchange proposes to make updates to
Rule 6.18 to harmonize its disaster recovery rules with the newly
implemented disaster recovery-related regulatory imperatives of
Regulation SCI. Regulation SCI supersedes and replaces the SEC's
voluntary Automation Review Policy (``ARP''), established by the
Commission's two policy statements each titled ``Automated Systems of
Self-Regulatory Organizations,'' issued in 1989 and 1991, expanding
existing practices and making them mandatory.\9\ As part of Regulation
SCI, the Exchange is required to maintain back-up and recovery
capabilities with sufficient resiliency and geographical diversity and
that are reasonably designed to achieve next business-day resumption of
trading and two-hour resumption of critical systems following a wide-
scale disruption.\10\ The Exchange must also participate in at least
annual testing of its business continuity and disaster recovery plans
and, to that end, develop and adopt standards to designate which of its
TPHs must participate in testing in order to reasonably ensure the
maintenance of a fair and orderly market if the Exchange's disaster
recovery plan must be activated.\11\ Although the Exchange's current
Rules provide the Exchange sufficient authority to meet its disaster
recovery-related obligations under Regulation SCI, the Exchange
believes that certain clarifying updates to the Rules are warranted in
light of Regulation SCI.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR at 72252 (December 5, 2014) (Regulation Systems
Compliance and Integrity) (File No. S7-01-13).
\10\ 17 CFR 242.1001(a)(2)(v).
\11\ Id. at 242.1004.
---------------------------------------------------------------------------
Proposed Rule Changes
The Exchange proposes to make changes to Rule 6.18 to provide
additional details regarding the Exchange's back-up trading systems and
business continuity and disaster recovery plans activation and testing.
As discussed above, the Exchange also seeks to update its disaster
recovery rules to ensure consistency with Regulation SCI.
Current Rule 6.18 is divided into five sections, (a) through (e).
Rule 6.18(a) authorizes the Exchange to maintain a back-up data center
to preserve the Exchange's ability to trade options in the event the
Exchange's primary data center becomes inoperable or otherwise
unavailable for use. Rule 6.18(a) also authorizes the Exchange to
operate in a screen-based only environment using a floorless
configuration in the event that the trading floor becomes inoperable.
Rule 6.18(b) describes the notice that must be given prior to
commencing trading on back-up data center systems. Rule 6.18(c)
describes the rules that would be in effect if the Exchange were to
switch its trading operations to the back-up data center and the rules
that would be suspended if the Exchange were to operate in a screen-
based only environment using a floorless configuration in the event
that the trading floor becomes inoperable. Rule 6.18(d), prescribes
that TPHs are required to take appropriate actions as instructed by the
Exchange to accommodate the Exchange's ability to trade options via the
back-up data center. Finally, current Rule 6.18(e) provides that
nothing in 6.18 precludes the Exchange from entering into agreements to
trade options elsewhere in accordance with Rule 6.16 (Back-up Trading
Arrangements) in the event that the Exchange's trading floor is
rendered inoperable.
The Exchange proposes to make rule changes to Rule 6.18 that would
leave the current rule largely intact, but reorganized with detail
added to each section of the current rule. Under proposed Rule 6.18(a)
(General), rather than explaining the Exchange's back-up data center
and alternative disaster-related trading configurations in the
introductory section, the Exchange would adopt a general statement
regarding the purpose of its disaster recovery rules, providing that
the Exchange maintains business continuity and disaster recovery plans
that may be effected in the interests of the continued operation of
fair and orderly markets in the event of a systems failure, disaster,
or other unusual circumstances that might threaten the ability to
conduct business on the Exchange. The content of current Rule 6.18(a)
would be moved from the general section of Rule 6.18(a) to proposed
Rule 6.18(b) regarding the Exchange's back-up data center.
Proposed Rule 6.18(b) (Back-up Data Center), would mirror current
Rule 6.18(a), but would include a definitive statement that the
Exchange maintains a back-up data center in order to preserve the
Exchange's ability to conduct business in the event the Exchange's
primary data center becomes inoperable or otherwise unavailable for
use, rather than providing that the Exchange may maintain such back-up
facilities. The Exchange also proposes to change the text of current
Rule 6.18(a) in proposed Rule 6.18(b) to provide that the Exchange
maintains a back-up data center in order to preserve the Exchange's
ability to conduct business in the event the Exchange's primary data
center becomes inoperable or otherwise unavailable for use, rather than
to preserve only the Exchange's ability to trade options. This proposed
rule change reflects the fact that the Exchange is engaged in business
activities other than just the trading of options, including, but not
limited to providing market data services and conducting regulatory
functions.
Whereas the Exchange's current rules provide that the Exchange may
determine to switch operations from the primary data center to the
back-up data
[[Page 65260]]
center due to a disaster or other unusual circumstances, proposed Rule
6.18(b) would add the scenario of a significant systems failure to the
list of causes that may trigger an operational switch to the Exchange's
back-up data center. The proposed addition of significant systems
failures to the list of scenarios that may trigger an operational
switch to the Exchange's back-up data center is intended to more
acutely reflect the realities of electronic trading environments and
contemporary threats posed to the operation of fair and orderly
markets. The statements in current Rule 6.18(a) regarding contingent
alternative plans in the event that the Exchange's trading floor
becomes inoperable would be removed from the section and relocated to
proposed Rule 6.18(c) (Loss of Trading Floor), which would be dedicated
to the details of the Exchange's authority in the event that the
Exchange trading floor becomes inoperable. In addition to the
reformulation of the description of the Exchange's back-up data center
in proposed Rule 6.18(b), proposed Rule 6.18(b) would also contain
subsections setting forth the notice, applicable rules, and Trading
Permit Holder (``TPH'') preparations provisions currently contained in
Rules 6.18(b) through (d).
Proposed Rule 6.18(b)(i) (Back-up Data Center Functionality), would
make clear the functional and performance standards that the back-up
data center must be reasonably designed to achieve. Specifically,
proposed Rule 6.18(b)(i) would provide that the Exchange maintains a
back-up data center that the Exchange has determined is reasonably
designed to achieve prompt resumption of systems in [sic] manner
consistent with the Exchange's obligations under Regulation SCI.\12\
Proposed Rule 6.18(b)(i) would also provide that nothing in the
provisions of proposed Rule 6.18(b) shall be interpreted to require the
Exchange to develop or maintain a back-up data center designed to fully
replicate the capacity, latency, and other features of the primary data
center. This statement attempts to make clear that in order to preserve
the Exchange's ability to conduct business in the event the Exchange's
primary data center becomes inoperable or otherwise unavailable for
use, the Exchange must maintain a back-up data center that is
reasonably designed achieve resumption of systems in a manner
consistent with Regulation SCI during a significant systems failure,
disaster or other unusual circumstances, rather than replicate the
Exchange's primary data center systems. The Exchange believes that the
standards set forth in proposed Rule 6.18(b)(i) are reasonable to help
ensure the maintenance of fair and orderly markets in the event of a
significant systems failure, disaster or other unusual circumstances
and are consistent with provisions in the release language of
Regulation SCI.\13\
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\12\ Among other things, Regulation SCI requires that the
Exchange ``establish, maintain, and enforce written policies and
procedures reasonably designed to ensure that its SCI systems . . .
have levels of capacity, integrity, resiliency, availability, and
security, adequate to maintain . . . [sic] [the Exchange's]
operational capability and promote the maintenance of fair and
orderly markets.'' See 17 CFR 242.1001(a)(1). With respect to
business continuity and disaster recovery plans, such standards mean
that, at a minimum, the Exchange shall maintain ``backup and
recovery capabilities sufficiently resilient and geographically
diverse [sic] that they [sic] are reasonably designed to achieve
next business day resumption of trading and two-hour resumption of
critical SCI systems following a wide-scale disruption.'' See id. at
Sec. 242.1001(a)(2)(v).
\13\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR at 72353 (December 5, 2014) (Regulation Systems
Compliance and Integrity) (File No. S7-01-13).
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Proposed Rule 6.18(b)(ii) (Notice), would be the same as current
Rule 6.18(b) and provide that prior to commencing trading on the back-
up data center, the Exchange shall announce publicly the classes that
will be available for trading. Proposed Rule 6.18(b)(iii) (Applicable
Rules) would be the same as current Rule 6.18(c) and provide that the
same rules that apply to trading using primary data center systems
would be applicable to trading on back-up data center systems. The
applicable rule exceptions with respect to the suspension of open
outcry trading on the floor, however, would be removed from proposed
Rule 6.18(b)(iii) and relocated to proposed Rule 6.18(c) (Loss of
Trading Floor). Accordingly, proposed Rule 6.18(b)(iii) would provide
that in the event the primary data center becomes inoperable, trading
will continue using the back-up data center and all trading rules will
remain in effect. Consistent with current Rule 6.18(c), the proposed
rule would also contain the provisions that only conduct permissible
pursuant to trading rules that are in force shall be allowed via the
back-up data center and that all non-trading rules of the Exchange
shall continue to apply.
Proposed Rule 6.18(b)(iv) (Trading Permit Holder Participation)
regarding testing of the Exchange's back-up data center would contain
provisions similar to current Rule 6.18(d) (Trading Permit Holder
Preparations), but add subparagraphs to more clearly articulate the
Exchange's authority to conduct testing of its back-up data center
systems. Thus, similar to current Rule 6.18(d), proposed Rule
6.18(b)(iv) would provide that TPHs are required to take appropriate
actions as instructed by the Exchange to accommodate the Exchange's
ability to trade options via the back-up data center. Similar to the
proposed changes to the text of current Rule 6.18(a) with respect to
the purpose for which the Exchange maintains a back-up data center, for
the reasons discussed above, the Exchange also proposes changing the
rule text in proposed Rule 6.18(b)(iv) to provide that TPHs are
required to take appropriate actions as instructed by the Exchange to
accommodate the Exchange's ability to conduct business via the back-up
data center, rather than solely to accommodate the Exchange's ability
to conduct business [sic]. Under the proposed rule change, the title of
current Rule 6.18(d) (Trading Permit Holder Preparations) would also be
changed in proposed Rule 6.18(b)(iv) (Trading Permit Holder
Participation) to better describe the purpose of the rule provisions.
Subsections (A) through (C) of proposed Rule 6.18(b)(iv) are
designed to harmonize the Exchange's back-up data center testing rules
with certain provisions of Regulation SCI. Under proposed Rule
6.18(b)(iv)(A) (Designated BCP/DR Participants), the Exchange shall
designate those Trading Permit Holders that the Exchange determines
are, as a whole, necessary for the maintenance of fair and orderly
markets in the event of the activation of the Exchange's business
continuity and disaster recovery plans (``Designated BCP/DR
Participants''). Under proposed Rule 6.18(b)(iv)(A)(1), Designated BCP/
DR Participants will be identified based on criteria determined by the
Exchange and announced via Regulatory Circular, which may include
whether the Trading Permit Holder (``TPH'') is an appointed Designated
Primary Market-Maker (``DPM''), Lead Market-Maker (``LMM'') or Market-
Maker in a class and the quality of markets provided by the DPM, LMM,
or Market-Maker,\14\ the amount of volume transacted by the market
participant in a class or on the Exchange in general, operational
capacity, trading experience, and historical contribution to fair and
orderly markets on the Exchange. Under proposed Rule 6.18(b)(iv)(A)(2),
Designated BCP/DR Participants shall include, at a minimum, all Market-
Makers in option
[[Page 65261]]
classes exclusively listed on the Exchange that stream quotes in such
classes and all DPMs in multiply listed option classes. Although under
the proposed rule, Designated BCP/DR Participants would definitively
include all Market-Makers in option classes exclusively listed on the
Exchange that stream quotes in such classes and all DPMs in multiply
listed option classes, the proposed rule would leave open the
possibility that other market participants might be designated by the
Exchange as Designated BCP/DR Participants based on certain of the
criteria listed in proposed Rule 6.18(b)(iv)(A)(1) and announced via
Regulatory Circular. Any changes to the standards by which a market
participant might be determined to be a Designated BCP/DR Participant
would be applied prospectively with reasonable advance notice as
announced via Regulatory Circular. The Exchange would first announce
the criteria by which market participants would be determined to be
Designated BCP/DR Participants by November 1, 2015.
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\14\ Among other things, quality of markets provided refers to
the average size quoted in a class, percentage quoting on NBBO, how
many series are quoted in a class, and how many calendar months out
from present day a participant normally quotes.
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The Exchange has attempted to model the provisions of proposed Rule
6.18(b)(iv)(A) based on provisions of Regulation SCI, which require the
Exchange to establish standards for the designation of those members or
participants that the Exchange reasonably determines are, taken as a
whole, the minimum number of members or participants necessary for the
maintenance of fair and orderly markets in the event of the activation
of its business continuity and disaster recovery plans.\15\ Also
consistent with Regulation SCI, proposed Rule 6.18(b)(iv)(B) (Fair and
Orderly Market Conditions) would make clear that nothing in proposed
Rule 6.18(b) would require the Exchange to assume that average levels
of liquidity, depth, or other characteristics of a usual trading
session must be present in order to achieve a fair and orderly market
in the event of the activation of the Exchange's business continuity
and disaster recovery plans.\16\
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\15\ See 17 CFR 242.1004(a)-(b).
\16\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR at 72353 (December 5, 2014) (Regulation Systems
Compliance and Integrity) (File No. S7-01-13).
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Proposed Rule 6.18(b)(iv)(C) (Business Continuity and Disaster
Recovery Plans Testing), would provide that The [sic] Exchange shall
require Designated BCP/DR Participants and may require other market
participants to participate in scheduled business continuity and
disaster recovery plans tests in the manner and frequency prescribed by
the Exchange. Proposed Rule 6.18(b)(iv)(C) would set forth the
Exchange's authority to conduct testing of business continuity and
disaster recovery plans and obtain assistance from Designated BCP/DR
Participants and other market participants in conducting such tests.
The Exchange notes that the provisions of proposed Rule 6.18(b)(iv)(C)
are consistent with the Exchange's current rules \17\ as well as
provisions of Regulation SCI pertaining to business continuity and
disaster recovery plan testing.\18\ Proposed Rule 6.18(b)(iv)(C)(1)
(Documentation and Reports), would provide that the Exchange may
require Designated BCP/DR Participants and/or other market participants
to provide documentation and reports regarding tests conducted pursuant
to Rule 6.18, including related data and information, as may be
requested by the Exchange, and in the manner and frequency prescribed
by the Exchange. Proposed Rule 6.18(b)(iv)(C)(2) (Notice), would
provide that the Exchange will provide reasonable prior notice of
scheduled business continuity and disaster recovery plans tests to
Trading Permit Holders, which notice shall describe the general nature
of the test(s) and identify the Trading Permit Holders required to
participate and shall be announced via Regulatory Circular.
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\17\ See Rules 6.23A (Trading Permit Holder Connectivity);
6.18(d) (Trading Permit Holder Preparations).
\18\ See 17 CFR 242.1004(a)-(b).
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Proposed Rule 6.18(c) (Loss of Trading Floor), would be
substantially similar to provisions in current Rule 6.18(a) (General),
regarding loss of the trading floor, which would be removed from
proposed Rule 6.18(b) (Back-up Data Center) and more appropriately
placed in a separate section regarding the Exchange's trading floor
facilities. Under proposed Rule 6.18(c), if the Exchange trading floor
were to become inoperable, the Exchange would have the authority to
continue to operate in a screen-based only environment using a
floorless configuration of the Hybrid Trading System located in the
primary data center that is operational while the trading floor is
inoperable. The Exchange would operate using this configuration only
until the Exchange's trading floor facility is operational and open
outcry trading would not be available in the event the trading floor
becomes inoperable, except in accordance with Rule 6.16 (Back-up
Trading Arrangements), as applicable.
Proposed Rule 6.18(c)(i) (Applicable Rules), would mirror current
Rule 6.18(c) (Applicable Rules), except that the current rule would be
updated in proposed Rule 6.18(c)(i) to include additional rules
pertaining to open outcry trading, including, but not limited to Rule
6.12A (Public Automated Routing System (PAR)) and Rule 7.12 (PAR
Official). Thus, under proposed Rule 6.18(c)(i), in the event that the
trading floor becomes inoperable, trading would be conducted pursuant
to all applicable Hybrid System rules, except that open-outcry rules
would not be in force. In these circumstances, a non-exclusive list of
open outcry trading rules that would not apply would include either
all, or some portion of, Rules 6.2, 6.2A, 6.8, 6.8B, 6.9, 6.12; 6.12A,
6.13A, 6.20, 6.22, 6.23, 6.45, 6.47, 6.54, 6.74, 7.12, 8.15, and
8.17.\19\ Proposed Rule 6.18(c)(ii) (Other Back-up Trading
Arrangements), would be similar to current Rule 6.18(e), making clear
that proposed Rule 6.18 would not preclude the Exchange from conducting
business on the floor of another exchange pursuant to Rule 6.16 (Back-
up Trading Arrangements), in the event the trading floor is rendered
inoperable.
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\19\ In an effort to shorten and simply [sic] the Exchange's
disaster recovery rule, the Exchange proposes to eliminate redundant
parenthetical information referencing the titles of each of the
rules cited in Rule 6.18. The rules and respective titles of the
rules cited in proposed Rule 6.18(c)(i) include the following: 6.2
(Trading Rotations); 6.2A (Rapid Opening System); 6.8 (RAES
Operations); 6.8B (Automatic ORS Order Execution Against Booked
Orders); 6.9 (Solicited Transactions); 6.12 (CBOE Hybrid Order
Handling System); 6.12A (Public Automated Routing System (PAR));
6.13A (Simple Auction Liaison (SAL)); 6.20 (Admission to and Conduct
on the Trading Floor; Trading Permit Holder Education); 6.22
(Trading by Trading Permit Holders on the Floor); 6.23 (Trading
Permit Holder Wires from Floor [sic]); 6.45 (Priority of Bids and
Offers--Allocation of Trades); 6.47 (Priority on Split-Price
Transactions Occurring in Open Outcry); 6.54 (Accommodation
Liquidations (Cabinet Trades)); 6.74 (Crossing Orders); 7.12 (PAR
Official); 8.15 (Lead Market-Makers and Supplemental Market-Makers
in Hybrid 3.0 Classes); and 8.17 (Stopping of Option Orders).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of section 6(b) of the
Act \20\ and Regulation SCI.\21\ Specifically, the Exchange believes
the proposed rule change is consistent with the section 6(b)(5) \22\
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
[[Page 65262]]
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) \23\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\20\ 15 U.S.C. 78f(b).
\21\ See 17 CFR 242.1001(a) and 1004.
\22\ 15 U.S.C. 78f(b)(5).
\23\ Id.
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In particular, the proposed rule change is designed to promote the
Exchange's ability to ensure the continued operation of a fair and
orderly market in the event of a systems failure, disaster, or other
unusual circumstances that might threaten the ability to conduct
business on the Exchange. The Exchange recognizes that switching
operations to the back-up data center may occur in times of uncertainty
or great volatility in the markets. It is at these times that the
investors may have the greatest need for viable, trustworthy
marketplaces. The proposed rule changes seek to ensure that such a
marketplace will exist when most needed. Accordingly, the Exchange
believes that the proposed rule protects investors in the most
fundamental sense by helping to ensure that a fair and orderly market
will exist at a time when such a market may be most needed.
The Exchange also believes that the proposed rule change promotes
just and equitable principles of trade by adding detail and clarity to
the Rules. The proposed rule change seeks to provide additional clarity
to the Exchange's disaster recovery rules, putting all market
participants on notice as to how the Exchange will function in case of
significant systems disruption or other disaster situation. The
Exchange is continuously updating the Rules to provide additional
detail, clarity, and transparency regarding its operations and trading
systems and regulatory authority. The Exchange believes that the
adoption of detailed, clear, and transparent rules reduces burdens on
competition and promotes just and equitable principles of trade. The
Exchange also believes that adding greater detail to the Rules
regarding the Exchange's ability to ensure the continuous operation of
the market and preserve the ability to conduct business on the Exchange
will increase confidence in the markets and encourage wider
participation in the markets and greater investment. Finally, the
Exchange notes that proposed Rule 6.18 is designed to harmonize the
Exchange's disaster recovery rules with Regulation SCI under the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Rather, the proposed rule
change will help ensure that competitive markets remain operative in
the event of a systems failure or other disaster event. The Exchange
notes that the proposed rule change is designed to clarify the
Exchange's authority to require market participants to participate in,
and provide necessary liquidity to ensure fair and orderly markets. The
Exchange further notes that the proposed rule change is designed to
ensure competitive markets in that it is designed around the mandates
of Regulation SCI, which each of the national securities exchanges is
required to satisfy.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to section 19(b)(3)(A) of the Act \24\ and Rule 19b-4(f)(6)
thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Commission deems this requirement to have been met.
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A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \27\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. According to the Exchange, the proposed rule change does not
present any novel or controversial issues. Rather, the Exchange is
merely reorganizing its existing rule, updating cross-references to
incorporate previously adopted rules, or adding provisions that are
consistent with or required by Regulation SCI. In addition, the
Exchange has represented that much of the proposed rule change is
already permitted under the Exchange's existing rule. Accordingly, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest as
it will allow the Exchange to incorporate changes required under
Regulation SCI, such as establishing standards for designating BCP/DR
Participants, prior to the November 3, 2015 compliance date. Therefore,
the Commission designates the proposed rule change to be operative upon
filing.\28\
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\28\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2015-088 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities
[[Page 65263]]
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2015-088. 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-CBOE-2015-088, and should be
submitted on or before November 16, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-27086 Filed 10-23-15; 8:45 am]
BILLING CODE 8011-01-P
