Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 20.6, Nullification and Adjustment of Options Transactions Including Obvious Errors, 66069-66072 [2015-27351]
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices
specified in the Plan, of which other
equities exchanges are also Participants.
Other competing national securities
exchanges are subject to the same
trading and quoting requirements
specified in the Plan. Therefore, the
proposed changes would not impose
any burden on competition, while
providing certainty of treatment and
execution of trading interests on the
Exchange to market participants in NMS
Stocks that are acting in compliance
with the requirements specified in the
Plan.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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 Section, 100 F Street NE.,
Washington, DC 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. 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–NYSE–2015–46 and should
be submitted on or before November 18,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Brent J. Fields,
Secretary.
[FR Doc. 2015–27349 Filed 10–27–15; 8:45 am]
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–
NYSE–2015–46 on the subject line.
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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:
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rule 20.6, Nullification
and Adjustment of Options
Transactions Including Obvious Errors
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2015–46. 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
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
20, 2015, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76231; File No. SR–BATS–
2015–91]
October 22, 2015.
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 for the
Exchange’s equity options platform
(‘‘BATS Options’’) to extend the pilot
program that suspends certain obvious
error provisions of Rule 20.6 during
limit up-limit down states in securities
that underlie options traded on the
Exchange.
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
Earlier this year, the Exchange
adopted new Rule 20.6 related to the
adjustment and nullification of
transactions that occur on the
Exchange’s equity options platform
(‘‘BATS Options’’).5 Interpretation and
Policy .01 to Rule 20.6 is designed to
address certain issues related to the Plan
to Address Extraordinary Market
Volatility Pursuant to Rule 608 of
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii).
5 See Securities Exchange Act Release No. 74556
(March 20, 2015), 80 FR 16031 (March 26, 2015)
(SR–BATS–2014–067).
4 17
34 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices
Regulation NMS under the Act (the
‘‘Limit Up-Limit Down Plan’’ or the
‘‘Plan’’).6 Specifically, pursuant to a
pilot program set forth in Interpretation
and Policy .01 to Rule 20.6, the
Exchange excludes from certain
provisions of Rule 20.6 transactions
executed during a ‘‘Limit State’’ or
‘‘Straddle State,’’ as such terms are
defined in the Plan.
The purpose of this filing is to extend
the effectiveness of the pilot program of
Interpretation and Policy .01 of Rule
20.6 to coincide with the pilot period
for the Limit Up-Limit Down Plan,
including any extensions to the pilot
period for the Plan. The Exchange also
proposes to amend a cross-reference
contained within Interpretation and
Policy .01, as described below.
The Exchange believes the benefits to
market participants from Interpretation
and Policy .01 should continue on a
pilot basis. The Exchange continues to
believe that adding certainty to the
execution of orders in Limit or Straddle
States will encourage market
participants to continue to provide
liquidity to the Exchange, and, thus,
promote a fair and orderly market
during these periods. Barring this
provision, the obvious error provisions
of Rule 20.6 would likely apply in many
instances during Limit States and
Straddle States. The Exchange believes
that continuing the pilot will protect
against any unanticipated consequences
in the options markets during a Limit
State or Straddle State. Thus, the
Exchange believes that the protections
of the current rule should continue
while the industry gains further
experience operating the Plan. Rather
than extending the pilot program to a
specific date, the Exchange proposes to
extend the pilot to coincide with the
operation of the Plan, which is also a
pilot program.7
The Exchange represents that it will
conduct its own analysis concerning the
elimination of the Obvious Error and
Catastrophic Error provisions during
Limit and Straddle States and agrees to
provide the Commission with relevant
data to assess the impact of this
proposed rule change. As part of its
analysis, the Exchange will evaluate (1)
the options market quality during Limit
and Straddle States, (2) assess the
character of incoming order flow and
transactions during Limit and Straddle
6 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (the
‘‘Limit Up-Limit Down Release’’).
7 Currently, the pilot period for the Plan is
proposed to be extended to April 22, 2016. See
Securities Exchange Act Release No. 75917
(September 14, 2015), 80 FR 56515 (September 18,
2015).
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States, and (3) review any complaints
from Members and their customers
concerning executions during Limit and
Straddle States. The Exchange also
agrees to provide to the Commission
data requested to evaluate the impact of
the inapplicability of the Obvious Error
and Catastrophic Error provisions,
including data relevant to assessing the
various analyses noted above.
In connection with this proposal, each
month the Exchange will provide to the
Commission and the public a dataset
containing the data for each Straddle
State and Limit State in NMS Stocks
underlying options traded on the
Exchange, limited to those option
classes that have at least one (1) trade
on the Exchange during a Straddle State
or Limit State. For each of those option
classes affected, each data record will
contain the following information:
• Stock symbol, option symbol, time
at the start of the Straddle or Limit
State, an indicator for whether it is a
Straddle or Limit State.
• For activity on the Exchange:
• executed volume, time-weighted
quoted bid-ask spread, time-weighted
average quoted depth at the bid, timeweighted average quoted depth at the
offer;
• high execution price, low
execution price;
• number of trades for which a
request for review for error was received
during Straddle and Limit States;
• an indicator variable for whether
those options outlined above have a
price change exceeding 30% during the
underlying stock’s Limit or Straddle
State compared to the last available
option price as reported by OPRA before
the start of the Limit or Straddle State
(1 if observe 30% and 0 otherwise).
Another indicator variable for whether
the option price within five minutes of
the underlying stock leaving the Limit
or Straddle state (or halt if applicable)
is 30% away from the price before the
start of the Limit or Straddle State.
In addition, the Exchange shall
provide to the Commission and the
public assessments relating to the
impact of the operation of the Obvious
Error rules during Limit and Straddle
States as follows: (1) Evaluate the
statistical and economic impact of Limit
and Straddle States on liquidity and
market quality in the options markets;
and (2) Assess whether the lack of
Obvious Error rules in effect during the
Straddle and Limit States are
problematic. The Exchange agrees to
provide the analysis and data to the
Commission to help evaluate the impact
of the pilot program no later than five
months prior to the pilot expiration,
including any extensions. If the Plan
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extension is approved, the next data
assessment will be due on December 18,
2015.
As noted above, pursuant to the pilot
program, the Exchange excludes from
certain provisions of Rule 20.6
transactions executed during a Limit
State or Straddle State, as such terms are
defined in the Plan. The Exchange,
however, retains authority to review
transactions on an Official’s own motion
pursuant to sub-paragraph (c)(3) of Rule
20.6 and to bust or adjust transactions
pursuant to provisions governing
Significant Market Events, as defined in
the Rule, trading halts, erroneous prints
and quotes in the underlying security,
and in connection with stop and stop
limit orders that have been triggered by
an erroneous execution. The Exchange
believes that these safeguards will
provide the Exchange with the
flexibility to act when necessary and
appropriate to nullify or adjust a
transaction, while also providing market
participants with certainty that, under
normal circumstances, the trades they
affect with quotes and/or orders having
limit prices will stand irrespective of
subsequent moves in the underlying
security. Subsequent to the adoption of
new Rule 20.6, the Exchange adopted a
provision, paragraph (k), which governs
erroneous trades occurring from
disruptions and/or malfunctions of
Exchange systems. The Exchange
proposes to extend the authority to
nullify transactions pursuant to
paragraph (k) even in the event of a
Limit State or Straddle State for the
underlying security, thereby excluding
such provision from the pilot program.
The Exchange notes that other options
exchanges that have a provision
governing erroneous trades occurring
from disruptions and/or malfunctions of
Exchange systems have also excluded
such provision from the pilot program.8
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the Act.9
In particular, the proposal is consistent
with Section 6(b)(5) of the Act 10
because it would promote just and
equitable principles of trade, remove
8 See, e.g., NYSE MKT Rule 975NY, Interpretation
and Policy .03, which excludes paragraph (l) of
Rule 975NY from the pilot program; see also, CBOE
Rule 6.25, Interpretation and Policy .01, which
excludes Interpretation and Policy .05 from the
pilot program.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices
impediments to, and perfect the
mechanism of, a free and open market
and a national market system.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 11 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange further
believes that it is necessary and
appropriate in the interest of promoting
fair and orderly markets to exclude
transactions executed during a Limit or
Straddle State from certain aspects of
Rule 20.6. The Exchange believes the
application of the current rule will be
impracticable given the lack of a reliable
national best bid or offer in the options
market during Limit States and Straddle
States, and that the resulting actions
(i.e., nullified trades or adjusted prices)
may not be appropriate given market
conditions. Extension of this pilot to
coincide with the pilot period for the
Limit Up-Limit Down Plan would
ensure that limit orders that are filled
during a Limit or Straddle State would
have certainty of execution in a manner
that promotes just and equitable
principles of trade, removes
impediments to, and perfects the
mechanism of a free and open market
and a national market system. Thus, the
Exchange believes that the protections
of the pilot should continue while the
industry gains further experience
operating the Plan. The Exchange also
believes it is necessary and appropriate
in the interest of promoting fair and
orderly markets to retain authority to
nullify erroneous trades occurring from
disruptions and/or malfunctions of
Exchange systems without regard to
whether the underlying security was in
a Limit State or Straddle State. As noted
above, this will ensure consistency with
the rules of other options exchanges.12
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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. Specifically,
the Exchange believes that, by extending
the expiration of the pilot, the proposed
rule change will allow for further
analysis of the pilot and a determination
of how the pilot shall be structured in
the future. In doing so, the proposed
rule change will also serve to promote
regulatory clarity and consistency,
thereby reducing burdens on the
11 Id.
12 See
supra note 7.
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marketplace and facilitating investor
protection.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
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 13 and Rule 19b–4(f)(6)(iii)
thereunder.14
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest, as it
will allow the obvious error pilot
program to continue uninterrupted
while the industry gains further
experience operating under the Plan,
and avoid any investor confusion that
could result from a temporary
interruption in the pilot program. For
this reason, the Commission designates
the proposed rule change to be operative
upon filing.15
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
13 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
15 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).
14 17
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66071
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–
BATS–2015–91 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BATS–2015–91. 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–BATS–
2015–91, and should be submitted on or
before November 18, 2015.
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66072
Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Brent J. Fields,
Secretary.
[FR Doc. 2015–27351 Filed 10–27–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76235; File No. SR–CBOE–
2015–095]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Revisions to
the Registered Options Principal
Examination
October 22, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
16, 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 CBOE. CBOE has
designated the proposed rule change as
‘‘constituting a stated policy, practice,
or interpretation with respect to the
meaning, administration, or
enforcement of an existing rule’’ under
Section 19(b)(3)(A)(i) of the Act 3 and
Rule19b–4(f)(1) thereunder,4 which
renders the proposal effective upon
receipt of this filing by the Commission.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE is filing revisions to the content
outline and selection specifications for
the Registered Options Principal (Series
4) examination program.5 The proposed
revisions update the material to reflect
changes to the laws, rules and
regulations covered by the examination
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(i).
4 17 CFR 240.19b–4(f)(1).
5 CBOE is also proposing corresponding revisions
to the Series 4 question bank. CBOE is submitting
this filing for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the act and Rule 19b–4(f)(1)
thereunder.
and to incorporate the functions and
associated tasks currently performed by
a Registered Options Principal. In
addition, CBOE is proposing to make
changes to the format of the content
outline. CBOE is not proposing any
textual changes to the By-Laws,
Schedules to the By-Laws or Rules of
CBOE. CBOE is proposing these
revisions to adopt the revised Series 4
examination program of the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’). FINRA currently
administers Series 4 examinations on
behalf of CBOE.
The revised content outline is
attached.6 The Series 4 selection
specifications were submitted to the
Commission under separate cover by
FINRA. FINRA submitted the Series 4
selection specifications in connection
with a FINRA filing to revise its Series
4 Examination Program.7 CBOE is in
agreement with the selection
specifications submitted by FINRA.
The text of the [sic] 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
Section 6(c)(3) of the Act 8 authorizes
CBOE to prescribe standards of training,
experience, and competence for persons
associated with CBOE Trading Permit
Holders (‘‘TPH’’). In accordance with
1 15
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6 The
Commission notes that the revised content
outline is attached to the filing, not to this Notice.
The content outline is available as part of the filing
on CBOE’s Web site.
7 See Securities Exchange Act Release No. 75246
(June 18, 2015), 80 FR 36388 (June 24, 2015) (SR–
FINRA–2015–018).
8 15 U.S.C. 78f(c)(3).
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that provision, CBOE has developed
examinations that are designed to
establish that persons associated with
CBOE TPHs have attained specified
levels of competence and knowledge,
consistent with applicable registration
requirements under CBOE rules. CBOE
periodically reviews the content of the
examinations to determine whether
revisions are necessary or appropriate in
view of changes pertaining to the
subject matter covered by the
examinations.
CBOE Rule 9.2 states that no TPH
organization shall be approved to
transact options business with the
public until those persons associated
with it who are designated as Options
Principals have been approved by and
registered with the Exchange. Rule 9.2
states that persons engaged in the
supervision of options sales practices or
a person to who the designated general
partner or executive officer or another
Registered Options Principal delegates
the authority to supervise options sales
practices shall be designated as Options
Principals. CBOE Rule 9.2 further
requires successful completion of an
examination prescribed by the Exchange
in order to qualify for registration as an
Options Principal. The Series 4
examination, an industry-wide
examination, has been designed for this
purpose, and tests a candidate’s
knowledge of options trading generally,
the industry rules applicable to trading
of option contracts, and the rules of
registered clearing agencies for options.
The Series 4 examination covers, among
other things, equity options, foreign
currency options, and index options.
In consultation with a committee of
industry representatives, including
representatives from CBOE, FINRA
recently undertook a review of the
Series 4 examination program. As a
result of this review, FINRA filed
revisions to the content outline to reflect
changes to the laws, rules and
regulations covered by the examination
and to incorporate the functions and
associated tasks currently performed by
a Registered Options Principal. FINRA
also made changes to the format of the
content outline.9 CBOE is filing these
changes to adopt FINRA’s revised Series
4 examination program.
Current Content Outline
The current content outline is divided
into three sections. The following are
the three sections and the number of
questions associated with each of the
9 See Securities Exchange Act Release No. 75246
(June 18, 2015), 80 FR 36388 (June 24, 2015) (SR–
FINRA–2015–018).
E:\FR\FM\28OCN1.SGM
28OCN1
]]>Agencies
[Federal Register Volume 80, Number 208 (Wednesday, October 28, 2015)]
[Notices]
[Pages 66069-66072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27351]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76231; File No. SR-BATS-2015-91]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule
20.6, Nullification and Adjustment of Options Transactions Including
Obvious Errors
October 22, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 20, 2015, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') 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 ``non-controversial'' 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange filed a proposal for the Exchange's equity options
platform (``BATS Options'') to extend the pilot program that suspends
certain obvious error provisions of Rule 20.6 during limit up-limit
down states in securities that underlie options traded on the Exchange.
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
Earlier this year, the Exchange adopted new Rule 20.6 related to
the adjustment and nullification of transactions that occur on the
Exchange's equity options platform (``BATS Options'').\5\
Interpretation and Policy .01 to Rule 20.6 is designed to address
certain issues related to the Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of
[[Page 66070]]
Regulation NMS under the Act (the ``Limit Up-Limit Down Plan'' or the
``Plan'').\6\ Specifically, pursuant to a pilot program set forth in
Interpretation and Policy .01 to Rule 20.6, the Exchange excludes from
certain provisions of Rule 20.6 transactions executed during a ``Limit
State'' or ``Straddle State,'' as such terms are defined in the Plan.
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\5\ See Securities Exchange Act Release No. 74556 (March 20,
2015), 80 FR 16031 (March 26, 2015) (SR-BATS-2014-067).
\6\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
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The purpose of this filing is to extend the effectiveness of the
pilot program of Interpretation and Policy .01 of Rule 20.6 to coincide
with the pilot period for the Limit Up-Limit Down Plan, including any
extensions to the pilot period for the Plan. The Exchange also proposes
to amend a cross-reference contained within Interpretation and Policy
.01, as described below.
The Exchange believes the benefits to market participants from
Interpretation and Policy .01 should continue on a pilot basis. The
Exchange continues to believe that adding certainty to the execution of
orders in Limit or Straddle States will encourage market participants
to continue to provide liquidity to the Exchange, and, thus, promote a
fair and orderly market during these periods. Barring this provision,
the obvious error provisions of Rule 20.6 would likely apply in many
instances during Limit States and Straddle States. The Exchange
believes that continuing the pilot will protect against any
unanticipated consequences in the options markets during a Limit State
or Straddle State. Thus, the Exchange believes that the protections of
the current rule should continue while the industry gains further
experience operating the Plan. Rather than extending the pilot program
to a specific date, the Exchange proposes to extend the pilot to
coincide with the operation of the Plan, which is also a pilot
program.\7\
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\7\ Currently, the pilot period for the Plan is proposed to be
extended to April 22, 2016. See Securities Exchange Act Release No.
75917 (September 14, 2015), 80 FR 56515 (September 18, 2015).
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The Exchange represents that it will conduct its own analysis
concerning the elimination of the Obvious Error and Catastrophic Error
provisions during Limit and Straddle States and agrees to provide the
Commission with relevant data to assess the impact of this proposed
rule change. As part of its analysis, the Exchange will evaluate (1)
the options market quality during Limit and Straddle States, (2) assess
the character of incoming order flow and transactions during Limit and
Straddle States, and (3) review any complaints from Members and their
customers concerning executions during Limit and Straddle States. The
Exchange also agrees to provide to the Commission data requested to
evaluate the impact of the inapplicability of the Obvious Error and
Catastrophic Error provisions, including data relevant to assessing the
various analyses noted above.
In connection with this proposal, each month the Exchange will
provide to the Commission and the public a dataset containing the data
for each Straddle State and Limit State in NMS Stocks underlying
options traded on the Exchange, limited to those option classes that
have at least one (1) trade on the Exchange during a Straddle State or
Limit State. For each of those option classes affected, each data
record will contain the following information:
Stock symbol, option symbol, time at the start of the
Straddle or Limit State, an indicator for whether it is a Straddle or
Limit State.
For activity on the Exchange:
executed volume, time-weighted quoted bid-ask spread,
time-weighted average quoted depth at the bid, time-weighted average
quoted depth at the offer;
high execution price, low execution price;
number of trades for which a request for review for error
was received during Straddle and Limit States;
an indicator variable for whether those options outlined
above have a price change exceeding 30% during the underlying stock's
Limit or Straddle State compared to the last available option price as
reported by OPRA before the start of the Limit or Straddle State (1 if
observe 30% and 0 otherwise). Another indicator variable for whether
the option price within five minutes of the underlying stock leaving
the Limit or Straddle state (or halt if applicable) is 30% away from
the price before the start of the Limit or Straddle State.
In addition, the Exchange shall provide to the Commission and the
public assessments relating to the impact of the operation of the
Obvious Error rules during Limit and Straddle States as follows: (1)
Evaluate the statistical and economic impact of Limit and Straddle
States on liquidity and market quality in the options markets; and (2)
Assess whether the lack of Obvious Error rules in effect during the
Straddle and Limit States are problematic. The Exchange agrees to
provide the analysis and data to the Commission to help evaluate the
impact of the pilot program no later than five months prior to the
pilot expiration, including any extensions. If the Plan extension is
approved, the next data assessment will be due on December 18, 2015.
As noted above, pursuant to the pilot program, the Exchange
excludes from certain provisions of Rule 20.6 transactions executed
during a Limit State or Straddle State, as such terms are defined in
the Plan. The Exchange, however, retains authority to review
transactions on an Official's own motion pursuant to sub-paragraph
(c)(3) of Rule 20.6 and to bust or adjust transactions pursuant to
provisions governing Significant Market Events, as defined in the Rule,
trading halts, erroneous prints and quotes in the underlying security,
and in connection with stop and stop limit orders that have been
triggered by an erroneous execution. The Exchange believes that these
safeguards will provide the Exchange with the flexibility to act when
necessary and appropriate to nullify or adjust a transaction, while
also providing market participants with certainty that, under normal
circumstances, the trades they affect with quotes and/or orders having
limit prices will stand irrespective of subsequent moves in the
underlying security. Subsequent to the adoption of new Rule 20.6, the
Exchange adopted a provision, paragraph (k), which governs erroneous
trades occurring from disruptions and/or malfunctions of Exchange
systems. The Exchange proposes to extend the authority to nullify
transactions pursuant to paragraph (k) even in the event of a Limit
State or Straddle State for the underlying security, thereby excluding
such provision from the pilot program. The Exchange notes that other
options exchanges that have a provision governing erroneous trades
occurring from disruptions and/or malfunctions of Exchange systems have
also excluded such provision from the pilot program.\8\
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\8\ See, e.g., NYSE MKT Rule 975NY, Interpretation and Policy
.03, which excludes paragraph (l) of Rule 975NY from the pilot
program; see also, CBOE Rule 6.25, Interpretation and Policy .01,
which excludes Interpretation and Policy .05 from the pilot program.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\9\ In particular, the
proposal is consistent with Section 6(b)(5) of the Act \10\ because it
would promote just and equitable principles of trade, remove
[[Page 66071]]
impediments to, and perfect the mechanism of, a free and open market
and a national market system. Additionally, the Exchange believes the
proposed rule change is consistent with the Section 6(b)(5) \11\
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In particular, the Exchange further believes that it is necessary
and appropriate in the interest of promoting fair and orderly markets
to exclude transactions executed during a Limit or Straddle State from
certain aspects of Rule 20.6. The Exchange believes the application of
the current rule will be impracticable given the lack of a reliable
national best bid or offer in the options market during Limit States
and Straddle States, and that the resulting actions (i.e., nullified
trades or adjusted prices) may not be appropriate given market
conditions. Extension of this pilot to coincide with the pilot period
for the Limit Up-Limit Down Plan would ensure that limit orders that
are filled during a Limit or Straddle State would have certainty of
execution in a manner that promotes just and equitable principles of
trade, removes impediments to, and perfects the mechanism of a free and
open market and a national market system. Thus, the Exchange believes
that the protections of the pilot should continue while the industry
gains further experience operating the Plan. The Exchange also believes
it is necessary and appropriate in the interest of promoting fair and
orderly markets to retain authority to nullify erroneous trades
occurring from disruptions and/or malfunctions of Exchange systems
without regard to whether the underlying security was in a Limit State
or Straddle State. As noted above, this will ensure consistency with
the rules of other options exchanges.\12\
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\12\ See supra note 7.
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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. Specifically, the Exchange
believes that, by extending the expiration of the pilot, the proposed
rule change will allow for further analysis of the pilot and a
determination of how the pilot shall be structured in the future. In
doing so, the proposed rule change will also serve to promote
regulatory clarity and consistency, thereby reducing burdens on the
marketplace and facilitating investor protection.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
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 \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest,
as it will allow the obvious error pilot program to continue
uninterrupted while the industry gains further experience operating
under the Plan, and avoid any investor confusion that could result from
a temporary interruption in the pilot program. For this reason, the
Commission designates the proposed rule change to be operative upon
filing.\15\
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\15\ 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).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-BATS-2015-91 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2015-91. 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-BATS-2015-91, and should be
submitted on or before November 18, 2015.
[[Page 66072]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-27351 Filed 10-27-15; 8:45 am]
BILLING CODE 8011-01-P
