Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Technical Disconnect Mechanism, 79984-79986 [2015-32186]

Download as PDF 79984 Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Notices records (collectively ‘‘records’’) made or received by it in connection with proposed rule changes filed with the Commission or in connection with its index CDS clearance and settlement services as required to be maintained under Rule 17a–1(a) and (b).14 In the Written Request, CME further represents that it will produce such records and furnish such information at the request of any representative of the Commission, and will maintain such records for a period of 5 years from the effective date of the withdrawal of CME’s registration as a clearing agency.15 As noted above, no comments were received in response to the published notice of CME’s Written Request to withdraw from registration as a clearing agency, which included CME’s representations regarding maintenance of records and record production, as well as CME’s representations regarding any potential for claims associated with its clearing agency registration. SECURITIES AND EXCHANGE COMMISSION III. Conclusion I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.23C related to the Exchange’s Technical Disconnect Mechanism. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 6.23C Technical Disconnect (a) When a CBOE Application Server (‘‘CAS’’) loses communication with a Client Application such that a CAS does not receive an appropriate response to a Heartbeat Request within ‘‘x’’ period of time, the Technical Disconnect Mechanism will automatically logoff the Trading Permit Holder’s affected Client Application and automatically cancel all the Trading Permit Holder’s MarketMaker quotes, if applicable, and open orders with a time-in-force of ‘‘day’’ resting in the Book (which excludes orders resting on a PAR workstation or order management terminal) (‘‘day orders’’), if the Trading Permit Holder enables that optional service, posted through the affected Client Application. The following describes how the Technical Disconnect Mechanism works for each of the Exchange’s application programming interfaces (‘‘APIs’’): It is therefore ordered, pursuant to Section 19(a)(3) of the Exchange Act,16 that: (1) Effective December 17, 2015, CME’s registration as a clearing agency under Section 17A of the Exchange Act is withdrawn and (2) For a period of 5 years from the effective date of withdrawal of registration as a clearing agency, CME will maintain all the records required to be maintained pursuant to Rule 17A– 1(a) and (b) which are in CME’s possession and will produce such records upon the request of any representative of the Commission. By the Commission. Robert W. Errett, Deputy Secretary. [FR Doc. 2015–32192 Filed 12–22–15; 8:45 am] tkelley on DSK3SPTVN1PROD with NOTICES BILLING CODE 8011–01–P 14 See Written Request at 5, note 15. See also 17 CFR 240.17a–1(a) and (b). 15 See Written Request at 5, note 15. 16 15 U.S.C. 78s(a)(3). VerDate Sep<11>2014 18:05 Dec 22, 2015 Jkt 238001 [Release No. 34–76672; File No. SR–CBOE– 2015–113] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Technical Disconnect Mechanism December 17, 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 December 8, 2015, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00168 Fmt 4703 Sfmt 4703 (i)–(ii) No change. (b)–(c) No change. . . . Interpretations and Policies: .01 No change. * * * * * The text of the proposed rule change is also available on the Exchange’s Web site (https://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Rule 6.23C(a) provides that when a CBOE Application Server (‘‘CAS’’) 3 loses communication with a Client Application 4 such that a CAS does not receive an appropriate response to a Heartbeat Request 5 within ‘‘x’’ period of time, the Technical Disconnect Mechanism will automatically logoff the Trading Permit Holder’s (‘‘TPH’’) affected Client Application. If that occurs, the current rule provides that the Technical Disconnect Mechanism, if applicable, will automatically cancel all the TPH’s Market-Maker quotes posted through the affected Client 3 CBOE currently has numerous CASs serving TPHs. 4 For relevant purposes, a ‘‘Client Application’’ is the system component, such as a CBOE-supported workstation or a TPH’s custom trading application, through which a TPH communicates its quotes and/ or orders to a CAS. Messages are passed between a Client Application and a CAS. A Market-Maker may send quotes to the Exchange from one or more Client Applications, and a TPH may send orders to the Exchange from one or more Client Applications. 5 A ‘‘Heartbeat Request’’ refers to a message from a CAS to a Client Application to check connectivity and which requires a response from the Client Application in order to avoid logoff. The Heartbeat Request acts as a virtual pulse between a CAS and a Client Application and allows a CAS to continually monitor its connection with a Client Application. Failure to receive a response to a Heartbeat Request within the Heartbeat Response Time is indicative of a technical or system issue. E:\FR\FM\23DEN1.SGM 23DEN1 Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Notices tkelley on DSK3SPTVN1PROD with NOTICES Application.6 The Technical Disconnect Mechanism is intended to help mitigate the potential risks associated with a loss of communication with a Client Application, such as erroneous or unintended executions for stale quotes that are resting in the CBOE book. This mechanism serves to assist a TPH when a technical or system issue occurs, as well as assist the Exchange in maintaining a fair and orderly market. Recently, the Exchange amended Rule 6.23C related to the Technical Disconnect Mechanism to provide TPHs with an optional service that, if enabled by a TPH, will cause the Technical Disconnect Mechanism to also automatically cancel all the TPH’s open orders with a time-in-force of ‘‘day’’ (‘‘day orders’’) posted through the affected Client Application if the CAS loses communication with the Client Application.7 This optional service is an additional preventative risk control measure that CBOE is making available to TPHs. It is intended to help further mitigate the potential risks associated with a loss of communication with a TPH’s Client Application. If a TPH’s Client Application is disconnected for any period of time, it is possible that market conditions upon which it based its day orders may change during that time and make those orders stale. Consequently, any resulting executions of those orders may be erroneous or unintended. The proposed rule change provides that this optional service will automatically cancel open orders with a time-in-force of day that are resting on the book, but not resting on a PAR workstation or order management terminal (‘‘OMT’’).8 A TPH’s day orders resting in the book may automatically execute against incoming quotes or orders and are thus subject to the risk of potential erroneous or unintended executions if the CAS loses communication with the TPH’s Client Application, which risk the optional service is intended to mitigate. However, the TPH’s day orders resting on a PAR workstation or OMT are subject to manual handling by a broker, 6 See Rule 6.23C and Securities Exchange Act Release No. 34–70039 (July 25, 2013), 78 FR 46395 (July 31, 2013) (SR–CBOE–2013–071) for further information regarding the Technical Disconnect Mechanism. 7 See Securities Exchange Act Release No. 34– 76489 (November 20, 2015), 80 FR 74149 (November 27, 2015) (SR–CBOE–2015–103). The Exchange has not yet implemented this optional service and will announce the implementation date of the service, including the proposed rule change, by Regulatory Circular. 8 See Rule 6.12 regarding CBOE’s hybrid order handling system, including when orders may be routed to a PAR workstation or OMT via the order handling system. VerDate Sep<11>2014 18:05 Dec 22, 2015 Jkt 238001 agent or PAR official, as applicable, and are not subject to automatic execution against incoming quotes or orders. This manual handling mitigates the risk of potential erroneous or unintended executions of those orders, even during a time when the TPH is disconnected from the CAS, as an individual can determine how to handle the orders in accordance with CBOE’s rules. The Exchange believes it is appropriate to have the Technical Disconnect Mechanism cancel only day orders resting on the book but not day orders resting on a PAR workstation or OMT terminal, since manual handling of those orders has already mitigated the applicable risk. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.9 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 10 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 11 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 helps maintain a fair and orderly market, promotes efficiency and protects investors. While the optional service to have the Technical Disconnect Mechanism cancel a TPH’s day orders mitigates the risks of potential erroneous or unintended executions of those orders associated with a loss in communication with a Client Application, those risks have already been mitigated for day orders resting on a PAR workstation or OMT that are subject to manual handling. Thus, the Exchange believes it is reasonable to not have the Technical U.S.C. 78f(b). U.S.C. 78f(b)(5). 11 Id. 10 15 Frm 00169 Fmt 4703 Disconnect Mechanism cancel those orders and instead allow the broker, agent or PAR Official, as applicable, to handle those orders as the individual deems appropriate in accordance with CBOE’s rules. The Exchange also believes that the proposed rule change is designed to not permit unfair discrimination among market participants, as it applies to all TPHs in the same manner. The Exchange believes it is appropriate to apply this optional cancellation functionality to day orders only resting on the book and not day orders resting on a PAR workstation or OMT, because the latter orders are not subject to the same risks of potential erroneous or unintended executions as the former orders. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange does not believe the proposed rule change will cause any burden on intramarket competition because the proposed rule change applies to all TPHs in the same manner. Use of the service to cancel day orders resting on the book in the event the CAS loses communication with a Client Application is voluntary. Additionally, whether a TPH enables the optional service or not, the TPH’s day orders resting on a PAR workstation or OMT will continue to be manually handled as they are today, even if the CAS loses communication with a TPH’s Client Application. The Exchange believes it is appropriate to apply this optional cancellation functionality to day orders resting only on the book and not on a PAR workstation or OMT, because, as discussed above, those orders are not subject to the same risks of potential erroneous or unintended executions as the orders resting on the book. Further, the Exchange does not believe that such change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change modifies a mechanism available on CBOE’s system and applies only to orders resting in CBOE’s book. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. 9 15 PO 00000 79985 Sfmt 4703 E:\FR\FM\23DEN1.SGM 23DEN1 79986 Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and paragraph (f) of Rule 19b–4 13 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: tkelley on DSK3SPTVN1PROD with NOTICES 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–2015–113 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2015–113. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE– 2015–113 and should be submitted on or before January 13, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Robert W. Errett, Deputy Secretary. VerDate Sep<11>2014 18:05 Dec 22, 2015 1. Purpose The Exchange proposes to amend its Fee Schedule to: (i) Increase the transaction fees for transactions in standard options in non-Penny Pilot classes for Public Customers 3 that are not a Priority Customer,4 Non-MIAX Market Makers, Non-Member BrokerDealers, and Firms,5 and (ii) increase the transaction fees for transactions in standard options in Penny Pilot classes for Firms. The Exchange also proposes to modify the transaction fees for transactions for Public Customers that are not a Priority Customer, Non-MIAX Market Makers, Non-Member BrokerDealers and Firms that achieve certain Priority Customer Rebate Program 6 volume tiers. The proposed changes are based on the similar fees of other competing options exchanges.7 The Exchange is also proposing proportional fee changes applicable to Mini-Options in non-Penny Pilot classes, except that such fees applicable to Firms will be increased from $0.04 to $0.07 per contract, as described below. The Mini-Options transaction fee in SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76674; File No. SR–MIAX– 2015–70] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule December 17, 2015. Pursuant to the provisions of 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 December 4, 2015, Miami International Securities Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. 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 is filing a proposal to amend the MIAX Options Fee Schedule (the ‘‘Fee Schedule’’). The text of the proposed rule change is available on the Exchange’s Web site at https://www.miaxoptions.com/filter/ wotitle/rule_filing, at MIAX’s principal office, and at the Commission’s Public Reference Room. 1 15 Jkt 238001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b–4(f). 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. [FR Doc. 2015–32186 Filed 12–22–15; 8:45 am] 14 17 12 15 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change PO 00000 Frm 00170 Fmt 4703 Sfmt 4703 3 The term ‘‘Public Customer’’ means a person that is not a broker or dealer in securities. See Exchange Rule 100. 4 The term ‘‘Priority Customer’’ means a person or entity that (i) is not a broker or dealer in securities, and (ii) does not place more than 390 orders in listed options per day on average during a calendar month for its own beneficial accounts(s). 5 This fee is assessed to an Electronic Exchange Member (‘‘EEM’’) that enters an order that is executed for an account identified by the EEM for clearing in the OCC ‘‘Firm’’ range. See Fee Schedule, Section 1)a)ii). The term ‘‘Electronic Exchange Member’’ means the holder of a Trading Permit who is not a Market Maker. Electronic Exchange Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 6 See Fee Schedule, Section 1)a)iii). 7 See NASDAQ OMX PHLX LLC Pricing Schedule, Section II; and Chicago Board Options Exchange, Incorporated, Fees Schedule, p. 1. E:\FR\FM\23DEN1.SGM 23DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 246 (Wednesday, December 23, 2015)]
[Notices]
[Pages 79984-79986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32186]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76672; File No. SR-CBOE-2015-113]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the Technical Disconnect Mechanism

December 17, 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 December 8, 2015, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the
Exchange. 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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to amend Rule 6.23C related to the Exchange's
Technical Disconnect Mechanism. The text of the proposed rule change is
provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 6.23C Technical Disconnect

(a) When a CBOE Application Server (``CAS'') loses communication
with a Client Application such that a CAS does not receive an
appropriate response to a Heartbeat Request within ``x'' period of
time, the Technical Disconnect Mechanism will automatically logoff the
Trading Permit Holder's affected Client Application and automatically
cancel all the Trading Permit Holder's Market-Maker quotes, if
applicable, and open orders with a time-in-force of ``day'' resting in
the Book (which excludes orders resting on a PAR workstation or order
management terminal) (``day orders''), if the Trading Permit Holder
enables that optional service, posted through the affected Client
Application. The following describes how the Technical Disconnect
Mechanism works for each of the Exchange's application programming
interfaces (``APIs''):
(i)-(ii) No change.
(b)-(c) No change.
. . . Interpretations and Policies:
.01 No change.
* * * * *
The text of the proposed rule change is also available on the
Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
Rule 6.23C(a) provides that when a CBOE Application Server
(``CAS'') \3\ loses communication with a Client Application \4\ such
that a CAS does not receive an appropriate response to a Heartbeat
Request \5\ within ``x'' period of time, the Technical Disconnect
Mechanism will automatically logoff the Trading Permit Holder's
(``TPH'') affected Client Application. If that occurs, the current rule
provides that the Technical Disconnect Mechanism, if applicable, will
automatically cancel all the TPH's Market-Maker quotes posted through
the affected Client

[[Page 79985]]

Application.\6\ The Technical Disconnect Mechanism is intended to help
mitigate the potential risks associated with a loss of communication
with a Client Application, such as erroneous or unintended executions
for stale quotes that are resting in the CBOE book. This mechanism
serves to assist a TPH when a technical or system issue occurs, as well
as assist the Exchange in maintaining a fair and orderly market.
---------------------------------------------------------------------------

\3\ CBOE currently has numerous CASs serving TPHs.
\4\ For relevant purposes, a ``Client Application'' is the
system component, such as a CBOE-supported workstation or a TPH's
custom trading application, through which a TPH communicates its
quotes and/or orders to a CAS. Messages are passed between a Client
Application and a CAS. A Market-Maker may send quotes to the
Exchange from one or more Client Applications, and a TPH may send
orders to the Exchange from one or more Client Applications.
\5\ A ``Heartbeat Request'' refers to a message from a CAS to a
Client Application to check connectivity and which requires a
response from the Client Application in order to avoid logoff. The
Heartbeat Request acts as a virtual pulse between a CAS and a Client
Application and allows a CAS to continually monitor its connection
with a Client Application. Failure to receive a response to a
Heartbeat Request within the Heartbeat Response Time is indicative
of a technical or system issue.
\6\ See Rule 6.23C and Securities Exchange Act Release No. 34-
70039 (July 25, 2013), 78 FR 46395 (July 31, 2013) (SR-CBOE-2013-
071) for further information regarding the Technical Disconnect
Mechanism.
---------------------------------------------------------------------------

Recently, the Exchange amended Rule 6.23C related to the Technical
Disconnect Mechanism to provide TPHs with an optional service that, if
enabled by a TPH, will cause the Technical Disconnect Mechanism to also
automatically cancel all the TPH's open orders with a time-in-force of
``day'' (``day orders'') posted through the affected Client Application
if the CAS loses communication with the Client Application.\7\ This
optional service is an additional preventative risk control measure
that CBOE is making available to TPHs. It is intended to help further
mitigate the potential risks associated with a loss of communication
with a TPH's Client Application. If a TPH's Client Application is
disconnected for any period of time, it is possible that market
conditions upon which it based its day orders may change during that
time and make those orders stale. Consequently, any resulting
executions of those orders may be erroneous or unintended.
---------------------------------------------------------------------------

\7\ See Securities Exchange Act Release No. 34-76489 (November
20, 2015), 80 FR 74149 (November 27, 2015) (SR-CBOE-2015-103). The
Exchange has not yet implemented this optional service and will
announce the implementation date of the service, including the
proposed rule change, by Regulatory Circular.
---------------------------------------------------------------------------

The proposed rule change provides that this optional service will
automatically cancel open orders with a time-in-force of day that are
resting on the book, but not resting on a PAR workstation or order
management terminal (``OMT'').\8\ A TPH's day orders resting in the
book may automatically execute against incoming quotes or orders and
are thus subject to the risk of potential erroneous or unintended
executions if the CAS loses communication with the TPH's Client
Application, which risk the optional service is intended to mitigate.
However, the TPH's day orders resting on a PAR workstation or OMT are
subject to manual handling by a broker, agent or PAR official, as
applicable, and are not subject to automatic execution against incoming
quotes or orders. This manual handling mitigates the risk of potential
erroneous or unintended executions of those orders, even during a time
when the TPH is disconnected from the CAS, as an individual can
determine how to handle the orders in accordance with CBOE's rules. The
Exchange believes it is appropriate to have the Technical Disconnect
Mechanism cancel only day orders resting on the book but not day orders
resting on a PAR workstation or OMT terminal, since manual handling of
those orders has already mitigated the applicable risk.
---------------------------------------------------------------------------

\8\ See Rule 6.12 regarding CBOE's hybrid order handling system,
including when orders may be routed to a PAR workstation or OMT via
the order handling system.
---------------------------------------------------------------------------

2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
---------------------------------------------------------------------------

In particular, the proposed rule change helps maintain a fair and
orderly market, promotes efficiency and protects investors. While the
optional service to have the Technical Disconnect Mechanism cancel a
TPH's day orders mitigates the risks of potential erroneous or
unintended executions of those orders associated with a loss in
communication with a Client Application, those risks have already been
mitigated for day orders resting on a PAR workstation or OMT that are
subject to manual handling. Thus, the Exchange believes it is
reasonable to not have the Technical Disconnect Mechanism cancel those
orders and instead allow the broker, agent or PAR Official, as
applicable, to handle those orders as the individual deems appropriate
in accordance with CBOE's rules. The Exchange also believes that the
proposed rule change is designed to not permit unfair discrimination
among market participants, as it applies to all TPHs in the same
manner. The Exchange believes it is appropriate to apply this optional
cancellation functionality to day orders only resting on the book and
not day orders resting on a PAR workstation or OMT, because the latter
orders are not subject to the same risks of potential erroneous or
unintended executions as the former orders.

B. Self-Regulatory Organization's Statement on Burden on Competition

CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange does
not believe the proposed rule change will cause any burden on
intramarket competition because the proposed rule change applies to all
TPHs in the same manner. Use of the service to cancel day orders
resting on the book in the event the CAS loses communication with a
Client Application is voluntary. Additionally, whether a TPH enables
the optional service or not, the TPH's day orders resting on a PAR
workstation or OMT will continue to be manually handled as they are
today, even if the CAS loses communication with a TPH's Client
Application. The Exchange believes it is appropriate to apply this
optional cancellation functionality to day orders resting only on the
book and not on a PAR workstation or OMT, because, as discussed above,
those orders are not subject to the same risks of potential erroneous
or unintended executions as the orders resting on the book. Further,
the Exchange does not believe that such change will impose any burden
on intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change
modifies a mechanism available on CBOE's system and applies only to
orders resting in CBOE's book.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

The Exchange neither solicited nor received comments on the
proposed rule change.

[[Page 79986]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 \13\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
---------------------------------------------------------------------------

\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2015-113 on the subject line.

Paper Comments

Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2015-113. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2015-113 and should be
submitted on or before January 13, 2016.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-32186 Filed 12-22-15; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.