Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to the Automated Improvement Mechanism, 46975-46978 [2016-16972]

Download as PDF Federal Register / Vol. 81, No. 138 / Tuesday, July 19, 2016 / Notices order handling, routing, and related compliance processes. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,8 in particular, in that it is 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. The Exchange believes that its proposal to update Exchange Rule 13.4(a) to include IEX will ensure that the rule correctly identifies and publicly states on a market-by-market basis all of the specific network processor and proprietary data feeds that the Exchange utilizes for the handling, routing, and execution of orders, and for performing the regulatory compliance checks related to each of those functions. The proposed rule change also removes impediments to and perfects the mechanism of a free and open market and protects investors and the public interest because it provides additional specificity, clarity and transparency. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes its proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes the proposal would enhance competition because including all of the exchanges enhances transparency and enables investors to better assess the quality of the Exchange’s execution and routing services. mstockstill on DSK3G9T082PROD with NOTICES 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 unsolicited written comments from Members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and paragraph (f)(6) of Rule 19b– 4 thereunder,10 the Exchange has designated this rule filing as noncontroversial. The Exchange has given the Commission written notice of its 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. 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: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsEDGX–2016–30 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–BatsEDGX–2016–30. 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 (http://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 will also 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 SRBatsEDGX–2016–30 and should be submitted on or before August 9, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Jill M. Peterson, Assistant Secretary. [FR Doc. 2016–16975 Filed 7–18–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78316; File No. SR–CBOE– 2016–056] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to the Automated Improvement Mechanism July 13, 2016. 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 July 13, 2016, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule 11 17 7 15 U.S.C. 78f. 8 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 19:39 Jul 18, 2016 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4. Jkt 238001 PO 00000 Frm 00090 Fmt 4703 1 15 Sfmt 4703 46975 E:\FR\FM\19JYN1.SGM 19JYN1 46976 Federal Register / Vol. 81, No. 138 / Tuesday, July 19, 2016 / Notices 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. mstockstill on DSK3G9T082PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange seeks to extend the pilots associated with the Automated Improvement Mechanism. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) Chicago Board Options Exchange, Incorporated Rules Rule 6.74A. Automated Improvement Mechanism (‘‘AIM’’) Notwithstanding the provisions of Rule 6.74, a Trading Permit Holder that represents agency orders may electronically execute an order it represents as agent (‘‘Agency Order’’) against principal interest or a solicited order provided it submits the Agency Order for electronic execution into the AIM auction (‘‘Auction’’) pursuant to this Rule. (a)–(b) No change. . . . Interpretations and Policies: .01–.02 No change. .03 Initially, and for at least a Pilot Period expiring on [July 18, 2016] January 18, 2017, there will be no minimum size requirement for orders to be eligible for the Auction. During this Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the Auction mechanism. Any raw data which is submitted to the Commission will be provided on a confidential basis. .04–.05 No change. .06 Subparagraph (b)(2)(E) of this rule will be effective for a Pilot Period until [July 18, 2016] January 18, 2017. During the Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, relating to the frequency with which early termination of the Auction occurs pursuant to this provision as well as any other provision, and also the frequency 3 15 4 17 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). VerDate Sep<11>2014 19:39 Jul 18, 2016 Jkt 238001 with which early termination pursuant to this provision results in favorable pricing for the Agency Order. Any raw data which is submitted to the Commission will be provided on a confidential basis. .07–.08 No change. Rule 24B.5A. FLEX Automated Improvement Mechanism Notwithstanding the provisions of Rule 24B.5, a FLEX Trader that represents agency orders may electronically execute an order it represents as agent (‘‘Agency Order’’) against principal interest and/or against solicited orders provided it submits the Agency Order for execution into the automated improvement mechanism auction (‘‘AIM Auction’’) pursuant to this Rule. (a)–(b) No change. This rule supersedes Exchange Rule 6.74A. . . . Interpretations and Policies: .01–.02 No change. .03 Initially, and for at least a Pilot Period expiring on [July 18, 2016] January 18, 2017, there will be no minimum size requirement for orders to be eligible for the AIM Auction. During this Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the AIM Auction. Any raw data which is submitted to the Commission will be provided on a confidential basis. .04–.07 No change. The text of the proposed rule change is also available on the Exchange’s Web site (http://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. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In February 2006, CBOE obtained approval from the Securities and Exchange Commission (the ‘‘Commission’’) to adopt the AIM auction process.5 AIM exposes certain orders electronically to an auction process to provide these orders with the opportunity to receive an execution at an improved price. The AIM auction is available only for orders that a Trading Permit Holder represents as agent (‘‘Agency Order’’) and for which a second order of the same size as the Agency Order (and on the opposite side of the market) is also submitted (effectively stopping the Agency Order at a given price). The Commission approved two components of AIM on a pilot basis: (1) That there is no minimum size requirement for orders to be eligible for the auction; and (2) that the auction will conclude prematurely anytime there is a quote lock on the Exchange pursuant to Rule 6.45A(d).6 In connection with the pilot programs, the Exchange has submitted to the Commission reports providing detailed AIM auction and order execution data. Ten one-year extensions to the pilot programs have previously become effective.7 The proposed rule change merely extends the duration of the pilot programs until January 18, 2017. Extending the pilots for an additional six months will allow the Commission more time to consider the impact of the pilot programs on AIM order executions. Additionally, in March 2012, CBOE obtained approval from the Commission to adopt the AIM auction process for 5 See Securities Exchange Release No. 53222 (February 3, 2006), 71 FR 7089 (February 10, 2006) (SR–CBOE–2005–60). 6 A quote lock occurs when a CBOE MarketMaker’s quote interacts with the quote of another CBOE Market-Maker (i.e. when internal quotes lock). 7 See Securities Exchange Act Release Nos. 54147 (July 14, 2006), 71 FR 41487 (July 21, 2006) (SR– CBOE–2006–64); 56094 (July 18, 2007), 72 FR 40910 (July 25, 2007) (SR–CBOE–2007–80); 58196 (July 18, 2008), 73 FR 43803 (July 28, 2008) (SR– CBOE–2008–76); 60338 (July 17, 2009), 74 FR 36803 (July 24, 2009) (SR–CBOE–2009–051); 62522 (July 16, 2010), 75 FR 43596 (July 26, 2010) (SR– CBOE–2010–067); 64930 (July 20, 2011), 76 FR 44636 (July 26, 2011) (SR–CBOE–2011–066); 67302 (June 28, 2012), 77 FR 39779 (July 5, 2012) (SR– CBOE–2012–061); 69867 (June 27, 2013), 78 FR 40230 (July 3, 2013) (SR–CBOE–2013–066); and 72570 (July 9, 2014), 79 FR 41337 (July 15, 2014) (SR–CBOE–2014–054); and 75476 (July 16, 2015), 80 FR 43548 (July 22, 2015) (SR–CBOE–2015–068). E:\FR\FM\19JYN1.SGM 19JYN1 Federal Register / Vol. 81, No. 138 / Tuesday, July 19, 2016 / Notices FLEX Options.8 AIM for FLEX Options exposes certain FLEX Options orders electronically to an auction process to provide these orders with the opportunity to receive an execution at an improved price. The FLEX AIM auction is available only for Agency Orders and for which a second order of the same size as the Agency Order (and on the opposite side of the market) is also submitted (effectively stopping the Agency Order at a given price). The Commission approved on a pilot basis the component of AIM for FLEX Options that there is no minimum size requirement for orders to be eligible for the auction.9 In connection with the pilot program, the Exchange has submitted to the Commission reports providing detailed FLEX AIM auction and order execution data. Four one-year extensions to the pilot program have previously become effective.10 The proposed rule change merely extends the duration of the pilot program until July 18, 2017. Extending the pilot for an additional six months will allow the Commission more time to consider the impact of the pilot program on AIM order executions for FLEX Options. The Exchange also proposes to correct an inadvertent typographical error in Rule 24B.5A. On December 23, 2011 the Exchange filed a rule change to adopt Rule 24B.5A (FLEX Automated Improvement Mechanism).11 As part of that filing, a spelling error was made in the sentence that begins with ‘‘RULE 24B5A. Notwithstanding . . .’’ The error incorrectly identifies an ‘‘AIM Auction’’ as an ‘‘AIM Action.’’ The Exchange is now proposing to amend this typographical error. mstockstill on DSK3G9T082PROD with NOTICES 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 8 See Securities Exchange Release No. 66702 (March 30, 2012), 77 FR 20675 (April 5, 2012) (SR– CBOE–2011–123). 9 The pilot for the FLEX AIM auction process was modeled after the pilot for non-FLEX Options described above, and included an initial expiration date of July 18, 2012 so that the FLEX pilot would coincide with the existing non-FLEX pilot. 10 See Securities Exchange Act Release No. 67302 (June 28, 2012), 77 FR 39779 (July 5, 2012) (SR– CBOE–2012–061); 69938 (July 5, 2013), 78 FR 41481 (July 10, 2013) (SR–CBOE–2013–069); and 72570 (July 9, 2014), 79 FR 41337 (July 15, 2014) (SR–CBOE–2014–054); and 75476 (July 16, 2015), 80 FR 43548 (July 22, 2015) (SR–CBOE–2015–068). 11 See Securities Exchange Act Release No. 66702 (March 30, 2012), 77 FR 20675 (April 5, 2012) (SR– CBOE–2011–123) (Order approving Proposed Rule Change to Establish an Automated Improvement Mechanism and a Solicitation Auction Mechanism for FLEX Options). VerDate Sep<11>2014 19:39 Jul 18, 2016 Jkt 238001 and, in particular, the requirements of Section 6(b) of the Act.12 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 13 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) 14 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 protects investors and the public interest by allowing for an extension of the AIM and FLEX AIM pilot programs, and thus allowing additional time for the Commission to evaluate the pilot programs. The pilot programs will continue to allow (1) smaller non-FLEX option and FLEX Option orders to receive the opportunity for price improvement pursuant to the AIM auction, and (2) with respect to nonFLEX options, Agency Orders in AIM auctions that are concluded early because of quote lock on the Exchange to receive the benefit of the lock price. The additional data provided will help the Commission determine if there is evidence of meaningful competition for all size orders, significant price improvement for orders going through the AIM and FLEX AIM and an active and liquid market functioning on the Exchange outside of the AIM and FLEX AIM auctions. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule changes will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe the proposed rule changes impose any burden on intramarket competition because it applies to all Trading Permit Holders. All Trading Permit Holders that submit orders into an AIM or FLEX AIM auction are still subject to the same requirements. In addition, the Exchange PO 00000 12 15 13 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 14 Id. Frm 00092 Fmt 4703 Sfmt 4703 46977 does not believe the proposed rule changes will impose any burden on intermarket competition, as they merely extend the duration of an existing pilot programs, which are available to all market participants through Trading Permit Holders. AIM and FLEX AIM will continue to function in the same manner as they currently function for an extended period of time. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (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, it has become effective pursuant to Section 19(b)(3)(A) of the Act 15 and subparagraph (f)(6) of Rule 19b–4 thereunder.16 A proposed rule change filed under Rule 19b–4(f)(6) 17 normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b–4(f)(6)(iii),18 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requested that the Commission waive the 30-day operative delay. The Exchange noted that waiver of the 30-day operative delay will allow the Exchange to extend the pilot programs prior to their expiration on July 18, 2016. In addition, the Exchange believes that waiver of the operative delay is also consistent with the protection of investors and the public interest because it will allow for the least amount of market disruption, as the pilot programs will continue as they currently do, maintaining the status quo. 15 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) 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 Exchange has satisfied this requirement. 17 17 CFR 240.19b–4(f)(6). 18 17 CFR 240.19b–4(f)(6)(iii). 16 17 E:\FR\FM\19JYN1.SGM 19JYN1 46978 Federal Register / Vol. 81, No. 138 / Tuesday, July 19, 2016 / Notices 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 pilot programs to continue uninterrupted, thereby avoiding any potential investor confusion that could result from a temporary interruption in the pilot programs. Therefore, the Commission designates the proposed rule change to be operative on July 18, 2016.19 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2016–056 on the subject line. mstockstill on DSK3G9T082PROD with NOTICES 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–CBOE–2016–056. 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 (http://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 19 For purposes only of waiving the operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 19:39 Jul 18, 2016 Jkt 238001 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– 2016–056 and should be submitted on or before August 9, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. [FR Doc. 2016–16972 Filed 7–18–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736. Extension: Form Custody, SEC File No. 270–643, OMB Control No. 3235–0691. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (‘‘PRA’’), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Form Custody (17 CFR 249.639) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Exchange Act’’). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Section 17(a)(1) of the Exchange Act provides that broker-dealers registered with the Commission must make and keep records, furnish copies of the records, and make and disseminate reports as the Commission, by rule, prescribes. Pursuant to this authority, PO 00000 20 17 CFR 200.30–3(a)(12). Frm 00093 Fmt 4703 Sfmt 4703 the Commission adopted Rule 17a–5 (17 CFR 240.17a–5), which is one of the primary financial and operational reporting rules for broker-dealers.1 Paragraph (a)(5) of Rule 17–5 requires every broker-dealer registered with the Commission to file Form Custody (17 CFR 249.639) with its designated examining authority (‘‘DEA’’) within 17 business days after the end of each calendar quarter and within 17 business days after the date selected for the broker-dealer’s annual report if that date is not the end of a calendar quarter. Form Custody is designed to elicit information about whether a brokerdealer maintains custody of customer and non-customer assets, and, if so, how such assets are maintained. There are approximately 4,113 brokerdealers registered with the Commission. Based on staff experience, the Commission estimates that, on average, it would take a broker-dealer approximately 12 hours to complete and file Form Custody, for an annual industry-wide reporting burden of approximately 197,424 hours.2 Assuming an average cost per hour of approximately $291for a compliance manager, the total internal cost of compliance for the respondents is approximately $57,450,384 per year.3 Written comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. 1 Rule 17a–5 is subject to a separate PRA filing (OMB Control Number 3235–0123). 2 4,113 brokers-dealers × 4 times per year × 12 hours = 197,424 hours. 3 197,424 hours times $291 per hour = 57,450,384. $291 per hour for a compliance manager is from SIFMA’s Management & Professional Earnings in the Securities Industry 2013, modified by Commission staff for an 1800hour work-year, multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead, and adjusted for inflation. E:\FR\FM\19JYN1.SGM 19JYN1

Agencies

[Federal Register Volume 81, Number 138 (Tuesday, July 19, 2016)]
[Notices]
[Pages 46975-46978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16972]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78316; File No. SR-CBOE-2016-056]


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

July 13, 2016.
    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 July 13, 2016, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule

[[Page 46976]]

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

    The Exchange seeks to extend the pilots associated with the 
Automated Improvement Mechanism. The text of the proposed rule change 
is provided below.

(additions are italicized; deletions are [bracketed])

Chicago Board Options Exchange, Incorporated Rules

    Rule 6.74A. Automated Improvement Mechanism (``AIM'')
    Notwithstanding the provisions of Rule 6.74, a Trading Permit 
Holder that represents agency orders may electronically execute an 
order it represents as agent (``Agency Order'') against principal 
interest or a solicited order provided it submits the Agency Order for 
electronic execution into the AIM auction (``Auction'') pursuant to 
this Rule.
    (a)-(b) No change.
    . . . Interpretations and Policies:
    .01-.02 No change.
    .03 Initially, and for at least a Pilot Period expiring on [July 
18, 2016] January 18, 2017, there will be no minimum size requirement 
for orders to be eligible for the Auction. During this Pilot Period, 
the Exchange will submit certain data, periodically as required by the 
Commission, to provide supporting evidence that, among other things, 
there is meaningful competition for all size orders and that there is 
an active and liquid market functioning on the Exchange outside of the 
Auction mechanism. Any raw data which is submitted to the Commission 
will be provided on a confidential basis.
    .04-.05 No change.
    .06 Subparagraph (b)(2)(E) of this rule will be effective for a 
Pilot Period until [July 18, 2016] January 18, 2017. During the Pilot 
Period, the Exchange will submit certain data, periodically as required 
by the Commission, relating to the frequency with which early 
termination of the Auction occurs pursuant to this provision as well as 
any other provision, and also the frequency with which early 
termination pursuant to this provision results in favorable pricing for 
the Agency Order. Any raw data which is submitted to the Commission 
will be provided on a confidential basis.
    .07-.08 No change.
    Rule 24B.5A. FLEX Automated Improvement Mechanism
    Notwithstanding the provisions of Rule 24B.5, a FLEX Trader that 
represents agency orders may electronically execute an order it 
represents as agent (``Agency Order'') against principal interest and/
or against solicited orders provided it submits the Agency Order for 
execution into the automated improvement mechanism auction (``AIM 
Auction'') pursuant to this Rule.
    (a)-(b) No change.
    This rule supersedes Exchange Rule 6.74A.
    . . . Interpretations and Policies:
    .01-.02 No change.
    .03 Initially, and for at least a Pilot Period expiring on [July 
18, 2016] January 18, 2017, there will be no minimum size requirement 
for orders to be eligible for the AIM Auction. During this Pilot 
Period, the Exchange will submit certain data, periodically as required 
by the Commission, to provide supporting evidence that, among other 
things, there is meaningful competition for all size orders and that 
there is an active and liquid market functioning on the Exchange 
outside of the AIM Auction. Any raw data which is submitted to the 
Commission will be provided on a confidential basis.
    .04-.07 No change.

    The text of the proposed rule change is also available on the 
Exchange's Web site (http://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
    In February 2006, CBOE obtained approval from the Securities and 
Exchange Commission (the ``Commission'') to adopt the AIM auction 
process.\5\ AIM exposes certain orders electronically to an auction 
process to provide these orders with the opportunity to receive an 
execution at an improved price. The AIM auction is available only for 
orders that a Trading Permit Holder represents as agent (``Agency 
Order'') and for which a second order of the same size as the Agency 
Order (and on the opposite side of the market) is also submitted 
(effectively stopping the Agency Order at a given price).
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    \5\ See Securities Exchange Release No. 53222 (February 3, 
2006), 71 FR 7089 (February 10, 2006) (SR-CBOE-2005-60).
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    The Commission approved two components of AIM on a pilot basis: (1) 
That there is no minimum size requirement for orders to be eligible for 
the auction; and (2) that the auction will conclude prematurely anytime 
there is a quote lock on the Exchange pursuant to Rule 6.45A(d).\6\ In 
connection with the pilot programs, the Exchange has submitted to the 
Commission reports providing detailed AIM auction and order execution 
data.
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    \6\ A quote lock occurs when a CBOE Market-Maker's quote 
interacts with the quote of another CBOE Market-Maker (i.e. when 
internal quotes lock).
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    Ten one-year extensions to the pilot programs have previously 
become effective.\7\ The proposed rule change merely extends the 
duration of the pilot programs until January 18, 2017. Extending the 
pilots for an additional six months will allow the Commission more time 
to consider the impact of the pilot programs on AIM order executions.
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    \7\ See Securities Exchange Act Release Nos. 54147 (July 14, 
2006), 71 FR 41487 (July 21, 2006) (SR-CBOE-2006-64); 56094 (July 
18, 2007), 72 FR 40910 (July 25, 2007) (SR-CBOE-2007-80); 58196 
(July 18, 2008), 73 FR 43803 (July 28, 2008) (SR-CBOE-2008-76); 
60338 (July 17, 2009), 74 FR 36803 (July 24, 2009) (SR-CBOE-2009-
051); 62522 (July 16, 2010), 75 FR 43596 (July 26, 2010) (SR-CBOE-
2010-067); 64930 (July 20, 2011), 76 FR 44636 (July 26, 2011) (SR-
CBOE-2011-066); 67302 (June 28, 2012), 77 FR 39779 (July 5, 2012) 
(SR-CBOE-2012-061); 69867 (June 27, 2013), 78 FR 40230 (July 3, 
2013) (SR-CBOE-2013-066); and 72570 (July 9, 2014), 79 FR 41337 
(July 15, 2014) (SR-CBOE-2014-054); and 75476 (July 16, 2015), 80 FR 
43548 (July 22, 2015) (SR-CBOE-2015-068).
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    Additionally, in March 2012, CBOE obtained approval from the 
Commission to adopt the AIM auction process for

[[Page 46977]]

FLEX Options.\8\ AIM for FLEX Options exposes certain FLEX Options 
orders electronically to an auction process to provide these orders 
with the opportunity to receive an execution at an improved price. The 
FLEX AIM auction is available only for Agency Orders and for which a 
second order of the same size as the Agency Order (and on the opposite 
side of the market) is also submitted (effectively stopping the Agency 
Order at a given price).
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    \8\ See Securities Exchange Release No. 66702 (March 30, 2012), 
77 FR 20675 (April 5, 2012) (SR-CBOE-2011-123).
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    The Commission approved on a pilot basis the component of AIM for 
FLEX Options that there is no minimum size requirement for orders to be 
eligible for the auction.\9\ In connection with the pilot program, the 
Exchange has submitted to the Commission reports providing detailed 
FLEX AIM auction and order execution data.
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    \9\ The pilot for the FLEX AIM auction process was modeled after 
the pilot for non-FLEX Options described above, and included an 
initial expiration date of July 18, 2012 so that the FLEX pilot 
would coincide with the existing non-FLEX pilot.
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    Four one-year extensions to the pilot program have previously 
become effective.\10\ The proposed rule change merely extends the 
duration of the pilot program until July 18, 2017. Extending the pilot 
for an additional six months will allow the Commission more time to 
consider the impact of the pilot program on AIM order executions for 
FLEX Options.
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    \10\ See Securities Exchange Act Release No. 67302 (June 28, 
2012), 77 FR 39779 (July 5, 2012) (SR-CBOE-2012-061); 69938 (July 5, 
2013), 78 FR 41481 (July 10, 2013) (SR-CBOE-2013-069); and 72570 
(July 9, 2014), 79 FR 41337 (July 15, 2014) (SR-CBOE-2014-054); and 
75476 (July 16, 2015), 80 FR 43548 (July 22, 2015) (SR-CBOE-2015-
068).
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    The Exchange also proposes to correct an inadvertent typographical 
error in Rule 24B.5A. On December 23, 2011 the Exchange filed a rule 
change to adopt Rule 24B.5A (FLEX Automated Improvement Mechanism).\11\ 
As part of that filing, a spelling error was made in the sentence that 
begins with ``RULE 24B5A. Notwithstanding . . .'' The error incorrectly 
identifies an ``AIM Auction'' as an ``AIM Action.'' The Exchange is now 
proposing to amend this typographical error.
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    \11\ See Securities Exchange Act Release No. 66702 (March 30, 
2012), 77 FR 20675 (April 5, 2012) (SR-CBOE-2011-123) (Order 
approving Proposed Rule Change to Establish an Automated Improvement 
Mechanism and a Solicitation Auction Mechanism for FLEX Options).
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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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ 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) \14\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In particular, the proposed rule change protects investors and the 
public interest by allowing for an extension of the AIM and FLEX AIM 
pilot programs, and thus allowing additional time for the Commission to 
evaluate the pilot programs. The pilot programs will continue to allow 
(1) smaller non-FLEX option and FLEX Option orders to receive the 
opportunity for price improvement pursuant to the AIM auction, and (2) 
with respect to non-FLEX options, Agency Orders in AIM auctions that 
are concluded early because of quote lock on the Exchange to receive 
the benefit of the lock price. The additional data provided will help 
the Commission determine if there is evidence of meaningful competition 
for all size orders, significant price improvement for orders going 
through the AIM and FLEX AIM and an active and liquid market 
functioning on the Exchange outside of the AIM and FLEX AIM auctions.

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

    CBOE does not believe that the proposed rule changes will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed rule changes impose any burden on intramarket competition 
because it applies to all Trading Permit Holders. All Trading Permit 
Holders that submit orders into an AIM or FLEX AIM auction are still 
subject to the same requirements. In addition, the Exchange does not 
believe the proposed rule changes will impose any burden on intermarket 
competition, as they merely extend the duration of an existing pilot 
programs, which are available to all market participants through 
Trading Permit Holders. AIM and FLEX AIM will continue to function in 
the same manner as they currently function for an extended period of 
time.

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

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

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

    Because the foregoing proposed rule change does not: (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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
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 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay. The Exchange 
noted that waiver of the 30-day operative delay will allow the Exchange 
to extend the pilot programs prior to their expiration on July 18, 
2016. In addition, the Exchange believes that waiver of the operative 
delay is also consistent with the protection of investors and the 
public interest because it will allow for the least amount of market 
disruption, as the pilot programs will continue as they currently do, 
maintaining the status quo.
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).

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[[Page 46978]]

    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 pilot programs to continue uninterrupted, thereby 
avoiding any potential investor confusion that could result from a 
temporary interruption in the pilot programs. Therefore, the Commission 
designates the proposed rule change to be operative on July 18, 
2016.\19\
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    \19\ For purposes only of waiving the operative delay, the 
Commission has 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2016-056 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2016-056. 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 (http://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-2016-056 and should be 
submitted on or before August 9, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016-16972 Filed 7-18-16; 8:45 am]
 BILLING CODE 8011-01-P