Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Credit Option Margin Pilot Program Through July 18, 2017, 95236-95238 [2016-31113]
Download as PDF
<![CDATA[
95236
Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change to be operative on
December 14, 2016.27
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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.
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–BX–
2016–069 and should be submitted on
or before January 17, 2017.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Assistant Secretary.
asabaliauskas 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 rulecomments@sec.gov. Please include File
Number SR–BX–2016–069 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–BX–2016–069. 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
[FR Doc. 2016–31107 Filed 12–23–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79621; File No. SR–CBOE–
2016–089]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Credit
Option Margin Pilot Program Through
July 18, 2017
December 20, 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 December
14, 2016, 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 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.
28 17
27 For
purposes only of waiving the operative
delay for this proposal, 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
20:45 Dec 23, 2016
Jkt 241001
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)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
PO 00000
Frm 00139
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to amend Rule 12.3 by
extending the Credit Option Margin
Pilot Program through July 18, 2017.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On February 2, 2011, the Commission
approved the Exchange’s proposal to
establish a Credit Option Margin Pilot
Program (‘‘Program’’).5 The proposal
became effective on a pilot basis to run
on a parallel track with Financial
Industry Regulatory Authority
(‘‘FINRA’’) Rule 4240 that similarly
operates on an interim pilot basis.6
On January 17, 2012, the Exchange
filed a rule change to, among other
things, decouple the Program with the
FINRA program and to extend the
expiration date of the Program to
January 17, 2013.7 The Program,
however, continues to be substantially
5 See Securities Exchange Act Release No. 63819
(February 2, 2011), 76 FR 6838 (February 8, 2011)
order approving (SR–CBOE–2010–106). To
implement the Program, the Exchange amended
Rule 12.3(l), Margin Requirements, to make CBOE’s
margin requirements for Credit Options consistent
with Financial Industry Regulatory Authority
(‘‘FINRA’’) Rule 4240, Margin Requirements for
Credit Default Swaps. CBOE’s Credit Options (i.e.,
Credit Default Options and Credit Default Basket
Options) are analogous to credit default swaps.
6 See Securities Exchange Act Release No. 59955
(May 22, 2009), 74 FR 25586 (May 28, 2009) (Notice
of Filing and Order Granting Accelerated Approval
of Proposed Rule Change; SR–FINRA–2009–012).
7 See Securities Exchange Act Release No. 66163
(January 17, 2012), 77 FR 3318 (January 23, 2012)
(SR–CBOE–2012–007).
E:\FR\FM\27DEN1.SGM
27DEN1
Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices
similar to the provisions of the FINRA
program. Subsequently, the Exchange
filed rule changes to extend the program
until January 17, 2014, January 16, 2015,
January 15, 2016, and January 17, 2017,
respectively.8 The Exchange believes
that extending the expiration date of the
Program further will allow for further
analysis of the Program and a
determination of how the Program
should be structured in the future. Thus,
the Exchange is now currently
proposing to extend the duration of the
Program for an additional six months
until July 18, 2017.
Additionally, the Exchange believes
that it is in the public interest to extend
the expiration date of the Program
because it will continue to allow the
Exchange to list Credit Options for
trading. As a result, the Exchange will
remain competitive with the Over-theCounter Market with respect to swaps
and security-based swaps. In the future,
if the Exchange proposes an additional
extension of the Credit Option Margin
Pilot Program or proposes to make the
Program permanent, then the Exchange
will submit a filing proposing such
amendments to the Program.
2. Statutory Basis
asabaliauskas on DSK3SPTVN1PROD with NOTICES
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.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 facilitation 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
8 See Securities Exchange Act Release Nos. 68539
(December 27, 2012), 78 FR 138 (January 2, 2013)
(SR–CBOE–2012–125), 71124 (December 18, 2013),
78 FR 77754 (December 24, 2013) (SR–CBOE–2013–
123), 73837 (December 15, 2014), 79 FR 75850
(December 19, 2014) (SR–CBOE–2014–091), and
76824 (January 5, 2016), 81 FR 1255 (January 11,
2016) (SR–CBOE–2015–118).
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
11 Id.
VerDate Sep<11>2014
20:45 Dec 23, 2016
Jkt 241001
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposed rule change will
further the purposes of the Act because,
consistent with the goals of the
Commission at the initial adoption of
the Program, the margin requirements
set forth by the proposed rule change
will help to stabilize the financial
markets. In addition, the proposed rule
change is substantially similar to
existing FINRA Rule 4240.
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 believes that, by extending
the expiration of the Program, the
proposed rule change will allow for
further analysis of the Program and a
determination of how the Program 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 neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 12 and Rule 19b–4(f)(6) 13
thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission 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. The
Exchange has satisfied this requirement.
13 17
PO 00000
Frm 00140
Fmt 4703
Sfmt 4703
95237
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2016–089 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–2016–089. 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
E:\FR\FM\27DEN1.SGM
27DEN1
95238
Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices
available publicly. All submissions
should refer to File Number SR–CBOE–
2016–089 and should be submitted on
or before January 17,2017.
order institutes proceedings under
Section 19(b)(2)(B) of the Exchange Act 7
to determine whether to approve or
disapprove the proposed rule change.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
II. Summary of the Proposal
[FR Doc. 2016–31113 Filed 12–23–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79608; File No. SR–CHX–
2016–16]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Adopt the
CHX Liquidity Taking Access Delay
December 20, 2016.
I. Introduction
On September 6, 2016, the Chicago
Stock Exchange, Inc. (‘‘CHX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt the CHX Liquidity
Taking Access Delay (‘‘LTAD’’). The
proposed rule change was published for
comment in the Federal Register on
September 22, 2016.3 On November 1,
2016, pursuant to Section 19(b)(2) of the
Exchange Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 The Commission received
20 comments on the proposed rule
change, including a response to certain
comment letters by the Exchange.6 This
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 78860
(September 16, 2016), 81 FR 65442 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 79216,
81 FR 78228 (November 7, 2016). The Commission
designated December 21, 2016, as the date by which
the Commission shall either approve or disapprove,
or institute proceedings to determine whether to
disapprove, the proposed rule change.
6 See letters from: (1) Douglas A. Cifu, Chief
Executive Officer, Virtu Financial, dated September
21, 2016 (‘‘Virtu Letter’’); (2) R.T. Leuchtkafer,
dated September 29, 2016 (‘‘Leuchtkafer Letter 1’’);
(3) Adam Nunes, Head of Business Development,
Hudson River Trading LLC, dated October 6, 2016
asabaliauskas on DSK3SPTVN1PROD with NOTICES
1 15
VerDate Sep<11>2014
20:45 Dec 23, 2016
Jkt 241001
A. Description
The LTAD would require all new
incoming orders 8 received during the
Open Trading State 9 that could
immediately execute against one or
more resting orders on the CHX book, as
well as certain related cancel messages,
to be intentionally delayed for 350
microseconds before such delayed
messages would be processed 10 by the
(‘‘Hudson River Trading Letter’’); (4) Beste Bidd,
Trader, dated October 9, 2016 (‘‘Beste Bidd Letter’’);
(5) Joanna Mallers, Secretary, FIA Principal Traders
Group, dated October 13, 2016 (‘‘FIA PTG Letter’’);
(6) John L. Thornton, Co-Chair, Hal S. Scott,
Director, and R. Glenn Hubbard, Co-Chair,
Committee on Capital Markets Regulation, dated
October 13, 2016 (‘‘Committee on Capital Markets
Letter’’); (7) Adam C. Cooper, Senior Managing
Director and Chief Legal Officer, Citadel Securities,
dated October 13, 2016 (‘‘Citadel Letter’’); (8) Tyler
Gellasch, Executive Director, Healthy Markets
Association, dated October 13, 2016 (‘‘HMA
Letter’’); (9) Eric Budish, Professor of Economics,
University of Chicago Booth School of Business,
dated October 13, 2016 (‘‘Budish Letter’’); (10)
Elizabeth K. King, General Counsel and Corporate
Secretary, New York Stock Exchange, dated October
14, 2016 (‘‘NYSE Letter’’); (11) James J. Angel,
Associate Professor, McDonough School of
Business, Georgetown University, dated October 16,
2016 (‘‘Angel Letter’’); (12) Eric Swanson, EVP,
General Counsel and Secretary, Bats Global
Markets, Inc., dated October 25, 2016 (‘‘Bats
Letter’’); (13) Eric Pritchett, Chief Executive Officer,
Potamus Trading LLC, dated October 26, 2016
(‘‘Potamus Letter’’); (14) James Ongena, Executive
Vice President and General Counsel, CHX, dated
October 28, 2016 (‘‘CHX Response’’); (15) Steve
Crutchfield, Head of Market Structure, CTC Trading
Group, L.L.C., dated November 1, 2016 (‘‘CTC
Letter’’); (16) Boris Ilyevsky, Brokerage Director,
Interactive Brokers LLC, dated November 7, 2016
(‘‘IB Letter’’); (17) Alex Jacobson, dated November
9, 2016 (‘‘Jacobson Letter’’); (18) Brian Donnelly,
Founder and Chief Executive Officer, Volant
Trading, dated November 28, 2016 (‘‘Volant
Letter’’); (19) R.T. Leuchtkafer, dated December 14,
2016 (‘‘Leuchtkafer Letter 2’’); and (20) Theodore R.
Lazo, Managing Director and Associate General
Counsel, Securities Industry and Financial Markets
Association, dated December 16, 2016 (‘‘SIFMA
Letter’’). All of the comment letters are available at:
https://www.sec.gov/comments/sr-chx-2016-16/
chx201616.shtml.
7 15 U.S.C. 78s(b)(2)(B).
8 ‘‘New incoming orders’’ are orders received by
the Matching System for the first time. The LTAD
would not apply to other situations where existing
orders or portions thereof are treated as incoming
orders, such as (1) resting orders that are price slid
into a new price point pursuant to the CHX Only
Price Sliding or Limit Up-Limit Down Price Sliding
Processes and (2) unexecuted remainders of routed
orders released into the Matching System. See
Notice, supra note 3, 81 FR at 65443, n.5.
9 ‘‘Open Trading State’’ means the period of time
during the regular trading session when orders are
eligible for automatic execution. See CHX Article 1,
Rule 1(qq).
10 ‘‘Processed’’ means executing instructions
contained in a message, including, but not limited
to, permitting an order to execute within the
PO 00000
Frm 00141
Fmt 4703
Sfmt 4703
Matching System.11 All other messages,
including liquidity providing orders
(i.e., orders that would not immediately
execute against resting orders) and
cancel messages for resting orders,
would be immediately processed
without delay.
Each delayable message would be
diverted into the LTAD queue and
would remain delayed until it is
released for processing. A delayed
message would become releasable 350
microseconds after initial receipt by the
Exchange (‘‘Fixed LTAD Period’’), and
would be processed only after the
Matching System has evaluated and
processed, if applicable, all messages in
the security received by the Exchange
during the Fixed LTAD Period for the
delayed message.12 A message may be
delayed for longer than the Fixed LTAD
Period depending on the then-current
messaging volume in the security,
according to the Exchange.13
B. Purpose of the LTAD
The Exchange states that it designed
and proposed the LTAD to respond to
declines in CHX volume and size at the
national best bid or offer (‘‘NBBO’’) in
the SPDR S&P 500 trust exchange-traded
fund (‘‘SPY’’) between January 2016 and
July 2016, which it attributes to latency
arbitrage activity in SPY.14 CHX defines
‘‘latency arbitrage’’ as the practice of
exploiting disparities in the price of a
security or related securities that are
being traded in different markets by
taking advantage of the time it takes to
access and respond to market
information.15
The Exchange asserts that much of the
CHX liquidity in SPY and other S&P
500-correlated securities is provided as
part of an arbitrage strategy between
CHX and the futures markets, whereby
liquidity providers utilize, among other
things, proprietary algorithms to price
and size resting orders on CHX to track
index market data from a derivatives
market (e.g., E-Mini S&P traded on the
Chicago Mercantile Exchange’s Globex
trading platform).16 According to the
Exchange, prior to the beginning of the
SPY latency arbitrage activity, which
CHX first observed in January of 2016,
CHX volume and liquidity in SPY
Matching System pursuant to the terms of the order
or cancelling an existing order. See Notice, supra
note 3, 81 FR at 65443, n.7.
11 ‘‘Matching System’’ means the automated order
execution system, which is part of CHX’s ‘‘Trading
Facilities’’ as defined under CHX Article 1, Rule
1(z). See id. at 65443, n.8.
12 See id. at 65444.
13 See id. at 65444, text accompanying n.35.
14 See id. at 65443.
15 See id. at 65443, n.3.
16 See id. at 65443, n.10.
E:\FR\FM\27DEN1.SGM
27DEN1
]]>Agencies
[Federal Register Volume 81, Number 248 (Tuesday, December 27, 2016)]
[Notices]
[Pages 95236-95238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31113]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79621; File No. SR-CBOE-2016-089]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Extend the Credit Option Margin Pilot Program
Through July 18, 2017
December 20, 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 December 14, 2016, 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 and II below, which Items have been prepared by the
Exchange. The Exchange filed the proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend Rule 12.3 by extending the Credit Option
Margin Pilot Program through July 18, 2017.
The text of the proposed rule change is available on the Exchange's
Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx),
at the Exchange's Office of the Secretary, and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On February 2, 2011, the Commission approved the Exchange's
proposal to establish a Credit Option Margin Pilot Program
(``Program'').\5\ The proposal became effective on a pilot basis to run
on a parallel track with Financial Industry Regulatory Authority
(``FINRA'') Rule 4240 that similarly operates on an interim pilot
basis.\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 63819 (February 2,
2011), 76 FR 6838 (February 8, 2011) order approving (SR-CBOE-2010-
106). To implement the Program, the Exchange amended Rule 12.3(l),
Margin Requirements, to make CBOE's margin requirements for Credit
Options consistent with Financial Industry Regulatory Authority
(``FINRA'') Rule 4240, Margin Requirements for Credit Default Swaps.
CBOE's Credit Options (i.e., Credit Default Options and Credit
Default Basket Options) are analogous to credit default swaps.
\6\ See Securities Exchange Act Release No. 59955 (May 22,
2009), 74 FR 25586 (May 28, 2009) (Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change; SR-FINRA-
2009-012).
---------------------------------------------------------------------------
On January 17, 2012, the Exchange filed a rule change to, among
other things, decouple the Program with the FINRA program and to extend
the expiration date of the Program to January 17, 2013.\7\ The Program,
however, continues to be substantially
[[Page 95237]]
similar to the provisions of the FINRA program. Subsequently, the
Exchange filed rule changes to extend the program until January 17,
2014, January 16, 2015, January 15, 2016, and January 17, 2017,
respectively.\8\ The Exchange believes that extending the expiration
date of the Program further will allow for further analysis of the
Program and a determination of how the Program should be structured in
the future. Thus, the Exchange is now currently proposing to extend the
duration of the Program for an additional six months until July 18,
2017.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 66163 (January 17,
2012), 77 FR 3318 (January 23, 2012) (SR-CBOE-2012-007).
\8\ See Securities Exchange Act Release Nos. 68539 (December 27,
2012), 78 FR 138 (January 2, 2013) (SR-CBOE-2012-125), 71124
(December 18, 2013), 78 FR 77754 (December 24, 2013) (SR-CBOE-2013-
123), 73837 (December 15, 2014), 79 FR 75850 (December 19, 2014)
(SR-CBOE-2014-091), and 76824 (January 5, 2016), 81 FR 1255 (January
11, 2016) (SR-CBOE-2015-118).
---------------------------------------------------------------------------
Additionally, the Exchange believes that it is in the public
interest to extend the expiration date of the Program because it will
continue to allow the Exchange to list Credit Options for trading. As a
result, the Exchange will remain competitive with the Over-the-Counter
Market with respect to swaps and security-based swaps. In the future,
if the Exchange proposes an additional extension of the Credit Option
Margin Pilot Program or proposes to make the Program permanent, then
the Exchange will submit a filing proposing such amendments to the
Program.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\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
facilitation 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 Exchange believes that the proposed rule change
will further the purposes of the Act because, consistent with the goals
of the Commission at the initial adoption of the Program, the margin
requirements set forth by the proposed rule change will help to
stabilize the financial markets. In addition, the proposed rule change
is substantially similar to existing FINRA Rule 4240.
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
believes that, by extending the expiration of the Program, the proposed
rule change will allow for further analysis of the Program and a
determination of how the Program 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 neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \12\ and
Rule 19b-4(f)(6) \13\ thereunder.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
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. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2016-089 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-2016-089. 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
[[Page 95238]]
available publicly. All submissions should refer to File Number SR-
CBOE-2016-089 and should be submitted on or before January 17, 2017.
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31113 Filed 12-23-16; 8:45 am]
BILLING CODE 8011-01-P
