Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Rule 6.56 (Compression Forums), 29588-29592 [2017-13585]
Download as PDF
<![CDATA[
sradovich on DSK3GMQ082PROD with NOTICES
29588
Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices
the document is submitted through the
NRC’s E Filing system. To be timely, an
electronic filing must be submitted to
the E-Filing system no later than 11:59
p.m. Eastern Time on the due date.
Upon receipt of a transmission, the E
Filing system time-stamps the document
and sends the submitter an email notice
confirming receipt of the document. The
E-Filing system also distributes an email
notice that provides access to the
document to the NRC’s Office of the
General Counsel and any others who
have advised the Office of the Secretary
that they wish to participate in the
proceeding, so that the filer need not
serve the document on those
participants separately. Therefore,
applicants and other participants (or
their counsel or representative) must
apply for and receive a digital ID
certificate before adjudicatory
documents are filed so that they can
obtain access to the documents via the
E-Filing system.
A person filing electronically using
the NRC’s adjudicatory E-Filing system
may seek assistance by contacting the
NRC’s Electronic Filing Help Desk
through the ‘‘Contact Us’’ link located
on the NRC’s public Web site at https://
www.nrc.gov/site-help/esubmittals.html, by email to
MSHD.Resource@nrc.gov, or by a tollfree call at 1–866–672–7640. The NRC
Electronic Filing Help Desk is available
between 9 a.m. and 6 p.m., Eastern
Time, Monday through Friday,
excluding government holidays.
Participants who believe that they
have a good cause for not submitting
documents electronically must file an
exemption request, in accordance with
10 CFR 2.302(g), with their initial paper
filing stating why there is good cause for
not filing electronically and requesting
authorization to continue to submit
documents in paper format. Such filings
must be submitted by: (1) First class
mail addressed to the Office of the
Secretary of the Commission, U.S.
Nuclear Regulatory Commission,
Washington, DC 20555–0001, Attention:
Rulemaking and Adjudications Staff; or
(2) courier, express mail, or expedited
delivery service to the Office of the
Secretary, 11555 Rockville Pike,
Rockville, Maryland, 20852, Attention:
Rulemaking and Adjudications Staff.
Participants filing adjudicatory
documents in this manner are
responsible for serving the document on
all other participants. Filing is
considered complete by first-class mail
as of the time of deposit in the mail, or
by courier, express mail, or expedited
delivery service upon depositing the
document with the provider of the
service. A presiding officer, having
VerDate Sep<11>2014
18:29 Jun 28, 2017
Jkt 241001
granted an exemption request from
using E-Filing, may require a participant
or party to use E-Filing if the presiding
officer subsequently determines that the
reason for granting the exemption from
use of E-Filing no longer exists.
Documents submitted in adjudicatory
proceedings will appear in the NRC’s
electronic hearing docket which is
available to the public at https://
adams.nrc.gov/ehd, unless excluded
pursuant to an order of the Commission
or the presiding officer. If you do not
have an NRC-issued digital ID certificate
as described above, click cancel when
the link requests certificates and you
will be automatically directed to the
NRC’s electronic hearing dockets where
you will be able to access any publicly
available documents in a particular
hearing docket. Participants are
requested not to include personal
privacy information, such as social
security numbers, home addresses, or
personal phone numbers in their filings,
unless an NRC regulation or other law
requires submission of such
information. For example, in some
instances, individuals provide home
addresses in order to demonstrate
proximity to a facility or site. With
respect to copyrighted works, except for
limited excerpts that serve the purpose
of the adjudicatory filings and would
constitute a Fair Use application,
participants are requested not to include
copyrighted materials in their
submission. The Commission will issue
a notice or order granting or denying a
hearing request or intervention petition,
designating the issues for any hearing
that will be held and designating the
Presiding Officer. A notice granting a
hearing will be published in the Federal
Register and served on the parties to the
hearing.
For further details with respect to this
application, see the application dated
April 14, 2017, ADAMS Accession No.
ML17108A259.
Dated at Rockville, Maryland, this 21st day
of June 2017.
For the Nuclear Regulatory Commission.
Craig G. Erlanger,
Director, Division of Fuel Cycle Safety,
Safeguards, and Environmental Review,
Office of Nuclear Material Safety and
Safeguards.
[FR Doc. 2017–13646 Filed 6–28–17; 8:45 am]
BILLING CODE 7590–01–P
RAILROAD RETIREMENT BOARD
the Board’s meeting room on the 8th
floor of its headquarters building, 844
North Rush Street, Chicago, Illinois
60611. The agenda for this meeting
follows:
Portion open to the public:
(1) Executive Committee Reports
The person to contact for more
information is Martha P. Rico, Secretary
to the Board, Phone No. 312–751–4920.
Dated: June 27, 2017.
Martha P. Rico,
For the Board, Secretary to the Board.
[FR Doc. 2017–13764 Filed 6–27–17; 11:15 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81010; File No. SR–CBOE–
2017–049]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Rule 6.56
(Compression Forums)
June 23, 2017.
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 June 16,
2017, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 6.56. The text of the proposed rule
change is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated Rules
*
*
*
*
*
Rule 6.56. Compression Forums
Sunshine Act; Notice of Public Meeting
Notice is hereby given that the
Railroad Retirement Board will hold a
meeting on July 19, 2017, 1:30 p.m. at
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
E:\FR\FM\29JNN1.SGM
29JNN1
Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices
(a) No change.
(b) Trades executed through
compression forums are subject to
trading rules applicable to trading in
SPX during Regular Trading Hours
(including without limitation manner of
bids and offers, allocation and priority,
and solicited transaction rules), except:
(1) opening transactions in SPX
options may not execute against
opening transactions through a
compression forum; however, closing
transactions in SPX options (including
compression-list positions) that are
represented in the compression forum
may execute against closing or opening
transactions; [only closing transactions
in SPX options (including compressionlist positions) may be executed through
a compression forum;] and
(2) only closing transactions may be
executed in $0.01 increments, including
simple and complex orders. Bids and
offers for opening transactions made in
response to the representation of a
closing transaction must be priced in
the standard increment for simple and
complex orders set forth in Rule 6.42.
[the minimum increment for bids and
offers will be $0.01, including for both
simple and complex orders.]
(c) 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
sradovich on DSK3GMQ082PROD with NOTICES
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 6.56 (Compression Forums) in
order to fine-tune the compression
forum process. Specifically, the
Exchange seeks to allow closing
VerDate Sep<11>2014
18:29 Jun 28, 2017
Jkt 241001
transactions that are represented in the
compression forum to be executed
against opening transactions. Allowing
closing transactions that are represented
in the compression forum to be
executed against opening transactions
increases the likelihood that existing
positions creating high bank regulatory
capital requirements will be closed—
thus lowering a TPH’s bank capital
footprint.
Background
SEC Rule 15c3–1 (Net Capital
Requirements for Brokers or Dealers)
(‘‘Net Capital Rules’’) requires registered
broker-dealers, unless otherwise
excepted, to maintain certain specified
minimum levels of capital.5 The Net
Capital Rules are designed to protect
securities customers, counterparties,
and creditors by requiring that brokerdealers have sufficient liquid resources
on hand, at all times, to meet their
financial obligations. Notably, hedged
positions, including offsetting futures
and options contract positions, result in
certain net capital requirement
reductions under the Net Capital Rules.6
Subject to certain exceptions, CBOE
Clearing Trading Permit Holders
(‘‘CTPHs’’) 7 are subject to the Net
Capital Rules. However, a subset of
CTPHs are subsidiaries of U.S. bank
holding companies, which, due to their
affiliations with their parent U.S. bank
holding companies, must comply with
additional bank regulatory capital
requirements pursuant to rulemaking
required under the Dodd-Frank Wall
Street Reform and Consumer Protection
Act.8 Pursuant to this mandate, the
Board of Governors of the Federal
Reserve System, the Office of the
Comptroller of the Currency, and the
Federal Deposit Insurance Corporation
have approved a regulatory capital
framework for subsidiaries of U.S. bank
holding company clearing firms.9
Generally, these rules impose higher
minimum capital requirements, more
restrictive capital eligibility standards,
and higher asset risk weights than were
previously mandated for CTPHs that are
subsidiaries of U.S. bank holding
companies under the Net Capital Rules.
Furthermore, the new rules do not
5 17
CFR 240.15c3–1.
addition, the Net Capital Rules permit various
offsets under which a percentage of an option
position’s gain at any one valuation point is
allowed to offset another position’s loss at the same
valuation point (e.g., vertical spreads).
7 All CBOE CTPHs must also be clearing members
of The Options Clearing Corporation (‘‘OCC’’).
8 H.R. 4173 (amending section 3(a) of the
Securities Exchange Act of 1934 (the ‘‘Act’’) (15
U.S.C. 78c(a))).
9 12 CFR 50; 79 FR 61440 (Liquidity Coverage
Ratio: Liquidity Risk Measurement Standards).
6 In
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
29589
permit deductions for hedged securities
or offsetting options positions.10 Rather,
capital charges under these standards
are, in large part, based on the aggregate
notional value of short positions
regardless of offsets. As a result, in
general, CTPHs must hold substantially
more bank regulatory capital than
would otherwise be required under the
Net Capital Rules. The impact of these
regulatory capital rules are compounded
in the SPX options market due to the
large notional value of SPX contracts.
The Exchange believes that these
higher regulatory capital requirements
have the potential to impact liquidity in
the SPX options market by limiting the
amount of capital CTPHs can allocate to
their clients’ transactions. Specifically,
the rules may cause CTPHs to impose
stricter position limits on their client
clearing members, which include CBOE
Market-Makers. Such position limits
may impact the liquidity Market-Makers
might supply in the SPX market, and
this impact may be compounded when
a CTPH has multiple Market-Maker
client accounts, each having largely
risk-neutral portfolio holdings.11 The
Exchange believes that permitting
Market-Makers and Floor Brokers (for
their own proprietary accounts or for
the account of another on an agency
basis) to efficiently close existing SPX
options positions through modified
open outcry trading procedures on the
Exchange floor may assist CTPHs and
TPHs to address bank regulatory capital
requirements and would likely have a
beneficial effect on continued liquidity
in the SPX options market without
adversely affecting market quality.
In order to mitigate the potential
negative effects of these additional bank
regulatory capital requirements and
10 Many options strategies, including relatively
simple strategies often used by retail customers and
more sophisticated strategies used by marketmakers and institutions, are risk-limited strategies
or options spread strategies that employ offsets or
hedges to achieve certain investment outcomes.
Such strategies typically involve the purchase and
sale of multiple options (and may be coupled with
purchases or sales of the underlying securities),
executed simultaneously as part of the same
strategy. In many cases, the potential market
exposure of these strategies is limited and defined.
Whereas regulatory capital requirements have
historically reflected the risk-limited nature of
carrying offsetting positions, these positions may
now be subject to higher regulatory capital
requirements. Various factors, including
administration costs; transaction fees; and limited
market demand or counterparty interest, however,
may discourage market participants from closing
these positions even though many market
participants likely would prefer to close the
positions rather than carry them to expiration.
11 Several TPHs have indicated to the Exchange
that the heightened bank regulatory requirements
could impact their ability to provide consistent
liquidity in the SPX options market unless they are
able to efficiently close their positions in SPX.
E:\FR\FM\29JNN1.SGM
29JNN1
sradovich on DSK3GMQ082PROD with NOTICES
29590
Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices
foster continued liquidity in the SPX
options market in a manner consistent
with the requirements, the Exchange
adopted Rule 6.56 pursuant to which
TPHs can reduce (or ‘‘compress’’)
existing positions in SPX at the end of
each calendar month more efficiently
through trading in an open outcry
compression forum.12 The Exchange
believes that making available these
periodic trading forums, which allow
for closing transactions in SPX options
series to occur at reduced transaction
fees likely contributes to additional
liquidity and continued competitiveness
in the SPX market and promotes more
efficient capital deployment in light of
bank regulatory capital requirements.
Under current Rule 6.56, on the final
three business days of each calendar
month, the Exchange holds compression
forums in the SPX trading crowd.
Beforehand, in order to facilitate TPHs
finding counterparty offsets against
which they can trade closing positions,
currently, TPHs may submit lists of
existing SPX positions to the Exchange
that they wish to close during a
compression forum. Prior to the open of
trading on the third-to-last business day
of each calendar month (i.e., the first
day of the month on which a
compression forum is held), the
Exchange makes available to all TPHs
on its Web site a list including each
series for which both long and short
compression-list positions have been
submitted to the Exchange
(‘‘compression-list positions file’’). In
addition, TPHs that submit compression
positions list to the Exchange receive a
compression-list positions file
containing the names of the TPHs that
contributed to the file, including contact
information for each TPH’s designated
point of contact. This list does not
identify the specific positions that any
TPH has submitted to the Exchange.
The Exchange then holds open outcry
‘‘compression forums’’ in which all
TPHs may participate whether or not
they submitted positions for inclusion
in the compression-list position file.
Currently, trades executed during
compression forums are subject to
trading rules applicable to trading in
SPX during Regular Trading Hours,
including manner of bids and offers and
allocation and priority rules, except: (1)
Only closing transactions in SPX
options (including compression-list
positions) may be executed through a
compression forum; and (2) the
12 See Securities Exchange Act Release No. 79610
(December 20, 2016), 81 FR 95219 (December 27,
2016) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to Compression
of S&P 500(R) Index Options Positions) (SR–CBOE–
2016–090).
VerDate Sep<11>2014
18:29 Jun 28, 2017
Jkt 241001
minimum increment for all series is
$0.01 during a compression forum.
TPHs that trade positions previously
submitted to the Exchange on a
compression list may then take
advantage of the compression-list
position fee rebate on portions of a
transaction that involve their
compression-list positions, which are
executed through a compression forum.
The Exchange proposes to amend
Rule 6.56 to enhance the effectiveness
and utility of its compression forums
process for market participants.
Specifically, the Exchange seeks to
allow closing transactions that are
represented in the compression forum to
be executed against opening
transactions. Allowing closing
transactions that are represented in the
compression forum to be executed
against opening transactions increases
the likelihood that existing positions
creating high bank regulatory capital
requirements will be closed—thus
lowering a TPH’s (or clearing firm’s)
bank capital footprint.
Proposal
The purpose of Rule 6.56 is to
encourage the closing of positions that
are creating high bank regulatory capital
requirements. When Rule 6.56 was
originally implemented, the Exchange
was concerned that allowing opening
transactions in the compression forum
‘‘would defeat the purpose of the
proposed rule[.]’’ 13 However, after
observing the compression process for
the past several months, the Exchange
believes allowing closing transactions
that are represented in the compression
forum to execute against opening
transactions will not discourage the
closing of positions that are creating a
high bank regulatory capital footprint
nor will it adversely affect the
compression forums. Allowing opening
transactions will expand the liquidity
available to close positions represented
in a compression forum, thus,
increasing the opportunity for TPHs to
close positions that cause them to have
high bank regulatory capital footprints.
Ultimately the Exchange believes the
increased opportunity for positions to
be closed will in fact further encourage
TPHs to close positions that cause them
to have high bank regulatory capital
footprints without adversely affecting
the compression forums.
Thus, the Exchange proposes to
amend Rule 6.56(b)(1) to remove the
closing only restricting for compression
forum executions. Specifically, the
Exchange proposes to amend Rule
6.56(b)(1) to provide that transactions in
13 Id.
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
SPX options (including compression-list
positions) that are represented in the
compression forum may execute against
closing or opening transactions. To
provide further clarity as to the limited
application of this change, the Exchange
proposes to amend Rule 6.56(b)(1) to
provide that opening transactions in
SPX options may not execute against
opening transactions through a
compression forum. The Exchange notes
that Rule 6.56(b)(1) already effectively
prohibits opening transactions from
executing against opening transactions
in a compression forum because Rule
6.56(b)(1) currently provides that only
closing transactions are to be executed
via a compression forum.
Currently, transactions executed via a
compression forum may be executed in
$0.01 increments for both simple and
complex orders, but as previously
noted, compression forums are currently
restricted to closing transactions. Thus,
with the expansion of compression
forums to opening transactions
(provided they execute against closing
transactions), the Exchange proposes to
amend Rule 6.56(b)(2) to provide that
only closing transactions may be
executed in $0.01 increments, including
simple and complex orders whereas
bids and offers for opening transactions
made in response to the representation
of a closing transaction must be priced
in the standard increment for simple
and complex orders set forth in Rule
6.42 (e.g., $0.05 for option series below
$3, $0.10 for option series at or above
$3, and $0.05 increments for complex
orders).14 The Exchange notes that the
proposed minimum increment for
opening transactions executed against
closing transactions in a compression
forum is consistent with the minimum
increment applicable to SPX
transactions (opening or closing)
executed outside a compression forum.
Currently, only a fraction of the
offsetting interest provided in the
compression-list positions have
ultimately been closed out during
previous compression forums.15 This
proposal will allow a TPH that is
representing closing transactions in a
compression forum—but is unable to
close the position against another
party’s closing transaction—to solicit
TPHs or non-TPH customers or brokerdealers to participate in the
compression forum whether the TPH or
non-TPH is opening or closing a
position. Although the most impactful
14 See
Rule 6.42(1)–(4).
the months since the adoption of Rule 6.56,
of the compression-list positions submitted to the
Exchange, less than 10% of the offsetting interest
were actually closed in transactions through a
compression forum.
15 In
E:\FR\FM\29JNN1.SGM
29JNN1
Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
bank capital relief (in the context of
listed options) occurs when two parties
can each close offsetting open position,
whenever a TPH is able to close a
position—whether the TPH is
transacting with a party that is opening
or closing a position—the TPH will
lower its bank capital footprint. Thus,
the Exchange simply seeks to increase
the opportunity for TPHs to lower their
bank capital footprint.
A party’s bank capital footprint is
largely a function of its investor profile
and clearing firm. TPHs are
sophisticated parties capable of
assessing a transaction’s impact on their
bank capital footprint and determining
whether to close positions to reduce
their bank capital footprint. For those
TPHs concerned with their bank capital
footprint, Rule 6.56 provides an
opportunity for them to submit
compression-list positions and
participate in the compression process.
The Exchange believes this proposal
further encourages TPHs to close
positions via the compression process
by increasing the likelihood that there
will be liquidity against which a closing
position may execute.
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.16 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 17 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) 18 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that its proposal is consistent with the
Act in that it seeks to foster liquidity in
the SPX options market in light of the
16 15
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
18 Id.
VerDate Sep<11>2014
18:29 Jun 28, 2017
Jkt 241001
bank regulatory capital requirements. As
described above, the Exchange believes
that the new bank regulatory capital
requirements could potentially limit the
amount of capital CTPHs can allocate to
their clients’ transactions, which in
turn, may impact liquidity, particularly
in the SPX market. The Exchange
believes the proposal encourages TPHs
to close positions via the compression
process by increasing the likelihood that
there will be liquidity with which to
execute a closing position, which, in
general, helps to protect investors and
the public interest because closing
positions via the compression process
serves to alleviate the adverse impact of
bank capital requirements.
The Exchange also believes the
proposed rule change is consistent with
the Act, because the proposed
procedure is consistent with its current
rules. The proposed rule would direct
that all trading through compression
forums be conducted in accordance
with normal SPX trading rules and thus,
in the same manner as transactions
during normal SPX trading, except that
opening transactions may not execute
against opening transactions via a
compression forum and that closing
transactions executed against closing
transactions may be in penny
increments. The Exchange notes that
Rule 6.56(b)(1) already effectively
prohibits opening transactions from
executing against opening transactions
in a compression forum because Rule
6.56(b)(1) currently provides that only
closing transactions are to be executed
via a compression forum. The Exchange
also notes that the proposed minimum
increment for opening transactions
executed against closing transactions in
a compression forum (i.e., bids and
offers for opening transactions made in
response to the representation of a
closing transaction must be priced in
the standard increment for simple and
complex orders set forth in Rule 6.42) is
consistent with the minimum increment
applicable to SPX transactions (opening
or closing) executed outside a
compression forum.
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. The
proposed change would encourage the
closing of positions, which, once closed,
may serve to alleviate the capital
requirement constraints on TPHs and
improve overall market liquidity by
freeing capital currently tied up in
certain SPX positions. The Exchange
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
29591
does not believe that the proposed rule
changes will impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because the
proposed rule change applies only to
the trading of SPX options, which are
exclusively-listed on CBOE. To the
extent that the proposed changes make
the Exchange a more attractive
marketplace for market participants at
other exchanges, such market
participants are eligible to participant
through CBOE TPHs. Furthermore,
participation in compression forums is
completely voluntary and open to all
TPHs.
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 19 and Rule
19b–4(f)(6) thereunder.20 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, if
consistent with the protection of
investors and public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 21 and Rule 19b–4(f)(6)
thereunder.22
A proposed rule change filed under
Rule 19b–4(f)(6) 23 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),24 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
19 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
21 15 U.S.C. 78s(b)(3)(A).
22 17 CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
23 17 CFR 240.19b–4(f)(6).
24 17 CFR 240.19b–4(f)(6)(iii).
20 17
E:\FR\FM\29JNN1.SGM
29JNN1
sradovich on DSK3GMQ082PROD with NOTICES
29592
Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices
operative delay so that the proposed
rule change may become effective on
June 27, 2017, permitting the proposed
change to take effect for the
compression forum scheduled to take
place using the amended procedures
prior to the end of the second quarter.
In justifying its requested waiver, the
Exchange noted that bank-imposed
capital limits may impact certain TPHs
on at least a quarterly basis, which can
effectively limit the amount of liquidity
that such TPHs, including some MarketMakers, are willing or able to provide in
SPX options. The month of June is the
end of a quarter, and the Exchange
expressed concern that those bank
capital requirements may have adverse
consequences on investors if the
impacted TPHs are not able to more
effectively reduce their open interest in
SPX. The Exchange therefore believes
that it is in the best interest of investors
and the general public to help ensure
consistent continued depth of liquidity
in the SPX options market by allowing
TPHs to utilize the modified
compression forum process set forth in
this proposal on the final three days of
trading of the second quarter.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because this waiver will enable the
Exchange to hold a compression forum
for SPX options under the proposed
amended procedures prior to the end of
the second quarter, thereby helping to
facilitate transactions and remove
impediments to quarter-end trading in
SPX options. The Commission notes
that CBOE’s compression forum rule, as
proposed to be amended, is limited in
its application, involves no material
changes to how trading is conducted on
the Exchange, involves a process in
which participation is voluntary and
open to all, and is designed as a means
to help Market Makers and other market
participants, as well as their clearing
brokers, to close positions in SPX
options that they carry on their books
and which may impact their available
capital. For this reason, the Commission
hereby waives the 30-day operative
delay and designates the proposal
effective on June 27, 2017.25
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
25 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Sep<11>2014
18:29 Jun 28, 2017
Jkt 241001
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
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–2017–049 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–2017–049. 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–
Frm 00119
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–13585 Filed 6–28–17; 8:45 am]
BILLING CODE 8011–01–P
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:
PO 00000
2017–049 and should be submitted on
or before July 20, 2017.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81016; File No. SR–
NYSEMKT–2017–23]
Self-Regulatory Organizations; NYSE
MKT LLC; Order Granting Approval of
Proposed Rule Change To Harmonize
the Requirements of the NYSE MKT
Company Guide With the Periodic and
Semi-Annual Reporting Requirements
of the NYSE
June 23, 2017.
I. Introduction
On April 25, 2017, NYSE MKT LLC
(the ‘‘Exchange’’ or ‘‘NYSE MKT’’) 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 harmonize the
periodic reporting requirements of the
NYSE MKT Company Guide (the
‘‘Company Guide’’) with those of the
New York Stock Exchange LLC
(‘‘NYSE’’). The proposed rule change
was published for comment in the
Federal Register on May 12, 2017.3 The
Commission received no comments
regarding the proposal. This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange has proposed to
harmonize the requirements of the
Company Guide with respect to (i)
periodic reporting and (ii) semi-annual
reporting by foreign private issuers,
with those of the NYSE Listed Company
Manual (‘‘NYSE Manual’’).
A. Amendment to Annual Report
Requirements
Currently, under Section 610(a) of the
Company Guide, listed companies must
provide specific enumerated disclosures
with regard to outstanding options.4 The
26 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. 80619
(May 8, 2017), 82 FR 22170 (‘‘Notice’’).
4 Specifically, Section 610(a) provides that a
listed company must disclose in its annual report
to security holders, for the year covered by the
1 15
E:\FR\FM\29JNN1.SGM
29JNN1
]]>Agencies
[Federal Register Volume 82, Number 124 (Thursday, June 29, 2017)]
[Notices]
[Pages 29588-29592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13585]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81010; File No. SR-CBOE-2017-049]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Related to Rule 6.56 (Compression Forums)
June 23, 2017.
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 June 16, 2017, 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
The Exchange proposes to amend Rule 6.56. The text of the proposed
rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 6.56. Compression Forums
[[Page 29589]]
(a) No change.
(b) Trades executed through compression forums are subject to
trading rules applicable to trading in SPX during Regular Trading Hours
(including without limitation manner of bids and offers, allocation and
priority, and solicited transaction rules), except:
(1) opening transactions in SPX options may not execute against
opening transactions through a compression forum; however, closing
transactions in SPX options (including compression-list positions) that
are represented in the compression forum may execute against closing or
opening transactions; [only closing transactions in SPX options
(including compression-list positions) may be executed through a
compression forum;] and
(2) only closing transactions may be executed in $0.01 increments,
including simple and complex orders. Bids and offers for opening
transactions made in response to the representation of a closing
transaction must be priced in the standard increment for simple and
complex orders set forth in Rule 6.42. [the minimum increment for bids
and offers will be $0.01, including for both simple and complex
orders.]
(c) 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
The Exchange proposes to amend Rule 6.56 (Compression Forums) in
order to fine-tune the compression forum process. Specifically, the
Exchange seeks to allow closing transactions that are represented in
the compression forum to be executed against opening transactions.
Allowing closing transactions that are represented in the compression
forum to be executed against opening transactions increases the
likelihood that existing positions creating high bank regulatory
capital requirements will be closed--thus lowering a TPH's bank capital
footprint.
Background
SEC Rule 15c3-1 (Net Capital Requirements for Brokers or Dealers)
(``Net Capital Rules'') requires registered broker-dealers, unless
otherwise excepted, to maintain certain specified minimum levels of
capital.\5\ The Net Capital Rules are designed to protect securities
customers, counterparties, and creditors by requiring that broker-
dealers have sufficient liquid resources on hand, at all times, to meet
their financial obligations. Notably, hedged positions, including
offsetting futures and options contract positions, result in certain
net capital requirement reductions under the Net Capital Rules.\6\
---------------------------------------------------------------------------
\5\ 17 CFR 240.15c3-1.
\6\ In addition, the Net Capital Rules permit various offsets
under which a percentage of an option position's gain at any one
valuation point is allowed to offset another position's loss at the
same valuation point (e.g., vertical spreads).
---------------------------------------------------------------------------
Subject to certain exceptions, CBOE Clearing Trading Permit Holders
(``CTPHs'') \7\ are subject to the Net Capital Rules. However, a subset
of CTPHs are subsidiaries of U.S. bank holding companies, which, due to
their affiliations with their parent U.S. bank holding companies, must
comply with additional bank regulatory capital requirements pursuant to
rulemaking required under the Dodd-Frank Wall Street Reform and
Consumer Protection Act.\8\ Pursuant to this mandate, the Board of
Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, and the Federal Deposit Insurance Corporation have
approved a regulatory capital framework for subsidiaries of U.S. bank
holding company clearing firms.\9\ Generally, these rules impose higher
minimum capital requirements, more restrictive capital eligibility
standards, and higher asset risk weights than were previously mandated
for CTPHs that are subsidiaries of U.S. bank holding companies under
the Net Capital Rules. Furthermore, the new rules do not permit
deductions for hedged securities or offsetting options positions.\10\
Rather, capital charges under these standards are, in large part, based
on the aggregate notional value of short positions regardless of
offsets. As a result, in general, CTPHs must hold substantially more
bank regulatory capital than would otherwise be required under the Net
Capital Rules. The impact of these regulatory capital rules are
compounded in the SPX options market due to the large notional value of
SPX contracts.
---------------------------------------------------------------------------
\7\ All CBOE CTPHs must also be clearing members of The Options
Clearing Corporation (``OCC'').
\8\ H.R. 4173 (amending section 3(a) of the Securities Exchange
Act of 1934 (the ``Act'') (15 U.S.C. 78c(a))).
\9\ 12 CFR 50; 79 FR 61440 (Liquidity Coverage Ratio: Liquidity
Risk Measurement Standards).
\10\ Many options strategies, including relatively simple
strategies often used by retail customers and more sophisticated
strategies used by market-makers and institutions, are risk-limited
strategies or options spread strategies that employ offsets or
hedges to achieve certain investment outcomes. Such strategies
typically involve the purchase and sale of multiple options (and may
be coupled with purchases or sales of the underlying securities),
executed simultaneously as part of the same strategy. In many cases,
the potential market exposure of these strategies is limited and
defined. Whereas regulatory capital requirements have historically
reflected the risk-limited nature of carrying offsetting positions,
these positions may now be subject to higher regulatory capital
requirements. Various factors, including administration costs;
transaction fees; and limited market demand or counterparty
interest, however, may discourage market participants from closing
these positions even though many market participants likely would
prefer to close the positions rather than carry them to expiration.
---------------------------------------------------------------------------
The Exchange believes that these higher regulatory capital
requirements have the potential to impact liquidity in the SPX options
market by limiting the amount of capital CTPHs can allocate to their
clients' transactions. Specifically, the rules may cause CTPHs to
impose stricter position limits on their client clearing members, which
include CBOE Market-Makers. Such position limits may impact the
liquidity Market-Makers might supply in the SPX market, and this impact
may be compounded when a CTPH has multiple Market-Maker client
accounts, each having largely risk-neutral portfolio holdings.\11\ The
Exchange believes that permitting Market-Makers and Floor Brokers (for
their own proprietary accounts or for the account of another on an
agency basis) to efficiently close existing SPX options positions
through modified open outcry trading procedures on the Exchange floor
may assist CTPHs and TPHs to address bank regulatory capital
requirements and would likely have a beneficial effect on continued
liquidity in the SPX options market without adversely affecting market
quality.
---------------------------------------------------------------------------
\11\ Several TPHs have indicated to the Exchange that the
heightened bank regulatory requirements could impact their ability
to provide consistent liquidity in the SPX options market unless
they are able to efficiently close their positions in SPX.
---------------------------------------------------------------------------
In order to mitigate the potential negative effects of these
additional bank regulatory capital requirements and
[[Page 29590]]
foster continued liquidity in the SPX options market in a manner
consistent with the requirements, the Exchange adopted Rule 6.56
pursuant to which TPHs can reduce (or ``compress'') existing positions
in SPX at the end of each calendar month more efficiently through
trading in an open outcry compression forum.\12\ The Exchange believes
that making available these periodic trading forums, which allow for
closing transactions in SPX options series to occur at reduced
transaction fees likely contributes to additional liquidity and
continued competitiveness in the SPX market and promotes more efficient
capital deployment in light of bank regulatory capital requirements.
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 79610 (December 20,
2016), 81 FR 95219 (December 27, 2016) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Relating to
Compression of S&P 500(R) Index Options Positions) (SR-CBOE-2016-
090).
---------------------------------------------------------------------------
Under current Rule 6.56, on the final three business days of each
calendar month, the Exchange holds compression forums in the SPX
trading crowd. Beforehand, in order to facilitate TPHs finding
counterparty offsets against which they can trade closing positions,
currently, TPHs may submit lists of existing SPX positions to the
Exchange that they wish to close during a compression forum. Prior to
the open of trading on the third-to-last business day of each calendar
month (i.e., the first day of the month on which a compression forum is
held), the Exchange makes available to all TPHs on its Web site a list
including each series for which both long and short compression-list
positions have been submitted to the Exchange (``compression-list
positions file''). In addition, TPHs that submit compression positions
list to the Exchange receive a compression-list positions file
containing the names of the TPHs that contributed to the file,
including contact information for each TPH's designated point of
contact. This list does not identify the specific positions that any
TPH has submitted to the Exchange.
The Exchange then holds open outcry ``compression forums'' in which
all TPHs may participate whether or not they submitted positions for
inclusion in the compression-list position file. Currently, trades
executed during compression forums are subject to trading rules
applicable to trading in SPX during Regular Trading Hours, including
manner of bids and offers and allocation and priority rules, except:
(1) Only closing transactions in SPX options (including compression-
list positions) may be executed through a compression forum; and (2)
the minimum increment for all series is $0.01 during a compression
forum. TPHs that trade positions previously submitted to the Exchange
on a compression list may then take advantage of the compression-list
position fee rebate on portions of a transaction that involve their
compression-list positions, which are executed through a compression
forum.
The Exchange proposes to amend Rule 6.56 to enhance the
effectiveness and utility of its compression forums process for market
participants. Specifically, the Exchange seeks to allow closing
transactions that are represented in the compression forum to be
executed against opening transactions. Allowing closing transactions
that are represented in the compression forum to be executed against
opening transactions increases the likelihood that existing positions
creating high bank regulatory capital requirements will be closed--thus
lowering a TPH's (or clearing firm's) bank capital footprint.
Proposal
The purpose of Rule 6.56 is to encourage the closing of positions
that are creating high bank regulatory capital requirements. When Rule
6.56 was originally implemented, the Exchange was concerned that
allowing opening transactions in the compression forum ``would defeat
the purpose of the proposed rule[.]'' \13\ However, after observing the
compression process for the past several months, the Exchange believes
allowing closing transactions that are represented in the compression
forum to execute against opening transactions will not discourage the
closing of positions that are creating a high bank regulatory capital
footprint nor will it adversely affect the compression forums. Allowing
opening transactions will expand the liquidity available to close
positions represented in a compression forum, thus, increasing the
opportunity for TPHs to close positions that cause them to have high
bank regulatory capital footprints. Ultimately the Exchange believes
the increased opportunity for positions to be closed will in fact
further encourage TPHs to close positions that cause them to have high
bank regulatory capital footprints without adversely affecting the
compression forums.
---------------------------------------------------------------------------
\13\ Id.
---------------------------------------------------------------------------
Thus, the Exchange proposes to amend Rule 6.56(b)(1) to remove the
closing only restricting for compression forum executions.
Specifically, the Exchange proposes to amend Rule 6.56(b)(1) to provide
that transactions in SPX options (including compression-list positions)
that are represented in the compression forum may execute against
closing or opening transactions. To provide further clarity as to the
limited application of this change, the Exchange proposes to amend Rule
6.56(b)(1) to provide that opening transactions in SPX options may not
execute against opening transactions through a compression forum. The
Exchange notes that Rule 6.56(b)(1) already effectively prohibits
opening transactions from executing against opening transactions in a
compression forum because Rule 6.56(b)(1) currently provides that only
closing transactions are to be executed via a compression forum.
Currently, transactions executed via a compression forum may be
executed in $0.01 increments for both simple and complex orders, but as
previously noted, compression forums are currently restricted to
closing transactions. Thus, with the expansion of compression forums to
opening transactions (provided they execute against closing
transactions), the Exchange proposes to amend Rule 6.56(b)(2) to
provide that only closing transactions may be executed in $0.01
increments, including simple and complex orders whereas bids and offers
for opening transactions made in response to the representation of a
closing transaction must be priced in the standard increment for simple
and complex orders set forth in Rule 6.42 (e.g., $0.05 for option
series below $3, $0.10 for option series at or above $3, and $0.05
increments for complex orders).\14\ The Exchange notes that the
proposed minimum increment for opening transactions executed against
closing transactions in a compression forum is consistent with the
minimum increment applicable to SPX transactions (opening or closing)
executed outside a compression forum.
---------------------------------------------------------------------------
\14\ See Rule 6.42(1)-(4).
---------------------------------------------------------------------------
Currently, only a fraction of the offsetting interest provided in
the compression-list positions have ultimately been closed out during
previous compression forums.\15\ This proposal will allow a TPH that is
representing closing transactions in a compression forum--but is unable
to close the position against another party's closing transaction--to
solicit TPHs or non-TPH customers or broker-dealers to participate in
the compression forum whether the TPH or non-TPH is opening or closing
a position. Although the most impactful
[[Page 29591]]
bank capital relief (in the context of listed options) occurs when two
parties can each close offsetting open position, whenever a TPH is able
to close a position--whether the TPH is transacting with a party that
is opening or closing a position--the TPH will lower its bank capital
footprint. Thus, the Exchange simply seeks to increase the opportunity
for TPHs to lower their bank capital footprint.
---------------------------------------------------------------------------
\15\ In the months since the adoption of Rule 6.56, of the
compression-list positions submitted to the Exchange, less than 10%
of the offsetting interest were actually closed in transactions
through a compression forum.
---------------------------------------------------------------------------
A party's bank capital footprint is largely a function of its
investor profile and clearing firm. TPHs are sophisticated parties
capable of assessing a transaction's impact on their bank capital
footprint and determining whether to close positions to reduce their
bank capital footprint. For those TPHs concerned with their bank
capital footprint, Rule 6.56 provides an opportunity for them to submit
compression-list positions and participate in the compression process.
The Exchange believes this proposal further encourages TPHs to close
positions via the compression process by increasing the likelihood that
there will be liquidity against which a closing position may execute.
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.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that its proposal is
consistent with the Act in that it seeks to foster liquidity in the SPX
options market in light of the bank regulatory capital requirements. As
described above, the Exchange believes that the new bank regulatory
capital requirements could potentially limit the amount of capital
CTPHs can allocate to their clients' transactions, which in turn, may
impact liquidity, particularly in the SPX market. The Exchange believes
the proposal encourages TPHs to close positions via the compression
process by increasing the likelihood that there will be liquidity with
which to execute a closing position, which, in general, helps to
protect investors and the public interest because closing positions via
the compression process serves to alleviate the adverse impact of bank
capital requirements.
The Exchange also believes the proposed rule change is consistent
with the Act, because the proposed procedure is consistent with its
current rules. The proposed rule would direct that all trading through
compression forums be conducted in accordance with normal SPX trading
rules and thus, in the same manner as transactions during normal SPX
trading, except that opening transactions may not execute against
opening transactions via a compression forum and that closing
transactions executed against closing transactions may be in penny
increments. The Exchange notes that Rule 6.56(b)(1) already effectively
prohibits opening transactions from executing against opening
transactions in a compression forum because Rule 6.56(b)(1) currently
provides that only closing transactions are to be executed via a
compression forum. The Exchange also notes that the proposed minimum
increment for opening transactions executed against closing
transactions in a compression forum (i.e., bids and offers for opening
transactions made in response to the representation of a closing
transaction must be priced in the standard increment for simple and
complex orders set forth in Rule 6.42) is consistent with the minimum
increment applicable to SPX transactions (opening or closing) executed
outside a compression forum.
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. The proposed change would
encourage the closing of positions, which, once closed, may serve to
alleviate the capital requirement constraints on TPHs and improve
overall market liquidity by freeing capital currently tied up in
certain SPX positions. The Exchange does not believe that the proposed
rule changes will impose any burden on intermarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act
because the proposed rule change applies only to the trading of SPX
options, which are exclusively-listed on CBOE. To the extent that the
proposed changes make the Exchange a more attractive marketplace for
market participants at other exchanges, such market participants are
eligible to participant through CBOE TPHs. Furthermore, participation
in compression forums is completely voluntary and open to all TPHs.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\
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, if consistent with the protection of
investors and public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A)(iii).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \23\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\24\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day
[[Page 29592]]
operative delay so that the proposed rule change may become effective
on June 27, 2017, permitting the proposed change to take effect for the
compression forum scheduled to take place using the amended procedures
prior to the end of the second quarter. In justifying its requested
waiver, the Exchange noted that bank-imposed capital limits may impact
certain TPHs on at least a quarterly basis, which can effectively limit
the amount of liquidity that such TPHs, including some Market-Makers,
are willing or able to provide in SPX options. The month of June is the
end of a quarter, and the Exchange expressed concern that those bank
capital requirements may have adverse consequences on investors if the
impacted TPHs are not able to more effectively reduce their open
interest in SPX. The Exchange therefore believes that it is in the best
interest of investors and the general public to help ensure consistent
continued depth of liquidity in the SPX options market by allowing TPHs
to utilize the modified compression forum process set forth in this
proposal on the final three days of trading of the second quarter.
---------------------------------------------------------------------------
\23\ 17 CFR 240.19b-4(f)(6).
\24\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because this waiver will enable the Exchange to hold a compression
forum for SPX options under the proposed amended procedures prior to
the end of the second quarter, thereby helping to facilitate
transactions and remove impediments to quarter-end trading in SPX
options. The Commission notes that CBOE's compression forum rule, as
proposed to be amended, is limited in its application, involves no
material changes to how trading is conducted on the Exchange, involves
a process in which participation is voluntary and open to all, and is
designed as a means to help Market Makers and other market
participants, as well as their clearing brokers, to close positions in
SPX options that they carry on their books and which may impact their
available capital. For this reason, the Commission hereby waives the
30-day operative delay and designates the proposal effective on June
27, 2017.\25\
---------------------------------------------------------------------------
\25\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. 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-2017-049 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-2017-049. 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-2017-049 and should be
submitted on or before July 20, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
---------------------------------------------------------------------------
\26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13585 Filed 6-28-17; 8:45 am]
BILLING CODE 8011-01-P
