Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the On-Floor Lead Market-Maker Program, 43629-43633 [2017-19712]
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) 18 of the Act.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 19 of the Act 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:
sradovich on DSKBBY8HB2PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2017–29 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–IEX–2017–29. 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–IEX–
2017–29, and should be submitted on or
before October 10, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–19811 Filed 9–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81586; File No. SR–CBOE–
2017–059]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the On-Floor
Lead Market-Maker Program
September 12, 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 August
31, 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 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 the
On-Floor Lead Market-Maker (‘‘LMM’’)
program. The text of the proposed rule
change is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
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20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18 15
U.S.C. 78s(b)(3)(A)(ii).
19 15 U.S.C. 78s(b)(2)(B).
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Chicago Board Options Exchange,
Incorporated
Rules
*
*
*
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Rule 8.15. Lead Market-Makers
(a) No change.
(b) LMM Obligations: Each LMM must
fulfill all the obligations of a MarketMaker under the Rules and satisfy each
of the following requirements:
(i) Provide continuous electronic
quotes (as defined in Rule 1.1 (ccc)) in
at least the lesser of 99% of the nonadjusted option series or 100% of the
non-adjusted option series minus one
call-put pair, with the term ‘‘call-put
pair’’ referring to one call and one put
that cover the same underlying
instrument and have the same
expiration date and exercise price. This
obligation does not apply to intra-day
add-on series on the day during which
such series are added for trading.
Compliance with this quoting obligation
applies to all of an LMM’s appointed
classes on each platform collectively.
The Exchange will determine
compliance by an LMM with this
quoting obligation on a monthly basis.
However, determining compliance with
this obligation on a monthly basis does
not relieve an LMM from meeting this
obligation on a daily basis, nor does it
prohibit the Exchange from taking
disciplinary action against an LMM for
failing to meet this obligation each
trading day. In option classes in which
both an On-Floor LMM and an Off-Floor
DPM or Off-Floor LMM have been
appointed, the On-Floor LMM will not
be obligated to comply with this
paragraph (b)(i) and instead will be
obligated to comply with the obligations
of Market-Makers in Rule 8.7(d). In an
option class in which the Exchange
appointed an On-Floor LMM that has
open-outcry obligations only, that OnFloor LMM will not be obligated to
comply with this paragraph (b)(i) and
instead will be obligated to comply with
the obligations of Market-Makers in Rule
8.7(d) and have a designee in the class’s
crowd on the trading floor for the entire
trading day (except for a de minimis
amount of time);
(ii)–(iv) No change.
(v) enter opening quotes within one
minute of the initiation of an opening
rotation in any series that is not open
due to the lack of a quote (see Rule
6.2B(d)(i)(A) or (ii)(A)) and participate
in other rotations described in Rule 6.2B
(including the modified opening
rotation set forth in Interpretation and
Policy .01) or 24.13, as applicable. In
option classes in which both an OnFloor LMM and an Off-Floor DPM or
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Off-Floor LMM have been appointed,
the obligation set forth in this paragraph
(b)(v) will be that of the Off-Floor DPM
or Off-Floor LMM and not the On-Floor
LMM. In an option class in which the
Exchange appointed an On-Floor LMM
that has open-outcry obligations only,
that On-Floor LMM will not be obligated
to comply with this paragraph (b)(v);
(vi)–(viii) No change.
(c)–(d) No change.
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. . . Interpretations and Policies:
.01 An LMM generally will operate
on CBOE’s trading floor (‘‘On-Floor
LMM’’). However, as provided below,
an LMM can request that the Exchange
authorize the LMM to function remotely
away from CBOE’s trading floor (‘‘OffFloor LMM’’) on a class-by-class basis.
(a)–(b) No change.
(c) Notwithstanding Rule 8.15(a)[,]: (i)
in an option class in which an Off-Floor
LMM or Off-Floor DPM has been
appointed in accordance with this Rule
8.15 or Rule 8.83, as applicable, the
Exchange in its discretion may also
appoint an On-Floor LMM, which will
be eligible to receive a participation
entitlement under this Rule 8.15 with
respect to orders represented in open
outcry; and (ii) in a class in which the
Exchange does not grant an electronic
participation entitlement pursuant to
Rule 6.45(a)(ii) and in which the
Exchange did not appoint an Off-Floor
LMM or Off-Floor DPM, the Exchange
may appoint an On-Floor LMM that has
open-outcry obligations only. If the
Exchange in its discretion determines to
reallocate a class in which an Off-Floor
LMM or Off-Floor DPM has been
appointed, the On-Floor LMM
appointment will automatically
terminate.
.02–.04 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
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the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
On-Floor LMM program. Currently, Rule
8.15, Interpretation and Policy .01
permits an LMM that is approved to
operate as an Off-Floor LMM in one or
more classes can request the Exchange
authorize it to operate as an On-Floor
LMM in those classes. Additionally, in
an option class in which an Off-Floor
LMM or Off-Floor Designated Primary
Market-Maker (‘‘DPM’’) has been
appointed in accordance with Rule 8.15
or Rule 8.83, respectively, the Exchange
in its discretion may appoint an OnFloor LMM (which may be the same
firm or different firm serving as the OffFloor LMM or Off-Floor DPM), which
will be eligible to receive a participation
entitlement under Rule 8.15 with
respect to orders represented in open
outcry. Pursuant to Rule 8.15(b), in an
option class in which both an On-Floor
LMM and an Off-Floor DPM or Off-Floor
LMM have been appointed, the OnFloor LMM will not be obligated to
comply with the continuous electronic
quoting obligation in subparagraph (i) or
opening quoting obligation in
subparagraph (v) (the Off-Floor LMM or
Off-Floor DPM would be required to
comply with those quoting obligations).
Pursuant to Rule 6.45(a)(ii), which
permits the exchange to determine, on
a class-by-class basis, certain priority
overlays, including participation
entitlements to LMMs (as well as DPMs
and Preferred Market-Makers). The
Exchange may grant an LMM a
participation entitlement only if it has
applied the priority customer overlay.
LMMs operating on the trading floor
may also receive a participation
entitlement.3 In exchange for eligibility
to receive a participation entitlement,
LMMs must, among other things, satisfy
a heightened quoting obligation.4 If the
Exchange does not grant an electronic
participation entitlement to a class,
currently an LMM that operates off the
floor is required to continue to satisfy
the heightened electronic quoting
obligation under the rules, even though
See Rule 8.15(d).
Generally, LMMs and DPMs must provide
continuous electronic quotes (for 90% of the time)
in at least the lesser of 99% of the non-adjusted
series or 100% of the non-adjusted series minus one
call-put pair, while Market-Makers must provide
continuous electronic quotes (for 90% of the time)
in at least 60% of the series in their appointed
classes.
3
4
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it does not receive the benefit of an
electronic participation entitlement
(although it would continue to receive
an open outcry participation entitlement
if it also operates on the floor).
Therefore, under current Rules, the
Exchange may appoint an On-Floor
LMM in a class if there is also an OffFloor LMM or Off-Floor DPM in that
class (which, as noted above, the same
firm or different firms may be operating
as the On-Floor LMM and Off-Floor
LMM or Off-Floor DPM). Additionally,
the Rules provide an On-Floor LMM
does not have to satisfy heightened
electronic quoting standards if there is
also an Off-Floor LMM or Off-Floor
DPM in that class, who must satisfy
those standards. However, the Rules do
not expressly contemplate the Exchange
appointing an On-Floor LMM in a class
if it has not appointed an Off-Floor DPM
or Off-Floor LMM in that class.
Additionally, current Rules do not
explicitly permit the Exchange to not
impose a heightened electronic quoting
obligation on an On-Floor LMM if there
is no Off-Floor LMM or Off-Floor DPM
(in other words, if the Exchange were to
appoint an On-Floor LMM who operates
only on the floor, and no Off-Floor LMM
or Off-Floor DPM, the On-Floor LMM
would still be required to satisfy
heightened quoting standards). The
proposed rule change explicitly states
the Exchange may appoint an On-Floor
LMM in a class, under specific
circumstances (as further discussed
below), even if there is no Off-Floor
LMM or Off-Floor DPM in that class,
which On-Floor LMM must satisfy
certain floor-based obligations and is
eligible for an open outcry participation
entitlement, but will not have to satisfy
heightened electronic quoting
obligations and will not be eligible for
an electronic participation entitlement.
The proposed rule change merely
expands the Exchange’s flexibility with
respect to appointing On-Floor LMMs in
a circumstance not currently
contemplated in the Rules—in classes in
which it has not appointed an Off-Floor
DPM or Off-Floor LMM—and specifies
the obligations and entitlement in such
a circumstance.
Specifically, the Exchange proposes to
amend Rule 8.15, Interpretation and
Policy .01 to permit the Exchange to
appoint an On-Floor LMM to operate
only on the trading floor with openoutcry obligations only in a class in
which the Exchange appointed no OffFloor LMM or Off-Floor DPM and does
not grant an electronic participation
entitlement pursuant to Rule 6.45(a)(ii)
(in addition to classes in which the
Exchange has appointed an Off-Floor
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DPM or LMM).5 The proposed rule
change also amends Rule 8.15(b)(i) and
(v) to provide an On-Floor LMM with
open-outcry obligations only will not be
obligated to comply with the continuous
electronic quoting obligation in
subparagraph (i) or opening quoting
obligation in subparagraph (v), but must
comply with the obligations of MarketMakers in Rule 8.7(d) and have a
designee in the class’s crowd on the
trading floor for the entire trading day
(except for a de minimis amount of
time).6
The Exchange believes it is reasonable
for an On-Floor LMM with open-outcry
obligations only to be eligible for an
open outcry entitlement, because
priority customer orders in the book
always receive priority over in-crowd
market participants, including LMMs
who may be eligible for an open outcry
entitlement. Additionally, as proposed,
the On-Floor LMM must satisfy the
proposed heightened standard to be in
the crowd for the entire trading day to
be eligible for the open outcry
entitlement.7 The Exchange believes
this standard is reasonable, as it
understands On-Floor LMMs currently
have designees present on the floor
during the entire trading, because a
designee must be present to participate
in open outcry trades and receive open
outcry participation entitlements on
trades.8
If the Exchange eliminates an
electronic participation entitlement
from a class, the Exchange believes
there is no incentive for a Market-Maker
to satisfy a heightened electronic
quoting standard in that class due to the
allocation algorithm determined by the
Exchange. The Exchange does not
believe the open outcry participation
entitlement is a sufficient benefit to
balance the requirement to satisfy the
heightened electronic quoting obligation
(due to the significant electronic trading
volume) if an LMM or DPM is not also
receiving an electronic participation
entitlement. However, the Exchange
believes it will benefit price discovery
in the trading crowd for an LMM to be
present in that class if it is eligible to
receive a participation entitlement, even
5 The Exchange may remove an On-Floor LMM in
accordance with Rule 8.15 in the same manner as
it may remove any other LMM appointed pursuant
to Rule 8.15, including current On-Floor LMMs.
6 For example, a de minimis time period may be
the brief time during which a designee leaves the
trading floor to purchase a beverage.
7 See Rule 6.45(b)(i).
8 If an On-Floor LMM has no designee on the
trading floor at any time during the trading day, it
could not receive an entitlement, as there is no one
present to participate on any trade during that time.
On-Floor LMMs may have multiple designees in the
trading crowd.
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though there may be no LMM streaming
quotes remotely. The proposed rule
change will permit the Exchange to
appoint an LMM to a trading crowd in
this circumstance with an appropriate
balance of floor-based benefits and
obligations, consistent with the LMM’s
on-floor role.
The proposed rule change permits the
Exchange to appoint an On-Floor LMM
as it already can do pursuant to current
Rules, which is appoint an On-Floor
LMM that must satisfy regular marketmaker quoting obligations rather than
heightened LMM quoting obligations
and only receive an open outcry
participation entitlement (with the
expectation a designee of the LMM will
have a presence on the trading floor for
the entire trading day). The proposed
rule change merely provides the
Exchange with discretion to make such
an appointment in a different
circumstance not currently
contemplated in the Rules—in a class
with no Off-Floor DPM or Off-Floor
LMM. The Exchange may make such an
appointment in the limited
circumstance of classes in which it does
not grant an electronic participation
entitlement, and it will consider, among
other factors, electronic liquidity in the
class prior to making such an
appointment. An On-Floor LMM in
such a class will be subject to the same
obligations and receive the same
benefits as current On-Floor LMMs in
other classes, subject to a different
heightened quoting standard of
maintaining a floor presence all day
(subject to a de minimis exception)
(which is expected of current On-Floor
LMMs). Any violation of the proposed
heightened quoting standard will be
subject to potential discipline under
Chapter XVII.9
The Exchange notes current On-Floor
LMMs in classes in which there is a
different Off-Floor DPM or Off-Floor
LMM, as well as On-Floor LMMs in
classes with no Off-Floor DPM or OffFloor LMM pursuant to the proposed
rule change, are not subject to the
heightened electronic quoting obligation
or opening quoting obligation in Rule
8.15(b), but receive the participation
entitlement in Rule 8.15(d). While there
is no current obligation in the rules
requiring an On-Floor LMM to have a
designee on the floor during the entire
trading day, the Exchange expects
current On-Floor LMMs to do so and
9 Exchange regulatory staff are present on the
trading floor and may detect violations of this
obligation. Additionally, pursuant to Rule 17.2(a),
Trading Permit Holders (including those in a
trading crowd) may submit complaints to the
Regulatory Division alleging violations of this
obligation.
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43631
may consider trading floor presence
when determining whether to renew an
On-Floor LMM’s term.10
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.11 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 12 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) 13 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
change promotes just and equitable
principles of trade by creating a balance
between the obligations imposed on and
benefits provided to On-Floor LMMs
that only operate on the trading floor
and only have open-outcry obligations.
The Exchange believes if an On-Floor
LMM was obligated to satisfy a
heightened continuous electronic
quoting standard in a class in which
there was no electronic participation
entitlement, the obligations would
outweigh the benefit of an open outcry
entitlement. The proposed rule change
imposes a more reasonable heightened
open outcry obligation that balances the
eligibility of the open outcry benefit, as
the proposed rule change imposes an
on-floor requirement to be eligible for
the on-floor entitlement rather than an
electronic quoting obligation unrelated
to the corresponding potential
entitlement.
The proposed rule change permits the
Exchange to appoint an On-Floor LMM
as it does pursuant to current Rules; it
merely provides the Exchange with
discretion to appoint an On-Floor LMM
10 See Rule 8.15(a)(i) (a factor to be considered by
the Exchange when selecting LMMs includes
presence in the trading crowd).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
13 Id.
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in a different circumstance—in a class
with no Off-Floor DPM or Off-Floor
LMM. Current rules do not contemplate
an On-Floor LMM in a class with no
Off-Floor DPM or Off-Floor LMM. An
On-Floor LMM in such a class will be
subject to the same obligations and
receive the same benefits as current OnFloor LMMs in other classes, subject to
a different heightened quoting standard
of maintaining a floor presence for the
entire trading day (subject to a de
minimis exception), although current
On-Floor LMMs are similarly expected
have a designee present on the trading
floor for the entire trading day. The
proposed rule change removes
impediments to and perfects the
mechanism of a free and open market by
providing flexibility to have an LMM in
the trading crowd, which enhances
price discovery and provides potential
price improvement, in a class in which
there is no incentive for a Market-Maker
to satisfy a heightened electronic
quoting standard due to the allocation
algorithm determined by the Exchange
in that class.
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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
Exchange believes it is appropriate to
limit its ability to appoint an On-Floor
LMM with open-outcry obligations only
in classes in which it determines to
have no electronic participation
entitlement, as it wants to incentivize
firms to remain LMMs (and provide
liquidity) in the trading crowd when
there is no incentive for firms to satisfy
heightened electronic quoting
standards. The Exchange will, among
other factors, consider electronic
liquidity in the class prior to making
such an appointment. The Exchange
believes the continued presence of an
LMM in the trading crowd enhances
price discovery and provides potential
price improvement, and such
requirement creates a balance with
eligibility for an open outcry
participation entitlement. The Exchange
believes requiring an On-Floor LMM
that operates only on the trading floor
to satisfy heightened electronic quoting
standards would outweigh the benefit of
an open outcry only entitlement. The
proposed rule change has no impact on
intermarket competition, as it relates
solely to the presence of an LMM on
CBOE’s trading floor.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) 14 of the Act and Rule 19b–
4(f)(6) thereunder.15
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 16 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 17
permits the Commission to 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
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange states that waiver
of the 30-day operative delay would
permit the Exchange to appoint an OnFloor LMM as of September 1, 2017,
which in turn would permit the market
to benefit sooner from enhanced price
discovery and the potential for price
improvement. Based on the foregoing,
the Commission believes the waiver of
the operative delay is consistent with
the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal operative upon filing.18
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
14 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.
16 17 CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
18 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
15 17
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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.
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–2017–059 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–2017–059. 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–
E:\FR\FM\18SEN1.SGM
18SEN1
Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices
2017–059, and should be submitted on
or before October 10, 2017.
the Commission’s Public Reference
Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Assistant Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2017–19712 Filed 9–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81601; File No. SR–
NYSEARCA–2017–104]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Equities Fees and Charges
September 13, 2017.
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 1, 2017, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Fee Schedule to adopt an additional
tiered credit applicable to LMMs and to
ETP Holders and Market Makers
affiliated with the LMM that provide
displayed liquidity to the NYSE Arca
Book in Tape B Securities. The
Exchange currently provides tier-based
incremental credits for orders that
provide displayed liquidity to the NYSE
Arca Book in Tape B Securities.
Specifically, LMMs that are registered as
the LMM in Tape B Securities that have
a consolidated average daily volume
(‘‘CADV’’) in the previous month of less
than 100,000 shares, or 0.0070% of
Consolidated Tape B ADV, whichever is
greater (‘‘Less Active ETP Securities’’),
and the ETP Holders and Market Makers
affiliated with such LMMs, currently
receive an additional credit for orders
that provide displayed liquidity to the
Book in any Tape B Securities that trade
on the Exchange.5 The current
sradovich on DSKBBY8HB2PROD with NOTICES
The Exchange proposes to amend the
NYSE Arca Equities Fees and Charges
(the ‘‘Fee Schedule’’) to (i) adopt an
additional tiered credit applicable to
Lead Market Makers (‘‘LMMs’’) 4 and to
ETP Holders and Market Makers
affiliated with the LMM that provide
displayed liquidity to the NYSE Arca
Book in Tape B Securities; and (ii) add
a second way by which an ETP Holder
or Market Maker could qualify for the
Step Up Tier. The Exchange proposes to
implement the proposed fee change on
September 1, 2017.The proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, and at
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The term ‘‘Lead Market Maker’’ is defined in
Rule 1.1(w) to mean a registered Market Maker that
is the exclusive Designated Market Maker in listings
for which the Exchange is the primary market.
1 15
VerDate Sep<11>2014
16:54 Sep 15, 2017
Jkt 241001
The Exchange proposes to amend the
Fee Schedule to adopt an additional
tiered credit applicable to LMMs and to
ETP Holders and Market Makers
affiliated with the LMM that provide
displayed liquidity to the NYSE Arca
Book in Tape B Securities; and (ii) add
a second way by which an ETP Holder
or Market Maker could qualify for the
Step Up Tier. The Exchange proposes to
implement the proposed fee changes on
September 1, 2017.
LMM Transaction Fees and Credits
5 The Exchange defines ‘‘affiliate’’ to ‘‘mean any
ETP Holder under 75% common ownership or
control of that ETP Holder.’’ See Fee Schedule,
NYSE Arca Marketplace: General.
PO 00000
Frm 00120
Fmt 4703
Sfmt 4703
43633
incremental credits and volume
thresholds are as follows:
• An additional credit of $0.0004 per
share if an LMM is registered as the
LMM in at least 300 Less Active ETP
Securities
• An additional credit of $0.0003 per
share if an LMM is registered as the
LMM in at least 200 but less than 300
Less Active ETP Securities
• An additional credit of $0.0002 per
share if an LMM is registered as the
LMM in at least 100 but less than 200
Less Active ETP Securities
The number of Less Active ETP
Securities for the billing month is based
on the number of Less Active ETP
Securities in which an LMM is
registered as the LMM on the last
business day of the previous month. The
incremental credits also apply to ETP
Holders and Market Makers affiliated
with the LMM whose orders in Tape B
Securities provide displayed liquidity to
the NYSE Arca Book.
The Exchange proposes to adopt an
additional tier pursuant to which LMMs
and ETP Holders and Market Makers
affiliated with the LMM that provide
displayed liquidity to the NYSE Arca
Book in Tape B Securities would receive
an additional credit of $0.0001 per share
if the LMM is registered as the LMM in
at least 75 but less than 100 Less Active
ETP Securities.
For example, currently, a LMM that
provides liquidity to the NYSE Arca
Book in a security for which the LMM
is registered as the LMM which has a
CADV in the previous month of at least
5,000,000 shares would receive a credit
of $0.0033 per share. If that LMM is also
registered as an LMM in 80 Less Active
ETP Securities, the LMM would receive
an incremental credit of $0.0001 per
share under the proposed new rebate
structure, for a total credit of $0.0034
per share. Additionally, if the affiliated
ETP Holders and Market Makers of such
LMM that provide displayed liquidity in
Tape B Securities are a Tier 1 firm, they
would receive a total credit of $0.0024
per share, i.e., $0.0023 per share Tier 1
credit for orders that provide liquidity
to the NYSE Arca Book plus $0.0001 per
share for being registered as a LMM in
80 Less Active ETP Securities.
With the proposed additional tier, the
Exchange hopes to provide incentives
for increased trading in Less Active ETP
Securities for the benefit of all market
participants.
Step-Up Tier
The Exchange proposes to add a
second way by which an ETP Holder or
Market Maker could qualify for the
existing Step Up Tier. Currently, to
qualify for the Step Up Tier, ETP
E:\FR\FM\18SEN1.SGM
18SEN1
]]>Agencies
[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43629-43633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19712]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81586; File No. SR-CBOE-2017-059]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the On-Floor Lead Market-Maker Program
September 12, 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 August 31, 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 Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the On-Floor Lead Market-Maker
(``LMM'') program. The text of the proposed rule change is provided
below.
(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated
Rules
* * * * *
Rule 8.15. Lead Market-Makers
(a) No change.
(b) LMM Obligations: Each LMM must fulfill all the obligations of a
Market-Maker under the Rules and satisfy each of the following
requirements:
(i) Provide continuous electronic quotes (as defined in Rule 1.1
(ccc)) in at least the lesser of 99% of the non-adjusted option series
or 100% of the non-adjusted option series minus one call-put pair, with
the term ``call-put pair'' referring to one call and one put that cover
the same underlying instrument and have the same expiration date and
exercise price. This obligation does not apply to intra-day add-on
series on the day during which such series are added for trading.
Compliance with this quoting obligation applies to all of an LMM's
appointed classes on each platform collectively. The Exchange will
determine compliance by an LMM with this quoting obligation on a
monthly basis. However, determining compliance with this obligation on
a monthly basis does not relieve an LMM from meeting this obligation on
a daily basis, nor does it prohibit the Exchange from taking
disciplinary action against an LMM for failing to meet this obligation
each trading day. In option classes in which both an On-Floor LMM and
an Off-Floor DPM or Off-Floor LMM have been appointed, the On-Floor LMM
will not be obligated to comply with this paragraph (b)(i) and instead
will be obligated to comply with the obligations of Market-Makers in
Rule 8.7(d). In an option class in which the Exchange appointed an On-
Floor LMM that has open-outcry obligations only, that On-Floor LMM will
not be obligated to comply with this paragraph (b)(i) and instead will
be obligated to comply with the obligations of Market-Makers in Rule
8.7(d) and have a designee in the class's crowd on the trading floor
for the entire trading day (except for a de minimis amount of time);
(ii)-(iv) No change.
(v) enter opening quotes within one minute of the initiation of an
opening rotation in any series that is not open due to the lack of a
quote (see Rule 6.2B(d)(i)(A) or (ii)(A)) and participate in other
rotations described in Rule 6.2B (including the modified opening
rotation set forth in Interpretation and Policy .01) or 24.13, as
applicable. In option classes in which both an On-Floor LMM and an Off-
Floor DPM or
[[Page 43630]]
Off-Floor LMM have been appointed, the obligation set forth in this
paragraph (b)(v) will be that of the Off-Floor DPM or Off-Floor LMM and
not the On-Floor LMM. In an option class in which the Exchange
appointed an On-Floor LMM that has open-outcry obligations only, that
On-Floor LMM will not be obligated to comply with this paragraph
(b)(v);
(vi)-(viii) No change.
(c)-(d) No change.
. . . Interpretations and Policies:
.01 An LMM generally will operate on CBOE's trading floor (``On-
Floor LMM''). However, as provided below, an LMM can request that the
Exchange authorize the LMM to function remotely away from CBOE's
trading floor (``Off-Floor LMM'') on a class-by-class basis.
(a)-(b) No change.
(c) Notwithstanding Rule 8.15(a)[,]: (i) in an option class in
which an Off-Floor LMM or Off-Floor DPM has been appointed in
accordance with this Rule 8.15 or Rule 8.83, as applicable, the
Exchange in its discretion may also appoint an On-Floor LMM, which will
be eligible to receive a participation entitlement under this Rule 8.15
with respect to orders represented in open outcry; and (ii) in a class
in which the Exchange does not grant an electronic participation
entitlement pursuant to Rule 6.45(a)(ii) and in which the Exchange did
not appoint an Off-Floor LMM or Off-Floor DPM, the Exchange may appoint
an On-Floor LMM that has open-outcry obligations only. If the Exchange
in its discretion determines to reallocate a class in which an Off-
Floor LMM or Off-Floor DPM has been appointed, the On-Floor LMM
appointment will automatically terminate.
.02-.04 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the On-Floor LMM program. Currently,
Rule 8.15, Interpretation and Policy .01 permits an LMM that is
approved to operate as an Off-Floor LMM in one or more classes can
request the Exchange authorize it to operate as an On-Floor LMM in
those classes. Additionally, in an option class in which an Off-Floor
LMM or Off-Floor Designated Primary Market-Maker (``DPM'') has been
appointed in accordance with Rule 8.15 or Rule 8.83, respectively, the
Exchange in its discretion may appoint an On-Floor LMM (which may be
the same firm or different firm serving as the Off-Floor LMM or Off-
Floor DPM), which will be eligible to receive a participation
entitlement under Rule 8.15 with respect to orders represented in open
outcry. Pursuant to Rule 8.15(b), in an option class in which both an
On-Floor LMM and an Off-Floor DPM or Off-Floor LMM have been appointed,
the On-Floor LMM will not be obligated to comply with the continuous
electronic quoting obligation in subparagraph (i) or opening quoting
obligation in subparagraph (v) (the Off-Floor LMM or Off-Floor DPM
would be required to comply with those quoting obligations).
Pursuant to Rule 6.45(a)(ii), which permits the exchange to
determine, on a class-by-class basis, certain priority overlays,
including participation entitlements to LMMs (as well as DPMs and
Preferred Market-Makers). The Exchange may grant an LMM a participation
entitlement only if it has applied the priority customer overlay. LMMs
operating on the trading floor may also receive a participation
entitlement.\3\ In exchange for eligibility to receive a participation
entitlement, LMMs must, among other things, satisfy a heightened
quoting obligation.\4\ If the Exchange does not grant an electronic
participation entitlement to a class, currently an LMM that operates
off the floor is required to continue to satisfy the heightened
electronic quoting obligation under the rules, even though it does not
receive the benefit of an electronic participation entitlement
(although it would continue to receive an open outcry participation
entitlement if it also operates on the floor).
---------------------------------------------------------------------------
\3\ See Rule 8.15(d).
\4\ Generally, LMMs and DPMs must provide continuous electronic
quotes (for 90% of the time) in at least the lesser of 99% of the
non-adjusted series or 100% of the non-adjusted series minus one
call-put pair, while Market-Makers must provide continuous
electronic quotes (for 90% of the time) in at least 60% of the
series in their appointed classes.
---------------------------------------------------------------------------
Therefore, under current Rules, the Exchange may appoint an On-
Floor LMM in a class if there is also an Off-Floor LMM or Off-Floor DPM
in that class (which, as noted above, the same firm or different firms
may be operating as the On-Floor LMM and Off-Floor LMM or Off-Floor
DPM). Additionally, the Rules provide an On-Floor LMM does not have to
satisfy heightened electronic quoting standards if there is also an
Off-Floor LMM or Off-Floor DPM in that class, who must satisfy those
standards. However, the Rules do not expressly contemplate the Exchange
appointing an On-Floor LMM in a class if it has not appointed an Off-
Floor DPM or Off-Floor LMM in that class. Additionally, current Rules
do not explicitly permit the Exchange to not impose a heightened
electronic quoting obligation on an On-Floor LMM if there is no Off-
Floor LMM or Off-Floor DPM (in other words, if the Exchange were to
appoint an On-Floor LMM who operates only on the floor, and no Off-
Floor LMM or Off-Floor DPM, the On-Floor LMM would still be required to
satisfy heightened quoting standards). The proposed rule change
explicitly states the Exchange may appoint an On-Floor LMM in a class,
under specific circumstances (as further discussed below), even if
there is no Off-Floor LMM or Off-Floor DPM in that class, which On-
Floor LMM must satisfy certain floor-based obligations and is eligible
for an open outcry participation entitlement, but will not have to
satisfy heightened electronic quoting obligations and will not be
eligible for an electronic participation entitlement. The proposed rule
change merely expands the Exchange's flexibility with respect to
appointing On-Floor LMMs in a circumstance not currently contemplated
in the Rules--in classes in which it has not appointed an Off-Floor DPM
or Off-Floor LMM--and specifies the obligations and entitlement in such
a circumstance.
Specifically, the Exchange proposes to amend Rule 8.15,
Interpretation and Policy .01 to permit the Exchange to appoint an On-
Floor LMM to operate only on the trading floor with open-outcry
obligations only in a class in which the Exchange appointed no Off-
Floor LMM or Off-Floor DPM and does not grant an electronic
participation entitlement pursuant to Rule 6.45(a)(ii) (in addition to
classes in which the Exchange has appointed an Off-Floor
[[Page 43631]]
DPM or LMM).\5\ The proposed rule change also amends Rule 8.15(b)(i)
and (v) to provide an On-Floor LMM with open-outcry obligations only
will not be obligated to comply with the continuous electronic quoting
obligation in subparagraph (i) or opening quoting obligation in
subparagraph (v), but must comply with the obligations of Market-Makers
in Rule 8.7(d) and have a designee in the class's crowd on the trading
floor for the entire trading day (except for a de minimis amount of
time).\6\
---------------------------------------------------------------------------
\5\ The Exchange may remove an On-Floor LMM in accordance with
Rule 8.15 in the same manner as it may remove any other LMM
appointed pursuant to Rule 8.15, including current On-Floor LMMs.
\6\ For example, a de minimis time period may be the brief time
during which a designee leaves the trading floor to purchase a
beverage.
---------------------------------------------------------------------------
The Exchange believes it is reasonable for an On-Floor LMM with
open-outcry obligations only to be eligible for an open outcry
entitlement, because priority customer orders in the book always
receive priority over in-crowd market participants, including LMMs who
may be eligible for an open outcry entitlement. Additionally, as
proposed, the On-Floor LMM must satisfy the proposed heightened
standard to be in the crowd for the entire trading day to be eligible
for the open outcry entitlement.\7\ The Exchange believes this standard
is reasonable, as it understands On-Floor LMMs currently have designees
present on the floor during the entire trading, because a designee must
be present to participate in open outcry trades and receive open outcry
participation entitlements on trades.\8\
---------------------------------------------------------------------------
\7\ See Rule 6.45(b)(i).
\8\ If an On-Floor LMM has no designee on the trading floor at
any time during the trading day, it could not receive an
entitlement, as there is no one present to participate on any trade
during that time. On-Floor LMMs may have multiple designees in the
trading crowd.
---------------------------------------------------------------------------
If the Exchange eliminates an electronic participation entitlement
from a class, the Exchange believes there is no incentive for a Market-
Maker to satisfy a heightened electronic quoting standard in that class
due to the allocation algorithm determined by the Exchange. The
Exchange does not believe the open outcry participation entitlement is
a sufficient benefit to balance the requirement to satisfy the
heightened electronic quoting obligation (due to the significant
electronic trading volume) if an LMM or DPM is not also receiving an
electronic participation entitlement. However, the Exchange believes it
will benefit price discovery in the trading crowd for an LMM to be
present in that class if it is eligible to receive a participation
entitlement, even though there may be no LMM streaming quotes remotely.
The proposed rule change will permit the Exchange to appoint an LMM to
a trading crowd in this circumstance with an appropriate balance of
floor-based benefits and obligations, consistent with the LMM's on-
floor role.
The proposed rule change permits the Exchange to appoint an On-
Floor LMM as it already can do pursuant to current Rules, which is
appoint an On-Floor LMM that must satisfy regular market-maker quoting
obligations rather than heightened LMM quoting obligations and only
receive an open outcry participation entitlement (with the expectation
a designee of the LMM will have a presence on the trading floor for the
entire trading day). The proposed rule change merely provides the
Exchange with discretion to make such an appointment in a different
circumstance not currently contemplated in the Rules--in a class with
no Off-Floor DPM or Off-Floor LMM. The Exchange may make such an
appointment in the limited circumstance of classes in which it does not
grant an electronic participation entitlement, and it will consider,
among other factors, electronic liquidity in the class prior to making
such an appointment. An On-Floor LMM in such a class will be subject to
the same obligations and receive the same benefits as current On-Floor
LMMs in other classes, subject to a different heightened quoting
standard of maintaining a floor presence all day (subject to a de
minimis exception) (which is expected of current On-Floor LMMs). Any
violation of the proposed heightened quoting standard will be subject
to potential discipline under Chapter XVII.\9\
---------------------------------------------------------------------------
\9\ Exchange regulatory staff are present on the trading floor
and may detect violations of this obligation. Additionally, pursuant
to Rule 17.2(a), Trading Permit Holders (including those in a
trading crowd) may submit complaints to the Regulatory Division
alleging violations of this obligation.
---------------------------------------------------------------------------
The Exchange notes current On-Floor LMMs in classes in which there
is a different Off-Floor DPM or Off-Floor LMM, as well as On-Floor LMMs
in classes with no Off-Floor DPM or Off-Floor LMM pursuant to the
proposed rule change, are not subject to the heightened electronic
quoting obligation or opening quoting obligation in Rule 8.15(b), but
receive the participation entitlement in Rule 8.15(d). While there is
no current obligation in the rules requiring an On-Floor LMM to have a
designee on the floor during the entire trading day, the Exchange
expects current On-Floor LMMs to do so and may consider trading floor
presence when determining whether to renew an On-Floor LMM's term.\10\
---------------------------------------------------------------------------
\10\ See Rule 8.15(a)(i) (a factor to be considered by the
Exchange when selecting LMMs includes presence in the trading
crowd).
---------------------------------------------------------------------------
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.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ 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) \13\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
---------------------------------------------------------------------------
In particular, the proposed rule change promotes just and equitable
principles of trade by creating a balance between the obligations
imposed on and benefits provided to On-Floor LMMs that only operate on
the trading floor and only have open-outcry obligations. The Exchange
believes if an On-Floor LMM was obligated to satisfy a heightened
continuous electronic quoting standard in a class in which there was no
electronic participation entitlement, the obligations would outweigh
the benefit of an open outcry entitlement. The proposed rule change
imposes a more reasonable heightened open outcry obligation that
balances the eligibility of the open outcry benefit, as the proposed
rule change imposes an on-floor requirement to be eligible for the on-
floor entitlement rather than an electronic quoting obligation
unrelated to the corresponding potential entitlement.
The proposed rule change permits the Exchange to appoint an On-
Floor LMM as it does pursuant to current Rules; it merely provides the
Exchange with discretion to appoint an On-Floor LMM
[[Page 43632]]
in a different circumstance--in a class with no Off-Floor DPM or Off-
Floor LMM. Current rules do not contemplate an On-Floor LMM in a class
with no Off-Floor DPM or Off-Floor LMM. An On-Floor LMM in such a class
will be subject to the same obligations and receive the same benefits
as current On-Floor LMMs in other classes, subject to a different
heightened quoting standard of maintaining a floor presence for the
entire trading day (subject to a de minimis exception), although
current On-Floor LMMs are similarly expected have a designee present on
the trading floor for the entire trading day. The proposed rule change
removes impediments to and perfects the mechanism of a free and open
market by providing flexibility to have an LMM in the trading crowd,
which enhances price discovery and provides potential price
improvement, in a class in which there is no incentive for a Market-
Maker to satisfy a heightened electronic quoting standard due to the
allocation algorithm determined by the Exchange in that class.
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 Exchange believes it is
appropriate to limit its ability to appoint an On-Floor LMM with open-
outcry obligations only in classes in which it determines to have no
electronic participation entitlement, as it wants to incentivize firms
to remain LMMs (and provide liquidity) in the trading crowd when there
is no incentive for firms to satisfy heightened electronic quoting
standards. The Exchange will, among other factors, consider electronic
liquidity in the class prior to making such an appointment. The
Exchange believes the continued presence of an LMM in the trading crowd
enhances price discovery and provides potential price improvement, and
such requirement creates a balance with eligibility for an open outcry
participation entitlement. The Exchange believes requiring an On-Floor
LMM that operates only on the trading floor to satisfy heightened
electronic quoting standards would outweigh the benefit of an open
outcry only entitlement. The proposed rule change has no impact on
intermarket competition, as it relates solely to the presence of an LMM
on CBOE's trading floor.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) \14\ of the Act and Rule 19b-
4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \16\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the
Commission to 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 operative delay so that
the proposal may become operative immediately upon filing. The Exchange
states that waiver of the 30-day operative delay would permit the
Exchange to appoint an On-Floor LMM as of September 1, 2017, which in
turn would permit the market to benefit sooner from enhanced price
discovery and the potential for price improvement. Based on the
foregoing, the Commission believes the waiver of the operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (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.
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-2017-059 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-2017-059. 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-
[[Page 43633]]
2017-059, and should be submitted on or before October 10, 2017.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19712 Filed 9-15-17; 8:45 am]
BILLING CODE 8011-01-P
