Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice of Filing of Proposed Rule Change Regarding CFE's New Trading System, 58998-59004 [2017-26914]
Download as PDF
<![CDATA[
58998
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
Electronic Comments
into the price and volume discovery
processes.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. Similarly, the
Exchange does not believe that the
proposed change to the Exchange’s
tiered pricing structure burdens
competition, but instead, enhances
competition by modifying pricing
incentives to attract order flow and
incentivize participants to increase their
participation on the Exchange. The
Exchange notes that it operates in a
highly competitive market in which
market participants can readily direct
order flow to competing venues if they
deem fee structures to be unreasonable
or excessive. The Exchange does not
believe the proposed amendments
would burden intramarket competition
as they would be available to all
Members uniformly.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
Members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and paragraph (f) of Rule
19b–4 thereunder.19 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
sradovich on DSK3GMQ082PROD with NOTICES
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:
• 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–
CboeEDGX–2017–003 on the subject
line.
Paper Comments
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82248; File No. SR–CFE–
2017–003]
Self-Regulatory Organizations; Cboe
Futures Exchange, LLC; Notice of
Filing of Proposed Rule Change
Regarding CFE’s New Trading System
December 8, 2017.
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeEDGX–2017–003. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGX–2017–003 and
should be submitted on or before
January 4, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–26911 Filed 12–13–17; 8:45 am]
Pursuant to Section 19(b)(7) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
November 29, 2017 Cboe Futures
Exchange, LLC (‘‘CFE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change described in Items
I and II below, which Items have been
prepared by CFE. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons. CFE also has
filed this proposed rule change with the
Commodity Futures Trading
Commission (‘‘CFTC’’). CFE filed a
written certification with the CFTC
under Section 5c(c) of the Commodity
Exchange Act (‘‘CEA’’) 2 on November
29, 2017.
I. Self-Regulatory Organization’s
Description of the Proposed Rule
Change
The Exchange proposes to amend its
rules in connection with the
implementation of a new CFE trading
system. The scope of this filing is
limited solely to the application of the
rule amendments to security futures
traded on CFE. The only security futures
that have been offered for trading on
CFE were traded under Chapter 16 of
CFE’s Rulebook, which is applicable to
Individual Stock Based and ExchangeTraded Fund Based Volatility Index
security futures. CFE does not currently
list any security futures for trading. The
text of the proposed rule change is
attached as Exhibit 4 to the filing but is
not attached to the publication of this
notice.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, CFE
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. CFE has prepared
BILLING CODE 8011–01–P
18 15
U.S.C. 78s(b)(3)(A).
19 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
21:28 Dec 13, 2017
1 15
20 17
Jkt 244001
PO 00000
CFR 200.30–3(a)(12).
Frm 00207
Fmt 4703
Sfmt 4703
27
U.S.C. 78s(b)(7).
U.S.C. 7a–2(c).
E:\FR\FM\14DEN1.SGM
14DEN1
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
that is either a CFE Trading Privilege
Holder (‘‘TPH’’) or a Related Party of a
TPH and is pre-authorized by a CFE
Clearing Member to report Exchange of
Contract for Related Position
transactions and Block Trades on behalf
of the TPH.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Cboe Global Markets, Inc. (formerly
known as CBOE Holdings, Inc.) (‘‘Cboe
Global Markets’’) is the parent company
of CFE. On February 28, 2017, Cboe
Global Markets completed the
acquisition of Bats Global Markets, Inc.
(‘‘Bats’’). In connection with this
acquisition, all of the exchanges owned
by Cboe Global Markets, including CFE,
are migrating their trading platforms to
trading systems based on Bats
technology. CFE’s new trading system
will be referred to in CFE rules as the
‘‘CFE System’’.
The Exchange is proposing to amend
the following rule provisions as a result
of changes for the CFE System: CFE
Rule Chapter 1; CFE Rules 303A, 403,
414, 415, 603, 620, 714, 1602, 1802, and
1902; and CFE Policy and Procedure
XVIII. These provisions set forth rules
related to Authorized Reporters, Order
Entry Operator IDs, Order Entry and
Maintenance of Front-End Audit Trail
Information, Exchange of Contract for
Related Position (‘‘ECRP’’) transactions,
Block Trades, Market Manipulation,
Disruptive Trading Practices, Imposition
of Fines for Minor Rule Violations,
Reportable Trading Volume, and
Contract Specifications. With one
exception, the rule amendments
included as part of this rule change are
to apply to all products traded on CFE,
including both non-security futures and
security futures. CFE is making these
rule amendments in conjunction with
other rule amendments being made by
CFE in connection with the
implementation of the CFE System that
are not required to be submitted to the
Commission pursuant to Section
19(b)(7) of the Act 3 and thus are not
included as part of this rule change.
sradovich on DSK3GMQ082PROD with NOTICES
Authorized Reporter
CFE Rule Chapter 1 includes
definitions for terms used in CFE’s
rules. CFE is proposing to include in
Chapter 1 a definition for the term
‘‘Authorized Reporter’’ which includes
cross-references to proposed CFE Rules
414(i) and 415(f) in which the term
‘‘Authorized Reporter’’ is defined.
Specifically, the proposed definition of
an Authorized Reporter in proposed
Rules 414(i) and 415(f) is an individual
3 15
U.S.C. 78s(b)(7).
VerDate Sep<11>2014
21:28 Dec 13, 2017
Jkt 244001
Order Entry Operator IDs
CFE Rule 303A (Order Entry Operator
IDs) sets forth that each TPH shall
include an Order Entry Operator ID with
every Order and the requirements
applicable to Order Entry Operator IDs.
CFE is proposing three changes to Rule
303A.
First, CFE is proposing to amend Rule
303A(a) to provide that an Order Entry
Operator ID must be included on every
Cancel Order and Cancel Replace/
Modify Order and to provide that any
Order that does not contain an Order
Entry Operator ID will be rejected or
canceled back to the sender by CFE’s
trading system.
Second, CFE is proposing to amend
Rule 303A to remove references to
quotes. A quote is a two-sided order that
includes both a bid and an offer whereas
an order only includes a bid or an offer.
Most TPHs submit orders instead of
quotes, and CFE will no longer accept
quotes with the implementation of the
CFE System.
Third, CFE is proposing to replace the
term ‘‘CBOE System’’ (which is the term
in CFE’s current rules for CFE’s trading
system) with the term ‘‘CFE System’’.
Order Entry and Maintenance of FrontEnd Audit Trail Information
CFE Rule 403 (Order Entry) sets forth
details regarding, among other things,
how Orders must be entered into CFE’s
trading system, the information each
Order must contain, and front-end audit
trail information that must be
maintained.
CFE is proposing to revise Rule 403(a)
to describe how TPHs will connect to
the CFE System by deleting current
language which describes how TPHs
sign onto the CBOE System by inputting
the user identification assigned for such
purpose and replacing that language
with language that describes how TPHs
will connect to the CFE System in a
form and manner prescribed by the
Exchange.
CFE is also updating Rule 403(a) to
revise and reorder the list of items of
information that must be included with
every Order. Currently, Rule 403(a)
provides that each Order must contain
the following information: (i) Whether
the Order is a buy or sell Order; (ii)
Order type; (iii) commodity; (iv)
contract expiration; (v) price; (vi)
quantity; (vii) account type; (viii)
PO 00000
Frm 00208
Fmt 4703
Sfmt 4703
58999
account designation; (ix) in the case of
Orders for Options, strike price, type of
option (put or call), and expiration
month; and (x) such additional
information as may be prescribed from
time to time by the Exchange. CFE is
proposing to amend Rule 403(a) to
provide that each Order must contain
the following information: (i) Whether
the Order is a buy or sell Order; (ii)
Order type; (iii) price or premium (if the
Order is not a Market Order); (iv)
quantity; (v) Contract identifier or
product and contract expiration(s); (vi)
Client Order ID; (vii) Executing Firm ID
(‘‘EFID’’); (viii) Order Entry Operator ID;
(ix) Clearing Corporation origin code (C
for Customer or F for Firm); (x)
Customer Type Indicator code; (xi)
manual Order indicator; (xii) account
designation; (xiii) in the case of Orders
for Options, either Contract identifier or
each of strike price, type of option (put
or call), and expiration; and (xiv) such
additional information as may be
prescribed from time to time by the
Exchange.
Additionally, CFE is proposing to
amend Rule 403(a) to provide that any
Order that does not contain required
information in a form and manner
prescribed by the Exchange will be
rejected or canceled back to the sender
by the CFE System.
CFE is proposing to revise Rule 403(c)
to reference that the CFE System
identifies the Clearing Member for the
execution of an Order by the EFID used
in the Order submission. CFE is also
proposing to replace the reference in
Rule 403(c) to CBOE Market Interface
(‘‘CMi’’) order structure with a reference
to Binary Order Entry (‘‘BOE’’) Order
message information since the BOE
protocol will be replacing the CMi
protocol. CFE is retaining the reference
in Rule 403(c) to the Financial
Information Exchange (‘‘FIX’’) protocol
since TPHs will be able to interface with
the CFE System either through the BOE
protocol or the FIX protocol.
CFE is also proposing to amend Rule
403 to remove references to quotes, to
replace the term ‘‘CBOE System’’ with
the term ‘‘CFE System’’, and to replace
the term ‘‘CBOE Workstation’’ with the
term ‘‘CFE Workstation’’ (which is any
computer connected directly to the CFE
System, including by means of an
Exchange defined protocol, for the
purpose of trading Contracts on the
Exchange).
Exchange of Contract for Related
Position Transactions
CFE Rule 414 (Exchange of Contract
for Related Position) sets forth details
regarding ECRP transactions. The
proposed changes to Rule 414 included
E:\FR\FM\14DEN1.SGM
14DEN1
sradovich on DSK3GMQ082PROD with NOTICES
59000
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
as part of this rule change filing and
which are described below are those
amendments to Rule 414 that are related
to recordkeeping or reporting.
First, CFE is proposing to set forth in
proposed Rule 414(e) the Reporting
Deadline and Permissible Reporting
Period for ECRP transactions that will
apply with the CFE System. CFE is
proposing that the Reporting Deadline
for an ECRP transaction be that an ECRP
transaction must be fully reported to the
Exchange without delay and by no later
than thirty minutes after the transaction
is agreed upon, unless otherwise
specified in the rules governing the
relevant Contract. The Reporting
Deadline would be measured from the
time the transaction is agreed upon to
the time that the full report of the
transaction is received by the CFE
System matching engine. CFE is
proposing that the Permissible
Reporting Period for an ECRP
transaction be that the ECRP transaction
must be fully reported to the Exchange
during Trading Hours, or a queuing
period, for the Contract that comprises
the Contract leg of the transaction, when
that Contract is not suspended. A
queuing period is a time frame in which
the CFE System accepts Orders but they
are not executable. Proposed Rule 414(e)
also addresses when it is permissible to
agree to an ECRP transaction (referred to
as a Permissible Agreement Period).
Accordingly, in order to satisfy the
requirements of proposed Rule 414(e),
the time periods in which an ECRP
transaction may occur would be limited
to those time periods in which the
transaction is agreed to within a
Permissible Agreement Period and the
transaction is able to be fully reported
to the Exchange within a Permissible
Reporting Period by no later than the
Reporting Deadline. Under CFE’s
current rules, the reporting deadline is
the same as is proposed by this rule
change but the permissible reporting
periods are specified time frames that
apply to all Contracts instead of having
a permissible reporting period for each
Contract based on its respective Trading
Hours and queuing periods as is
proposed.
Second, CFE is proposing to amend in
proposed Rule 414(g) the list of items of
information currently set forth in Rule
414(f) that must be recorded on an order
ticket for an ECRP by a TPH that acts as
agent for an ECRP. In particular, CFE is
proposing to add to the items of
information that must be recorded the
arrangement time, if any, for the ECRP
transaction (which is the time at which
the parties agreed to enter into the
transaction at a later time). CFE is also
proposing to clarify and provide that the
VerDate Sep<11>2014
21:28 Dec 13, 2017
Jkt 244001
following information must be recorded
for the Related Position: The identity,
quantity, and price or premium of the
Related Position (including the
expiration, strike price, type of option
(put or call), and delta in the case of an
option).
Third, CFE is proposing to revise a
provision in proposed Rule 414(h) to
make clear that references to ECRP are
to an ECRP transaction. This provision
is in current Rule 414(g) and requires a
TPH to maintain records evidencing
compliance with the criteria in Rule 414
or be able to obtain those records from
the TPH’s Customer.
Fourth, CFE is proposing to amend
provisions in proposed Rule 414(i) that
are currently in Rule 414(h) to provide
that an Authorized Reporter for an ECRP
transaction must be an individual (and
not an entity) and that a Clearing
Member may only authorize an
Authorized Reporter to report both
ECRP transactions and Block Trades
(and not one or the other).
Fifth, CFE is proposing to amend
provisions in proposed Rule 414(j) that
are currently in Rule 414(i) to no longer
allow for notification of ECRP
transactions to the Exchange to be made
by email and to provide that the
Contract legs of all ECRP transactions
will be submitted for clearing on the
Business Day during which the
applicable transaction is fully reported
to the Exchange. Current Rule 414(i)
allows Authorized Reporters to
designate either the calendar day of an
ECRP transaction or the next Business
Day as the Business Day for which the
Contract leg of the transaction is
submitted for clearing if an ECRP
transaction is reported to the Exchange
from 3:15 p.m. to 4:00 p.m. Chicago
time Monday through Thursday. This
will no longer be the case once ECRP
transactions are reported directly to the
CFE System (instead of by email)
pursuant to proposed Rule 414(l) as
described below.
Sixth, CFE is proposing to update
provisions in proposed Rule 414(k) that
are currently in Rule 414(j) to revise and
reorder the list of items of information
that must be included in the notification
to the Exchange of an ECRP transaction.
Currently, the notification of an ECRP
transaction must include the following
information: The identity, contract
expiration, price or premium, quantity,
and time of execution of the relevant
Contract leg (i.e., the time the parties
agreed to the Exchange of Contract for
Related Position transaction), (ii) the
counterparty Clearing Member, (iii) the
identity, quantity, and price of the
Related Position, and (iv) any other
information required by the Exchange.
PO 00000
Frm 00209
Fmt 4703
Sfmt 4703
CFE is proposing to provide in proposed
Rule 414(k) that the notification of an
ECRP transaction must include the
following information: (i) Whether the
component of the transaction in the
Contract listed on the Exchange is a
single leg transaction, a transaction in a
spread, or transaction in a strip; (ii) the
Contract identifier (or product and
contract expiration for a future or
product, expiration, strike price, and
type of option (put or call) in the case
of an option), price (or premium for an
option) and quantity of the relevant
Contract leg of the transaction, and
whether the relevant Contract leg is buy
or sell; (iii) the time of execution (i.e.,
the time at which the parties agreed to
the transaction); (iv) the arrangement
time, if any (i.e., the time at which the
parties agreed to enter into the
transaction at a later time); (v) Operator
ID; (vi) EFID; (vii) account; (viii)
Clearing Corporation origin code; (ix)
Customer Type Indicator code; (x) the
identity, quantity, and price or premium
of the Related Position (including the
expiration, strike price, type of option
(put or call), and delta in the case of an
option); and (xi) any other information
required by the Exchange.
Seventh, CFE is also proposing to
delete a provision from current Rule
414(k) which allows the Authorized
Reporters and parties to an ECRP
transaction thirty minutes from the time
the CFE Help Desk transmits a
transaction summary to the Authorized
Reporters to notify the Help Desk of any
inaccuracies in the content of the
transaction summary. The Help Desk
(which will be referred to as the Trade
Desk with the implementation of the
CFE System) will no longer transmit
transaction summaries to Authorized
Reporters since Authorized Reporters
will be entering the information
regarding ECRP transactions directly
into the CFE System pursuant to
proposed Rule 414(l) as described below
and will no longer be relying on the
Help Desk to manually enter into CFE’s
trading system the information included
in the email notifications that the Help
Desk currently receives from Authorized
Reporters regarding an ECRP
transaction. Accordingly, the
notification provision which permits
Authorized Reporters and parties to the
transaction to notify the Help Desk of
any inaccuracies in the transaction
summary from the Help Desk would no
longer have applicability.
Eighth, CFE proposes to provide in
proposed Rule 414(l) that Authorized
Reporters shall provide notification to
the Exchange of ECRP transactions by
reporting them to the CFE System in a
form and manner prescribed by the
E:\FR\FM\14DEN1.SGM
14DEN1
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
Exchange. Proposed Rule 414(l) also
describes how the CFE System includes
a mechanism, in a form and manner
provided by the Exchange, for the
Authorized Reporter that is the initiator
of a notification of an ECRP transaction
to enter information regarding the
transaction and for the Authorized
Reporter for the contra side of the
transaction to accept the notification to
the Exchange of the transaction as
entered by the initiating Authorized
Reporter and enter contra side
information for the transaction.
Ninth, CFE proposes to provide in
proposed Rule 414(m) how CFE will
measure adherence to Permissible
Reporting Periods and the Reporting
Deadline for ECRP transactions for
timing purposes. Specifically, an ECRP
transaction would be deemed to have
been fully reported to the Exchange
when the full report of the transaction
has been received by the CFE System
matching engine following notification
to the CFE System of required
information relating to the transaction
by the initiating Authorized Reporter
and acceptance and notification to the
CFE System of required information
relating to the transaction by the contra
side Authorized Reporter.
Tenth, CFE proposes to provide in
proposed Rule 414(n) that CFE may
modify the timing requirements for and
permissible manner of notification to
CFE for ECRP transactions in the event
of unusual circumstances. For example,
this provision could be invoked if the
CFE System is not accepting
notifications of ECRP transactions due
to a system malfunction.
Block Trades
CFE Rule 415 (Block Trading) (to be
renamed Block Trades) sets forth details
regarding Block Trades. CFE is
proposing to make corollary changes to
Rule 415 in relation to recordkeeping
and reporting that are substantially
equivalent to the changes being made to
Rule 414. Those proposed changes are
described below.
First, CFE is proposing to set forth in
Rule 415(c) the Reporting Deadline and
Permissible Reporting Period for Block
Trades that will apply with the CFE
System. CFE is proposing that the
Reporting Deadline for a Block Trade be
that a Block Trade must be fully
reported to the Exchange without delay
and by no later than ten minutes after
the transaction is agreed upon, unless
otherwise specified in the rules
governing the relevant Contract. The
Reporting Deadline would be measured
from the time the transaction is agreed
upon to the time that the full report of
the transaction is received by the CFE
VerDate Sep<11>2014
21:28 Dec 13, 2017
Jkt 244001
System matching engine. CFE is
proposing that the Permissible
Reporting Period for a Block Trade in a
Contract be that the Block Trade must
be fully reported to the Exchange during
Trading Hours, or a queuing period, for
the Contract, when that Contract is not
suspended. Proposed Rule 415(c) also
addresses when it is permissible to
agree to a Block Trade (referred to as a
Permissible Agreement Period).
Accordingly, in order to satisfy the
requirements of proposed Rule 415(c),
the time periods in which a Block Trade
may occur would be limited to those
time periods in which the transaction is
agreed to within a Permissible
Agreement Period and the transaction is
able to be fully reported to the Exchange
within a Permissible Reporting Period
by no later than the Reporting Deadline.
Under CFE’s current rules, the reporting
deadline is the same as is proposed by
this rule change but the permissible
reporting periods are specified time
frames that apply to all Contracts
instead of having a permissible
reporting period for each Contract based
on its respective Trading Hours and
queuing periods as is proposed.
Second, CFE is proposing to amend in
Rule 415(e) the list of items of
information that must be recorded by a
TPH on an order ticket for a Block
Trade. In particular, CFE is proposing to
add to the items of information that
must be recorded the arrangement time,
if any, for the Block Trade. CFE is also
proposing to clarify and provide that the
expiration, strike price, and type of
option (put or call) must be recorded for
the Block Trade if it involves an option.
Third, CFE is proposing to amend
provisions in Rule 415(f) to provide that
an Authorized Reporter for a Block
Trade must be an individual (and not an
entity) and that a Clearing Member may
only authorize an Authorized Reporter
to report both ECRP transactions and
Block Trades (and not one or the other).
Additionally, CFE is adding a provision
to Rule 415(f) which is currently
included in current Rule 414(h) in
relation to ECRP transactions to make
clear that both the parties to and
Authorized Reporters for a Block Trade
are obligated to comply with the
requirements set forth in Rule 415, and
any of these parties or Authorized
Reporters may be held responsible by
the Exchange for noncompliance with
those requirements.
Fifth, CFE is proposing to amend
provisions in proposed Rule 415(g) to
no longer allow for notification of Block
Trades to the Exchange to be made by
email and to provide that Block Trades
will be submitted for clearing on the
Business Day during which the
PO 00000
Frm 00210
Fmt 4703
Sfmt 4703
59001
applicable transaction is fully reported
to the Exchange. Current Rule 415(g)
allows Authorized Reporters to
designate either the calendar day of a
Block Trade or the next Business Day as
the Business Day for which the Block
Trade is submitted for clearing if a
Block Trade is reported to the Exchange
from 3:15 p.m. to 4:00 p.m. Chicago
time Monday through Thursday. This
will no longer be the case once Block
Trades are reported directly to the CFE
System (instead of by email) pursuant to
proposed Rule 415(i) as described
below.
Sixth, CFE is proposing to update
provisions in Rule 415(h) to revise and
reorder the list of items of information
that must be included in the notification
to the Exchange of a Block Trade.
Currently, the notification of a Block
Trade must include the following
information: relevant Contract, contract
expiration, price or premium, quantity,
time of execution (i.e., the time the
parties agreed to the Block Trade),
counterparty Clearing Member and, if
applicable, the underlying commodity,
whether the transaction involved a put
or a call and the strike price, and any
other information that is required by the
Exchange. CFE is proposing to provide
in proposed Rule 415(h) that the
notification of a Block Trade must
include the following information: (i)
Whether the Block Trade is a single leg
transaction, a transaction in a spread, or
a transaction in a strip; (ii) the Contract
identifier (or product and contract
expiration for a future or product,
expiration, strike price, and type of
option (put or call) in the case of an
option), price (or premium for an
option) and quantity of the Block Trade
and whether the Block Trade is buy or
sell; (iii) the time of execution (i.e., the
time at which the parties agreed to the
transaction); (iv) the arrangement time,
if any (i.e., the time at which the parties
agreed to enter into the transaction at a
later time); (v) Operator ID; (vi) EFID;
(vii) account; (viii) Clearing Corporation
origin code; (ix) Customer Type
Indicator code; and (x) any other
information required by the Exchange.
Seventh, CFE is proposing to delete a
provision from current Rule 415(i)
which allows the Authorized Reporters
and parties to a Block Trade thirty
minutes from the time the CFE Help
Desk transmits a transaction summary to
the Authorized Reporters to notify the
Help Desk of any inaccuracies in the
content of the transaction summary. The
Help Desk (which will be referred to as
the Trade Desk with the implementation
of the CFE System) will no longer
transmit transaction summaries to
Authorized Reporters since Authorized
E:\FR\FM\14DEN1.SGM
14DEN1
sradovich on DSK3GMQ082PROD with NOTICES
59002
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
Reporters will be entering the
information regarding Block Trades
directly into the CFE System pursuant
to proposed Rule 415(i) as described
below and will no longer be relying on
the Help Desk to manually enter into
CFE’s trading system the information
included in the email notifications that
the Help Desk currently receives from
Authorized Reporters regarding a Block
Trade. Accordingly, the notification
provision which permits Authorized
Reporters and parties to the transaction
to notify the Help Desk of any
inaccuracies in the transaction summary
from the Help Desk would no longer
have applicability.
Eighth, CFE proposes to provide in
proposed Rule 415(i) that Authorized
Reporters shall provide notification to
the Exchange of Block Trades by
reporting them to the CFE System in a
form and manner prescribed by the
Exchange. Proposed Rule 415(i) also
describes how the CFE System includes
a mechanism, in a form and manner
provided by the Exchange, for the
Authorized Reporter that is the initiator
of a notification of a Block Trade to
enter information regarding the
transaction and for the Authorized
Reporter for the contra side of the
transaction to accept the notification to
the Exchange of the transaction as
entered by the initiating Authorized
Reporter and enter contra side
information for the transaction.
Ninth, CFE proposes to provide in
proposed Rule 415(j) how CFE will
measure adherence to Permissible
Reporting Periods and the Reporting
Deadline for Block Trades for timing
purposes. Specifically, a Block Trade
would be deemed to have been fully
reported to the Exchange when the full
report of the transaction has been
received by the CFE System matching
engine following notification to the CFE
System of required information relating
to the transaction by the initiating
Authorized Reporter and acceptance
and notification to the CFE System of
required information relating to the
transaction by the contra side
Authorized Reporter.
Tenth, CFE proposes to provide in
proposed Rule 415(k) that CFE may
modify the timing requirements for and
permissible manner of notification to
CFE for Block Trades in the event of
unusual circumstances. For example,
this provision could be invoked if the
CFE System is not accepting
notifications of Block Trades due to a
system malfunction.
Market Manipulation
CFE Rule 603 (Market Manipulation)
prohibits manipulation of the market in
VerDate Sep<11>2014
21:28 Dec 13, 2017
Jkt 244001
any Contract traded on CFE. CFE is
proposing to amend Rule 603 replace
the term ‘‘CBOE System’’ with the term
‘‘CFE System’’.
Disruptive Practices
CFE Rule 620 (Disruptive Practices)
sets forth prohibited disruptive trading
practices, and Policy and Procedure
XVIII (Disruptive Trading Practices
(Rule 620) sets forth guidance regarding
the factors the Exchange may use in
assessing whether conduct violates Rule
620.
Since CFE will no longer accept
quotes with the implementation of the
CFE System, CFE is proposing to revise
Rule 620 and Policy and Procedure
XVIII to eliminate references to quotes
and to replace references to the CBOE
System with references to the CFE
System.
CFE is proposing to revise Policy and
Procedure XVIII(A) to eliminate
reference to a category of other prices
(such as an Expected Opening Price or
EOP) since this concept does not exist
with the CFE System.
CFE is proposing to amend Policy and
Procedure XVIII(J) to revise the
definition of actionable messages in
relation to the CFE System to be
messages that can be accepted by
another party or lead to the execution of
a trade or cancellation of an Order and
to change a reference to an example of
a non-actionable message from a request
for quote (which will no longer exist
with the elimination of quotes) to a
heartbeat message transmitted to the
CFE System.
CFE is proposing to amend Policy and
Procedure XVIII(Q) and (U) to replace
references to self-trade prevention
functionality with references to match
trade functionality (which is the name
for this functionality with the CFE
System).
CFE is proposing to revise Policy and
Procedure XVIII(R) to eliminate
reference to opening rotation periods
since this concept does not exist with
the CFE System, to replace reference to
an EOP with reference to an expected
opening price (since although an EOP is
not a price that is disseminated by the
CFE System, the concept of what market
participants expect an opening price to
be would still exist), and to revise the
restriction regarding the submission of
Trade at Settlement (‘‘TAS’’) Orders
between Business Days for a product in
which TAS Orders may be submitted.
CFE is amending the restriction on the
submission of TAS Orders to provide
that the first pre-opening notice for a
TAS Contract in a product establishes
the time at which TAS Orders may be
submitted for all TAS Contracts in that
PO 00000
Frm 00211
Fmt 4703
Sfmt 4703
product. Currently, this restriction
applies individually to each TAS
Contract based on when the pre-opening
notice for that particular TAS Contract
is disseminated. A pre-opening notice is
a notice disseminated by CFE of the
commencement of a queuing state in a
Contract during which Orders may be
submitted to the CFE System prior to
the commencement of trading hours for
that Contact.
Additionally, the Exchange is
proposing to amend Policy and
Procedure XVIII(T) to eliminate a
reference to user defined spreads and to
change the title of the provision to better
reflect the remaining portion of the
provision which is not being deleted by
this change. Although TPHs are
currently not permitted to create user
defined spreads, this prohibition is
currently not systematically enforced by
CFE’s trading system. CFE is proposing
to remove the rule text prohibiting user
defined spreads since the CFE System
will be able to systematically prevent
TPHs from creating user defined
spreads.
Imposition of Fines for Minor Rule
Violations
Rule 714 (Imposition of Fines for
Minor Rule Violations) sets forth fine
schedules for various violation types.
The proposed changes to Rule 714
included as part of this rule change
filing and which are described below
are those amendments to Rule 714 that
are related to recordkeeping or
reporting.
Specifically, CFE is proposing (i) to
modify the fine schedule in Rule
714(f)(i) regarding failure to include an
Order Entry Operator ID with an Order
submission to eliminate reference to
quotes and to change a reference from
CBOE System to CFE System; (ii) to
modify the fine schedule in Rule
714(f)(ii) regarding failure to identify the
correct account type in an Order
submission to be more specific to
reference failure to identify the correct
Customer Type Indicator Code in the
Order submission; and (iii) to modify
the fine schedules in Rule 714(f)(iii),
(iv), (viii), (ix), (x), and (xiv) to either renumber the rule cross-references in
those fine schedules without changing
their substance to reflect the new rule
numbers for the cross-referenced
provisions or to change references from
CBOE System to CFE System.
Reportable Trading Volume
Rule 1602(n)(ii) sets forth the
reportable trading volume that triggers
the requirement to report a volume
threshold account to the CFTC for
Individual Stock Based and Exchange
E:\FR\FM\14DEN1.SGM
14DEN1
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
Traded Fund Based Security Futures
(referred to in Chapter 16 of CFE’s rules
as Volatility Index futures). CFE does
not currently list any Volatility Index
futures for trading but did so previously
and may do so in the future.
CFE is proposing to amend Rule
1602(n)(ii) to provide that the reportable
trading volume that triggers the
requirement to report a volume
threshold account is 50 or more futures
contracts in a Volatility Index futures
contract during a single trading day or
such other reportable trading volume
threshold as may be designated by the
CFTC. This proposed change is
consistent with the comparable
reportable trading volume rule language
this is applicable in relation to other
CFE products. CFE is proposing to add
the additional phrase that the level may
be ‘‘such other reportable trading
volume threshold as may be designated
by the CFTC’’. Although the level
currently designated in Rule 1602(n)(ii)
is consistent with CFTC regulations, the
CFTC has issued no-action letters with
a different designated level and may do
so in the future. The proposed
additional language allows for reporting
consistent with these CFTC designations
when and if they are in effect.
Contract Specifications
CFE Rule 1802 sets forth contract
specifications for Single Stock Futures,
and CFE Rule 1902 sets forth contract
specifications for Narrow-Based Stock
Index Futures. CFE is proposing to
amend Rules 1802 and 1902 to
capitalize the term ‘‘Spread Order’’, to
replace the term ‘‘Help Desk’’ with the
term ‘‘Trade Desk’’, and to replace the
term ‘‘CBOE System’’ with the term
‘‘CFE System’’.
sradovich on DSK3GMQ082PROD with NOTICES
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,4 in general, and
furthers the objectives of Sections
6(b)(5) 5 and 6(b)(7) 6 in particular in
that it is designed:
• To prevent fraudulent and
manipulative acts and practices;
• to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities;
and
• 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.
4 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
6 15 U.S.C. 78f(b)(7).
5 15
VerDate Sep<11>2014
21:28 Dec 13, 2017
Jkt 244001
The proposed rule change is
consistent with these provisions in that
it revises CFE’s rules, including CFE’s
recordkeeping and reporting
requirements as they may relate to
security futures, to conform to the
functionality of the CFE System. In
particular, the proposed amendments
will align the changes resulting from the
implementation of the CFE System with
the rule provisions contained in CFE’s
rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CFE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act in that the proposed
rule changes to Chapter 1 of CFE’s rules
to include a definition for Authorized
Reporter, to Rule 303A requiring the
inclusion of an Order Entry Operator ID
on every Cancel Order and Cancel
Replace/Modify Order, to Rule 403
regarding the information that must be
included with Order submissions and
front-end audit trail information that
must be maintained, to Rule 414 and
415 regarding ECRP transaction and
Block Trade recordkeeping and
reporting requirements, to Rule 603 to
update terminology, to Rule 620 and
Policy and Procedure XVIII to update
guidance regarding disruptive trading
conduct to conform to the way the CFE
System will function, to Rule 714 to
update the fine schedules for minor rule
violations to conform to other CFE rule
revisions, to Rule 1602(n) to update the
reportable trading volume threshold
requirements for Volatility Index
futures, and to Rules 1802 and 1902 to
update terminology will enhance CFE’s
ability to carry out its responsibilities as
a self-regulatory organization.
Additionally, CFE believes that the
proposed amendments are equitable and
not unfairly discriminatory because the
changes will apply equally to all market
participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change will
become operative on December 13,
2017. At any time within 60 days of the
date of effectiveness of the proposed
rule change, the Commission, after
PO 00000
Frm 00212
Fmt 4703
Sfmt 4703
59003
consultation with the CFTC, may
summarily abrogate the proposed rule
change and require that the proposed
rule change be refiled in accordance
with the provisions of Section 19(b)(1)
of the Act.7
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–
CFE–2017–003 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–CFE–2017–003. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
7 15
E:\FR\FM\14DEN1.SGM
U.S.C. 78s(b)(1).
14DEN1
59004
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices
Number SR–CFE–2017–003, and should
be submitted on or before January 4,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–26914 Filed 12–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82256; File No. SR–MIAX–
2017–18]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing of Amendment
No. 1 to a Proposed Rule Change to
Amend the Fee Schedule
December 11, 2017.
On May 1, 2017, Miami International
Securities Exchange LLC (‘‘MIAX
Options’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt a fee schedule to establish the fees
for Industry Members related to the
National Market System Plan Governing
the Consolidated Audit Trail (‘‘CAT
NMS Plan’’). The proposed rule change
was published in the Federal Register
for comment on May 19, 2017.3 The
Commission received seven comment
letters on the proposed rule change,4
8 17
CFR 200.30–3(a)(73).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80675
(May 15, 2017), 82 FR 23100 (May 19, 2017)
(‘‘Original Proposal’’).
4 Since the CAT NMS Plan Participants’ proposed
rule changes to adopt fees to be charged to Industry
Members to fund the consolidated audit trail are
substantively identical, the Commission is
considering all comments received on the proposed
rule changes regardless of the comment file to
which they were submitted. See text accompanying
notes 14–17 infra, for a list of the CAT NMS Plan
Participants. See Letter from Theodore R. Lazo,
Managing Director and Associate General Counsel,
Securities Industry and Financial Markets
Association, to Brent J. Fields, Secretary,
Commission (dated June 6, 2017), available at:
https://www.sec.gov/comments/sr-batsbzx-2017-38/
batsbzx201738-1788188-153228.pdf; Letter from
Patricia L. Cerny and Steven O’Malley, Compliance
Consultants, to Brent J. Fields, Secretary,
Commission (dated June 12, 2017), available at:
https://www.sec.gov/comments/sr-cboe-2017-040/
cboe2017040-1799253-153675.pdf; Letter from
Daniel Zinn, General Counsel, OTC Markets Group
Inc., to Eduardo A. Aleman, Assistant Secretary,
Commission (dated June 13, 2017), available at:
https://www.sec.gov/comments/sr-finra-2017-011/
finra2017011-1801717-153703.pdf; Letter from
Joanna Mallers, Secretary, FIA Principal Traders
sradovich on DSK3GMQ082PROD with NOTICES
1 15
VerDate Sep<11>2014
21:28 Dec 13, 2017
Jkt 244001
and a response to comments from the
Participants.5 On June 30, 2017, the
Commission temporarily suspended and
initiated proceedings to determine
whether to approve or disapprove the
proposed rule change.6 The Commission
thereafter received seven comment
letters,7 and a response to comments
from the Participants.8 On November 7,
2017, the Exchange filed Amendment
No. 1 to the proposed rule change, as
Group, to Brent J. Fields, Secretary, Commission
(dated June 22, 2017), available at: https://
www.sec.gov/comments/sr-cboe-2017-040/
cboe2017040-1819670-154195.pdf; Letter from
Stuart J. Kaswell, Executive Vice President and
Managing Director, General Counsel, Managed
Funds Association, to Brent J. Fields, Secretary,
Commission (dated June 23, 2017), available at:
https://www.sec.gov/comments/sr-finra-2017-011/
finra2017011-1822454-154283.pdf; and Letter from
Suzanne H. Shatto, Investor, to Commission (dated
June 27, 2017), available at: https://www.sec.gov/
comments/sr-batsedgx-2017-22/batsedgx201722154443.pdf. The Commission also received a
comment letter which is not pertinent to these
proposed rule changes. See Letter from Christina
Crouch, Smart Ltd., to Brent J. Fields, Secretary,
Commission (dated June 5, 2017), available at:
https://www.sec.gov/comments/sr-batsbzx-2017-38/
batsbzx201738-1785545-153152.htm.
5 See Letter from CAT NMS Plan Participants to
Brent J. Fields, Secretary, Commission (dated June
29, 2017), available at: https://www.sec.gov/
comments/sr-batsbyx-2017-11/batsbyx2017111832632-154584.pdf.
6 See Securities Exchange Act Release No. 81067
(June 30, 2017), 82 FR 31656 (July 7, 2017).
7 See Letter from W. Hardy Callcott, Partner,
Sidley Austin LLP, to Brent J. Fields, Secretary,
Commission (dated July 27, 2017), available at:
https://www.sec.gov/comments/sr-batsbyx-2017-11/
batsbyx201711-2148338-157737.pdf; Letter from
Kevin Coleman, General Counsel and Chief
Compliance Officer, Belvedere Trading LLC, to
Brent J. Fields, Secretary, Commission (dated July
28, 2017), available at: https://www.sec.gov/
comments/sr-batsbyx-2017-11/batsbyx2017112148360-157740.pdf; Letter from Joanna Mallers,
Secretary, FIA Principal Traders Group, to Brent J.
Fields, Secretary, Commission (dated July 28, 2017),
available at: https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2151228157745.pdf; Letter from Theodore R. Lazo,
Managing Director and Associate General Counsel,
SIFMA, to Brent J. Fields, Secretary, Commission
(dated July 28, 2017), available at: https://
www.sec.gov/comments/sr-batsbyx-2017-11/
batsbyx201711-2150977-157744.pdf; Letter from
Stuart J. Kaswell, Executive Vice President and
Managing Director, General Counsel, Managed
Funds Association, to Brent J. Fields, Secretary,
Commission (dated July 28, 2017), available at:
https://www.sec.gov/comments/sr-batsbyx-2017-11/
batsbyx201711-2150818-157743.pdf; Letter from
John Kinahan, Chief Executive Officer, Group One
Trading, L.P., to Brent J. Fields, Secretary,
Commission (dated August 10, 2017), available at:
https://www.sec.gov/comments/sr-finra-2017-011/
finra2017011-2214568-160619.pdf; Letter from
Joseph Molluso, Executive Vice President and CFO,
Virtu Financial, to Brent J. Fields, Commission
(dated August 18, 2017), available at: https://
www.sec.gov/comments/sr-finra-2017-011/
finra2017011-2238648-160830.pdf.
8 See Letter from Michael Simon, Chair, CAT
NMS Plan Operating Committee, to Brent J. Fields,
Commission, Secretary (dated November 2, 2017),
available at https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2674608161412.pdf.
PO 00000
Frm 00213
Fmt 4703
Sfmt 4703
described in Items I and II below, which
Items have been prepared by the
Exchange.9 On November 9, 2017, the
Commission extended the time period
within which to approve the proposed
rule change or disapprove the proposed
rule change to January 14, 2018.10 The
Commission is publishing this notice to
solicit comments from interested
persons on Amendment No. 1.11
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
On May 1, 2017 Miami International
Securities Exchange, LLC (‘‘MIAX
Options’’ or ‘‘Exchange’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a proposed
rule change SR–MIAX–2017–18 (the
‘‘Original Proposal’’),12 to amend the
MIAX Options Fee Schedule (the ‘‘Fee
Schedule’’) to adopt a fee schedule to
establish the fees for Industry Members
related to the National Market System
Plan Governing the Consolidated Audit
Trail (the ‘‘CAT NMS Plan’’ or
‘‘Plan’’).13 MIAX Options files this
proposed rule change (the
‘‘Amendment’’) to amend the Original
Proposal. This Amendment replaces the
Original Proposal in its entirety, and
also describes the changes from the
Original Proposal.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
9 Amendment No. 1 to the proposed rule change
replaces and supersedes the Original Proposal in its
entirety.
10 See Securities Exchange Act Release No. 82049
(November 9, 2017), 82 FR 53549 (November 16,
2017).
11 The Commission notes that on December 1,
2017, the Exchange filed Amendment No. 2 to the
proposed rule change. Amendment No. 2 is a partial
amendment to the proposed rule change, as
amended by Amendment No. 1. Amendment No. 2
proposes to change the parenthetical regarding the
OTC Equity Securities discount in paragraph (b)(2)
of the proposed fee schedule from ‘‘with a discount
for Equity ATSs exclusively trading OTC Equity
Securities based on the average shares per trade
ratio between NMS Stocks and OTC Equity
Securities’’ to ‘‘with a discount for OTC Equity
Securities market share of Equity ATSs trading OTC
Equity Securities based on the average shares per
trade ratio between NMS Stocks and OTC Equity
Securities.’’ See Securities Exchange Act Release
No. 82257 (December 11, 2017).
12 See Securities Exchange Act Release No. 80675
(May 15, 2017), 82 FR 23100 (May 19, 2017)(SR–
MIAX–2017–18).
13 Unless otherwise specified, capitalized terms
used in this fee filing are defined as set forth herein,
in the CAT Compliance Rule Series, the CAT NMS
Plan, or the Original Proposal.
E:\FR\FM\14DEN1.SGM
14DEN1
]]>Agencies
[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 58998-59004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26914]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82248; File No. SR-CFE-2017-003]
Self-Regulatory Organizations; Cboe Futures Exchange, LLC; Notice
of Filing of Proposed Rule Change Regarding CFE's New Trading System
December 8, 2017.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on November 29, 2017 Cboe
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change described in Items I and II below, which Items have been
prepared by CFE. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons. CFE also
has filed this proposed rule change with the Commodity Futures Trading
Commission (``CFTC''). CFE filed a written certification with the CFTC
under Section 5c(c) of the Commodity Exchange Act (``CEA'') \2\ on
November 29, 2017.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(7).
\2\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Description of the Proposed Rule
Change
The Exchange proposes to amend its rules in connection with the
implementation of a new CFE trading system. The scope of this filing is
limited solely to the application of the rule amendments to security
futures traded on CFE. The only security futures that have been offered
for trading on CFE were traded under Chapter 16 of CFE's Rulebook,
which is applicable to Individual Stock Based and Exchange-Traded Fund
Based Volatility Index security futures. CFE does not currently list
any security futures for trading. The text of the proposed rule change
is attached as Exhibit 4 to the filing but is not attached to the
publication of this notice.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CFE 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. CFE has prepared
[[Page 58999]]
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
Cboe Global Markets, Inc. (formerly known as CBOE Holdings, Inc.)
(``Cboe Global Markets'') is the parent company of CFE. On February 28,
2017, Cboe Global Markets completed the acquisition of Bats Global
Markets, Inc. (``Bats''). In connection with this acquisition, all of
the exchanges owned by Cboe Global Markets, including CFE, are
migrating their trading platforms to trading systems based on Bats
technology. CFE's new trading system will be referred to in CFE rules
as the ``CFE System''.
The Exchange is proposing to amend the following rule provisions as
a result of changes for the CFE System: CFE Rule Chapter 1; CFE Rules
303A, 403, 414, 415, 603, 620, 714, 1602, 1802, and 1902; and CFE
Policy and Procedure XVIII. These provisions set forth rules related to
Authorized Reporters, Order Entry Operator IDs, Order Entry and
Maintenance of Front-End Audit Trail Information, Exchange of Contract
for Related Position (``ECRP'') transactions, Block Trades, Market
Manipulation, Disruptive Trading Practices, Imposition of Fines for
Minor Rule Violations, Reportable Trading Volume, and Contract
Specifications. With one exception, the rule amendments included as
part of this rule change are to apply to all products traded on CFE,
including both non-security futures and security futures. CFE is making
these rule amendments in conjunction with other rule amendments being
made by CFE in connection with the implementation of the CFE System
that are not required to be submitted to the Commission pursuant to
Section 19(b)(7) of the Act \3\ and thus are not included as part of
this rule change.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------
Authorized Reporter
CFE Rule Chapter 1 includes definitions for terms used in CFE's
rules. CFE is proposing to include in Chapter 1 a definition for the
term ``Authorized Reporter'' which includes cross-references to
proposed CFE Rules 414(i) and 415(f) in which the term ``Authorized
Reporter'' is defined. Specifically, the proposed definition of an
Authorized Reporter in proposed Rules 414(i) and 415(f) is an
individual that is either a CFE Trading Privilege Holder (``TPH'') or a
Related Party of a TPH and is pre-authorized by a CFE Clearing Member
to report Exchange of Contract for Related Position transactions and
Block Trades on behalf of the TPH.
Order Entry Operator IDs
CFE Rule 303A (Order Entry Operator IDs) sets forth that each TPH
shall include an Order Entry Operator ID with every Order and the
requirements applicable to Order Entry Operator IDs. CFE is proposing
three changes to Rule 303A.
First, CFE is proposing to amend Rule 303A(a) to provide that an
Order Entry Operator ID must be included on every Cancel Order and
Cancel Replace/Modify Order and to provide that any Order that does not
contain an Order Entry Operator ID will be rejected or canceled back to
the sender by CFE's trading system.
Second, CFE is proposing to amend Rule 303A to remove references to
quotes. A quote is a two-sided order that includes both a bid and an
offer whereas an order only includes a bid or an offer. Most TPHs
submit orders instead of quotes, and CFE will no longer accept quotes
with the implementation of the CFE System.
Third, CFE is proposing to replace the term ``CBOE System'' (which
is the term in CFE's current rules for CFE's trading system) with the
term ``CFE System''.
Order Entry and Maintenance of Front-End Audit Trail Information
CFE Rule 403 (Order Entry) sets forth details regarding, among
other things, how Orders must be entered into CFE's trading system, the
information each Order must contain, and front-end audit trail
information that must be maintained.
CFE is proposing to revise Rule 403(a) to describe how TPHs will
connect to the CFE System by deleting current language which describes
how TPHs sign onto the CBOE System by inputting the user identification
assigned for such purpose and replacing that language with language
that describes how TPHs will connect to the CFE System in a form and
manner prescribed by the Exchange.
CFE is also updating Rule 403(a) to revise and reorder the list of
items of information that must be included with every Order. Currently,
Rule 403(a) provides that each Order must contain the following
information: (i) Whether the Order is a buy or sell Order; (ii) Order
type; (iii) commodity; (iv) contract expiration; (v) price; (vi)
quantity; (vii) account type; (viii) account designation; (ix) in the
case of Orders for Options, strike price, type of option (put or call),
and expiration month; and (x) such additional information as may be
prescribed from time to time by the Exchange. CFE is proposing to amend
Rule 403(a) to provide that each Order must contain the following
information: (i) Whether the Order is a buy or sell Order; (ii) Order
type; (iii) price or premium (if the Order is not a Market Order); (iv)
quantity; (v) Contract identifier or product and contract
expiration(s); (vi) Client Order ID; (vii) Executing Firm ID
(``EFID''); (viii) Order Entry Operator ID; (ix) Clearing Corporation
origin code (C for Customer or F for Firm); (x) Customer Type Indicator
code; (xi) manual Order indicator; (xii) account designation; (xiii) in
the case of Orders for Options, either Contract identifier or each of
strike price, type of option (put or call), and expiration; and (xiv)
such additional information as may be prescribed from time to time by
the Exchange.
Additionally, CFE is proposing to amend Rule 403(a) to provide that
any Order that does not contain required information in a form and
manner prescribed by the Exchange will be rejected or canceled back to
the sender by the CFE System.
CFE is proposing to revise Rule 403(c) to reference that the CFE
System identifies the Clearing Member for the execution of an Order by
the EFID used in the Order submission. CFE is also proposing to replace
the reference in Rule 403(c) to CBOE Market Interface (``CMi'') order
structure with a reference to Binary Order Entry (``BOE'') Order
message information since the BOE protocol will be replacing the CMi
protocol. CFE is retaining the reference in Rule 403(c) to the
Financial Information Exchange (``FIX'') protocol since TPHs will be
able to interface with the CFE System either through the BOE protocol
or the FIX protocol.
CFE is also proposing to amend Rule 403 to remove references to
quotes, to replace the term ``CBOE System'' with the term ``CFE
System'', and to replace the term ``CBOE Workstation'' with the term
``CFE Workstation'' (which is any computer connected directly to the
CFE System, including by means of an Exchange defined protocol, for the
purpose of trading Contracts on the Exchange).
Exchange of Contract for Related Position Transactions
CFE Rule 414 (Exchange of Contract for Related Position) sets forth
details regarding ECRP transactions. The proposed changes to Rule 414
included
[[Page 59000]]
as part of this rule change filing and which are described below are
those amendments to Rule 414 that are related to recordkeeping or
reporting.
First, CFE is proposing to set forth in proposed Rule 414(e) the
Reporting Deadline and Permissible Reporting Period for ECRP
transactions that will apply with the CFE System. CFE is proposing that
the Reporting Deadline for an ECRP transaction be that an ECRP
transaction must be fully reported to the Exchange without delay and by
no later than thirty minutes after the transaction is agreed upon,
unless otherwise specified in the rules governing the relevant
Contract. The Reporting Deadline would be measured from the time the
transaction is agreed upon to the time that the full report of the
transaction is received by the CFE System matching engine. CFE is
proposing that the Permissible Reporting Period for an ECRP transaction
be that the ECRP transaction must be fully reported to the Exchange
during Trading Hours, or a queuing period, for the Contract that
comprises the Contract leg of the transaction, when that Contract is
not suspended. A queuing period is a time frame in which the CFE System
accepts Orders but they are not executable. Proposed Rule 414(e) also
addresses when it is permissible to agree to an ECRP transaction
(referred to as a Permissible Agreement Period). Accordingly, in order
to satisfy the requirements of proposed Rule 414(e), the time periods
in which an ECRP transaction may occur would be limited to those time
periods in which the transaction is agreed to within a Permissible
Agreement Period and the transaction is able to be fully reported to
the Exchange within a Permissible Reporting Period by no later than the
Reporting Deadline. Under CFE's current rules, the reporting deadline
is the same as is proposed by this rule change but the permissible
reporting periods are specified time frames that apply to all Contracts
instead of having a permissible reporting period for each Contract
based on its respective Trading Hours and queuing periods as is
proposed.
Second, CFE is proposing to amend in proposed Rule 414(g) the list
of items of information currently set forth in Rule 414(f) that must be
recorded on an order ticket for an ECRP by a TPH that acts as agent for
an ECRP. In particular, CFE is proposing to add to the items of
information that must be recorded the arrangement time, if any, for the
ECRP transaction (which is the time at which the parties agreed to
enter into the transaction at a later time). CFE is also proposing to
clarify and provide that the following information must be recorded for
the Related Position: The identity, quantity, and price or premium of
the Related Position (including the expiration, strike price, type of
option (put or call), and delta in the case of an option).
Third, CFE is proposing to revise a provision in proposed Rule
414(h) to make clear that references to ECRP are to an ECRP
transaction. This provision is in current Rule 414(g) and requires a
TPH to maintain records evidencing compliance with the criteria in Rule
414 or be able to obtain those records from the TPH's Customer.
Fourth, CFE is proposing to amend provisions in proposed Rule
414(i) that are currently in Rule 414(h) to provide that an Authorized
Reporter for an ECRP transaction must be an individual (and not an
entity) and that a Clearing Member may only authorize an Authorized
Reporter to report both ECRP transactions and Block Trades (and not one
or the other).
Fifth, CFE is proposing to amend provisions in proposed Rule 414(j)
that are currently in Rule 414(i) to no longer allow for notification
of ECRP transactions to the Exchange to be made by email and to provide
that the Contract legs of all ECRP transactions will be submitted for
clearing on the Business Day during which the applicable transaction is
fully reported to the Exchange. Current Rule 414(i) allows Authorized
Reporters to designate either the calendar day of an ECRP transaction
or the next Business Day as the Business Day for which the Contract leg
of the transaction is submitted for clearing if an ECRP transaction is
reported to the Exchange from 3:15 p.m. to 4:00 p.m. Chicago time
Monday through Thursday. This will no longer be the case once ECRP
transactions are reported directly to the CFE System (instead of by
email) pursuant to proposed Rule 414(l) as described below.
Sixth, CFE is proposing to update provisions in proposed Rule
414(k) that are currently in Rule 414(j) to revise and reorder the list
of items of information that must be included in the notification to
the Exchange of an ECRP transaction. Currently, the notification of an
ECRP transaction must include the following information: The identity,
contract expiration, price or premium, quantity, and time of execution
of the relevant Contract leg (i.e., the time the parties agreed to the
Exchange of Contract for Related Position transaction), (ii) the
counterparty Clearing Member, (iii) the identity, quantity, and price
of the Related Position, and (iv) any other information required by the
Exchange. CFE is proposing to provide in proposed Rule 414(k) that the
notification of an ECRP transaction must include the following
information: (i) Whether the component of the transaction in the
Contract listed on the Exchange is a single leg transaction, a
transaction in a spread, or transaction in a strip; (ii) the Contract
identifier (or product and contract expiration for a future or product,
expiration, strike price, and type of option (put or call) in the case
of an option), price (or premium for an option) and quantity of the
relevant Contract leg of the transaction, and whether the relevant
Contract leg is buy or sell; (iii) the time of execution (i.e., the
time at which the parties agreed to the transaction); (iv) the
arrangement time, if any (i.e., the time at which the parties agreed to
enter into the transaction at a later time); (v) Operator ID; (vi)
EFID; (vii) account; (viii) Clearing Corporation origin code; (ix)
Customer Type Indicator code; (x) the identity, quantity, and price or
premium of the Related Position (including the expiration, strike
price, type of option (put or call), and delta in the case of an
option); and (xi) any other information required by the Exchange.
Seventh, CFE is also proposing to delete a provision from current
Rule 414(k) which allows the Authorized Reporters and parties to an
ECRP transaction thirty minutes from the time the CFE Help Desk
transmits a transaction summary to the Authorized Reporters to notify
the Help Desk of any inaccuracies in the content of the transaction
summary. The Help Desk (which will be referred to as the Trade Desk
with the implementation of the CFE System) will no longer transmit
transaction summaries to Authorized Reporters since Authorized
Reporters will be entering the information regarding ECRP transactions
directly into the CFE System pursuant to proposed Rule 414(l) as
described below and will no longer be relying on the Help Desk to
manually enter into CFE's trading system the information included in
the email notifications that the Help Desk currently receives from
Authorized Reporters regarding an ECRP transaction. Accordingly, the
notification provision which permits Authorized Reporters and parties
to the transaction to notify the Help Desk of any inaccuracies in the
transaction summary from the Help Desk would no longer have
applicability.
Eighth, CFE proposes to provide in proposed Rule 414(l) that
Authorized Reporters shall provide notification to the Exchange of ECRP
transactions by reporting them to the CFE System in a form and manner
prescribed by the
[[Page 59001]]
Exchange. Proposed Rule 414(l) also describes how the CFE System
includes a mechanism, in a form and manner provided by the Exchange,
for the Authorized Reporter that is the initiator of a notification of
an ECRP transaction to enter information regarding the transaction and
for the Authorized Reporter for the contra side of the transaction to
accept the notification to the Exchange of the transaction as entered
by the initiating Authorized Reporter and enter contra side information
for the transaction.
Ninth, CFE proposes to provide in proposed Rule 414(m) how CFE will
measure adherence to Permissible Reporting Periods and the Reporting
Deadline for ECRP transactions for timing purposes. Specifically, an
ECRP transaction would be deemed to have been fully reported to the
Exchange when the full report of the transaction has been received by
the CFE System matching engine following notification to the CFE System
of required information relating to the transaction by the initiating
Authorized Reporter and acceptance and notification to the CFE System
of required information relating to the transaction by the contra side
Authorized Reporter.
Tenth, CFE proposes to provide in proposed Rule 414(n) that CFE may
modify the timing requirements for and permissible manner of
notification to CFE for ECRP transactions in the event of unusual
circumstances. For example, this provision could be invoked if the CFE
System is not accepting notifications of ECRP transactions due to a
system malfunction.
Block Trades
CFE Rule 415 (Block Trading) (to be renamed Block Trades) sets
forth details regarding Block Trades. CFE is proposing to make
corollary changes to Rule 415 in relation to recordkeeping and
reporting that are substantially equivalent to the changes being made
to Rule 414. Those proposed changes are described below.
First, CFE is proposing to set forth in Rule 415(c) the Reporting
Deadline and Permissible Reporting Period for Block Trades that will
apply with the CFE System. CFE is proposing that the Reporting Deadline
for a Block Trade be that a Block Trade must be fully reported to the
Exchange without delay and by no later than ten minutes after the
transaction is agreed upon, unless otherwise specified in the rules
governing the relevant Contract. The Reporting Deadline would be
measured from the time the transaction is agreed upon to the time that
the full report of the transaction is received by the CFE System
matching engine. CFE is proposing that the Permissible Reporting Period
for a Block Trade in a Contract be that the Block Trade must be fully
reported to the Exchange during Trading Hours, or a queuing period, for
the Contract, when that Contract is not suspended. Proposed Rule 415(c)
also addresses when it is permissible to agree to a Block Trade
(referred to as a Permissible Agreement Period). Accordingly, in order
to satisfy the requirements of proposed Rule 415(c), the time periods
in which a Block Trade may occur would be limited to those time periods
in which the transaction is agreed to within a Permissible Agreement
Period and the transaction is able to be fully reported to the Exchange
within a Permissible Reporting Period by no later than the Reporting
Deadline. Under CFE's current rules, the reporting deadline is the same
as is proposed by this rule change but the permissible reporting
periods are specified time frames that apply to all Contracts instead
of having a permissible reporting period for each Contract based on its
respective Trading Hours and queuing periods as is proposed.
Second, CFE is proposing to amend in Rule 415(e) the list of items
of information that must be recorded by a TPH on an order ticket for a
Block Trade. In particular, CFE is proposing to add to the items of
information that must be recorded the arrangement time, if any, for the
Block Trade. CFE is also proposing to clarify and provide that the
expiration, strike price, and type of option (put or call) must be
recorded for the Block Trade if it involves an option.
Third, CFE is proposing to amend provisions in Rule 415(f) to
provide that an Authorized Reporter for a Block Trade must be an
individual (and not an entity) and that a Clearing Member may only
authorize an Authorized Reporter to report both ECRP transactions and
Block Trades (and not one or the other). Additionally, CFE is adding a
provision to Rule 415(f) which is currently included in current Rule
414(h) in relation to ECRP transactions to make clear that both the
parties to and Authorized Reporters for a Block Trade are obligated to
comply with the requirements set forth in Rule 415, and any of these
parties or Authorized Reporters may be held responsible by the Exchange
for noncompliance with those requirements.
Fifth, CFE is proposing to amend provisions in proposed Rule 415(g)
to no longer allow for notification of Block Trades to the Exchange to
be made by email and to provide that Block Trades will be submitted for
clearing on the Business Day during which the applicable transaction is
fully reported to the Exchange. Current Rule 415(g) allows Authorized
Reporters to designate either the calendar day of a Block Trade or the
next Business Day as the Business Day for which the Block Trade is
submitted for clearing if a Block Trade is reported to the Exchange
from 3:15 p.m. to 4:00 p.m. Chicago time Monday through Thursday. This
will no longer be the case once Block Trades are reported directly to
the CFE System (instead of by email) pursuant to proposed Rule 415(i)
as described below.
Sixth, CFE is proposing to update provisions in Rule 415(h) to
revise and reorder the list of items of information that must be
included in the notification to the Exchange of a Block Trade.
Currently, the notification of a Block Trade must include the following
information: relevant Contract, contract expiration, price or premium,
quantity, time of execution (i.e., the time the parties agreed to the
Block Trade), counterparty Clearing Member and, if applicable, the
underlying commodity, whether the transaction involved a put or a call
and the strike price, and any other information that is required by the
Exchange. CFE is proposing to provide in proposed Rule 415(h) that the
notification of a Block Trade must include the following information:
(i) Whether the Block Trade is a single leg transaction, a transaction
in a spread, or a transaction in a strip; (ii) the Contract identifier
(or product and contract expiration for a future or product,
expiration, strike price, and type of option (put or call) in the case
of an option), price (or premium for an option) and quantity of the
Block Trade and whether the Block Trade is buy or sell; (iii) the time
of execution (i.e., the time at which the parties agreed to the
transaction); (iv) the arrangement time, if any (i.e., the time at
which the parties agreed to enter into the transaction at a later
time); (v) Operator ID; (vi) EFID; (vii) account; (viii) Clearing
Corporation origin code; (ix) Customer Type Indicator code; and (x) any
other information required by the Exchange.
Seventh, CFE is proposing to delete a provision from current Rule
415(i) which allows the Authorized Reporters and parties to a Block
Trade thirty minutes from the time the CFE Help Desk transmits a
transaction summary to the Authorized Reporters to notify the Help Desk
of any inaccuracies in the content of the transaction summary. The Help
Desk (which will be referred to as the Trade Desk with the
implementation of the CFE System) will no longer transmit transaction
summaries to Authorized Reporters since Authorized
[[Page 59002]]
Reporters will be entering the information regarding Block Trades
directly into the CFE System pursuant to proposed Rule 415(i) as
described below and will no longer be relying on the Help Desk to
manually enter into CFE's trading system the information included in
the email notifications that the Help Desk currently receives from
Authorized Reporters regarding a Block Trade. Accordingly, the
notification provision which permits Authorized Reporters and parties
to the transaction to notify the Help Desk of any inaccuracies in the
transaction summary from the Help Desk would no longer have
applicability.
Eighth, CFE proposes to provide in proposed Rule 415(i) that
Authorized Reporters shall provide notification to the Exchange of
Block Trades by reporting them to the CFE System in a form and manner
prescribed by the Exchange. Proposed Rule 415(i) also describes how the
CFE System includes a mechanism, in a form and manner provided by the
Exchange, for the Authorized Reporter that is the initiator of a
notification of a Block Trade to enter information regarding the
transaction and for the Authorized Reporter for the contra side of the
transaction to accept the notification to the Exchange of the
transaction as entered by the initiating Authorized Reporter and enter
contra side information for the transaction.
Ninth, CFE proposes to provide in proposed Rule 415(j) how CFE will
measure adherence to Permissible Reporting Periods and the Reporting
Deadline for Block Trades for timing purposes. Specifically, a Block
Trade would be deemed to have been fully reported to the Exchange when
the full report of the transaction has been received by the CFE System
matching engine following notification to the CFE System of required
information relating to the transaction by the initiating Authorized
Reporter and acceptance and notification to the CFE System of required
information relating to the transaction by the contra side Authorized
Reporter.
Tenth, CFE proposes to provide in proposed Rule 415(k) that CFE may
modify the timing requirements for and permissible manner of
notification to CFE for Block Trades in the event of unusual
circumstances. For example, this provision could be invoked if the CFE
System is not accepting notifications of Block Trades due to a system
malfunction.
Market Manipulation
CFE Rule 603 (Market Manipulation) prohibits manipulation of the
market in any Contract traded on CFE. CFE is proposing to amend Rule
603 replace the term ``CBOE System'' with the term ``CFE System''.
Disruptive Practices
CFE Rule 620 (Disruptive Practices) sets forth prohibited
disruptive trading practices, and Policy and Procedure XVIII
(Disruptive Trading Practices (Rule 620) sets forth guidance regarding
the factors the Exchange may use in assessing whether conduct violates
Rule 620.
Since CFE will no longer accept quotes with the implementation of
the CFE System, CFE is proposing to revise Rule 620 and Policy and
Procedure XVIII to eliminate references to quotes and to replace
references to the CBOE System with references to the CFE System.
CFE is proposing to revise Policy and Procedure XVIII(A) to
eliminate reference to a category of other prices (such as an Expected
Opening Price or EOP) since this concept does not exist with the CFE
System.
CFE is proposing to amend Policy and Procedure XVIII(J) to revise
the definition of actionable messages in relation to the CFE System to
be messages that can be accepted by another party or lead to the
execution of a trade or cancellation of an Order and to change a
reference to an example of a non-actionable message from a request for
quote (which will no longer exist with the elimination of quotes) to a
heartbeat message transmitted to the CFE System.
CFE is proposing to amend Policy and Procedure XVIII(Q) and (U) to
replace references to self-trade prevention functionality with
references to match trade functionality (which is the name for this
functionality with the CFE System).
CFE is proposing to revise Policy and Procedure XVIII(R) to
eliminate reference to opening rotation periods since this concept does
not exist with the CFE System, to replace reference to an EOP with
reference to an expected opening price (since although an EOP is not a
price that is disseminated by the CFE System, the concept of what
market participants expect an opening price to be would still exist),
and to revise the restriction regarding the submission of Trade at
Settlement (``TAS'') Orders between Business Days for a product in
which TAS Orders may be submitted. CFE is amending the restriction on
the submission of TAS Orders to provide that the first pre-opening
notice for a TAS Contract in a product establishes the time at which
TAS Orders may be submitted for all TAS Contracts in that product.
Currently, this restriction applies individually to each TAS Contract
based on when the pre-opening notice for that particular TAS Contract
is disseminated. A pre-opening notice is a notice disseminated by CFE
of the commencement of a queuing state in a Contract during which
Orders may be submitted to the CFE System prior to the commencement of
trading hours for that Contact.
Additionally, the Exchange is proposing to amend Policy and
Procedure XVIII(T) to eliminate a reference to user defined spreads and
to change the title of the provision to better reflect the remaining
portion of the provision which is not being deleted by this change.
Although TPHs are currently not permitted to create user defined
spreads, this prohibition is currently not systematically enforced by
CFE's trading system. CFE is proposing to remove the rule text
prohibiting user defined spreads since the CFE System will be able to
systematically prevent TPHs from creating user defined spreads.
Imposition of Fines for Minor Rule Violations
Rule 714 (Imposition of Fines for Minor Rule Violations) sets forth
fine schedules for various violation types. The proposed changes to
Rule 714 included as part of this rule change filing and which are
described below are those amendments to Rule 714 that are related to
recordkeeping or reporting.
Specifically, CFE is proposing (i) to modify the fine schedule in
Rule 714(f)(i) regarding failure to include an Order Entry Operator ID
with an Order submission to eliminate reference to quotes and to change
a reference from CBOE System to CFE System; (ii) to modify the fine
schedule in Rule 714(f)(ii) regarding failure to identify the correct
account type in an Order submission to be more specific to reference
failure to identify the correct Customer Type Indicator Code in the
Order submission; and (iii) to modify the fine schedules in Rule
714(f)(iii), (iv), (viii), (ix), (x), and (xiv) to either re-number the
rule cross-references in those fine schedules without changing their
substance to reflect the new rule numbers for the cross-referenced
provisions or to change references from CBOE System to CFE System.
Reportable Trading Volume
Rule 1602(n)(ii) sets forth the reportable trading volume that
triggers the requirement to report a volume threshold account to the
CFTC for Individual Stock Based and Exchange
[[Page 59003]]
Traded Fund Based Security Futures (referred to in Chapter 16 of CFE's
rules as Volatility Index futures). CFE does not currently list any
Volatility Index futures for trading but did so previously and may do
so in the future.
CFE is proposing to amend Rule 1602(n)(ii) to provide that the
reportable trading volume that triggers the requirement to report a
volume threshold account is 50 or more futures contracts in a
Volatility Index futures contract during a single trading day or such
other reportable trading volume threshold as may be designated by the
CFTC. This proposed change is consistent with the comparable reportable
trading volume rule language this is applicable in relation to other
CFE products. CFE is proposing to add the additional phrase that the
level may be ``such other reportable trading volume threshold as may be
designated by the CFTC''. Although the level currently designated in
Rule 1602(n)(ii) is consistent with CFTC regulations, the CFTC has
issued no-action letters with a different designated level and may do
so in the future. The proposed additional language allows for reporting
consistent with these CFTC designations when and if they are in effect.
Contract Specifications
CFE Rule 1802 sets forth contract specifications for Single Stock
Futures, and CFE Rule 1902 sets forth contract specifications for
Narrow-Based Stock Index Futures. CFE is proposing to amend Rules 1802
and 1902 to capitalize the term ``Spread Order'', to replace the term
``Help Desk'' with the term ``Trade Desk'', and to replace the term
``CBOE System'' with the term ``CFE System''.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\4\ in general, and furthers the
objectives of Sections 6(b)(5) \5\ and 6(b)(7) \6\ in particular in
that it is designed:
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ 15 U.S.C. 78f(b)(7).
---------------------------------------------------------------------------
To prevent fraudulent and manipulative acts and practices;
to foster cooperation and coordination with persons
engaged in facilitating transactions in securities; and
to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and in general, to
protect investors and the public interest.
The proposed rule change is consistent with these provisions in
that it revises CFE's rules, including CFE's recordkeeping and
reporting requirements as they may relate to security futures, to
conform to the functionality of the CFE System. In particular, the
proposed amendments will align the changes resulting from the
implementation of the CFE System with the rule provisions contained in
CFE's rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
CFE does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act in that the proposed rule changes to Chapter 1
of CFE's rules to include a definition for Authorized Reporter, to Rule
303A requiring the inclusion of an Order Entry Operator ID on every
Cancel Order and Cancel Replace/Modify Order, to Rule 403 regarding the
information that must be included with Order submissions and front-end
audit trail information that must be maintained, to Rule 414 and 415
regarding ECRP transaction and Block Trade recordkeeping and reporting
requirements, to Rule 603 to update terminology, to Rule 620 and Policy
and Procedure XVIII to update guidance regarding disruptive trading
conduct to conform to the way the CFE System will function, to Rule 714
to update the fine schedules for minor rule violations to conform to
other CFE rule revisions, to Rule 1602(n) to update the reportable
trading volume threshold requirements for Volatility Index futures, and
to Rules 1802 and 1902 to update terminology will enhance CFE's ability
to carry out its responsibilities as a self-regulatory organization.
Additionally, CFE believes that the proposed amendments are equitable
and not unfairly discriminatory because the changes will apply equally
to all market participants.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change will become operative on December 13,
2017. At any time within 60 days of the date of effectiveness of the
proposed rule change, the Commission, after consultation with the CFTC,
may summarily abrogate the proposed rule change and require that the
proposed rule change be refiled in accordance with the provisions of
Section 19(b)(1) of the Act.\7\
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
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 [email protected]. Please include
File Number SR-CFE-2017-003 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-CFE-2017-003. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File
[[Page 59004]]
Number SR-CFE-2017-003, and should be submitted on or before January 4,
2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(73).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26914 Filed 12-13-17; 8:45 am]
BILLING CODE 8011-01-P
