Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Delete Obsolete Rules, 3372-3376 [2018-01206]

Download as PDF 3372 Federal Register / Vol. 83, No. 16 / Wednesday, January 24, 2018 / Notices business combination. The proposed rule change was published for comment in the Federal Register on December 6, 2017.4 The Commission received two comments on the proposal.5 Section 19(b)(2) of the Act 6 provides that within 45 days of the notice publication of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is January 20, 2018. The Commission is extending this 45-day time period. The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposal and the comment letters. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,7 designates March 6, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR– NYSE–2017–53). SECURITIES AND EXCHANGE COMMISSION Exchange and to make other nonsubstantive changes to the Rules. [Release No. 34–82529; File No. SR–CBOE– 2018–003] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Eduardo A. Aleman, Assistant Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Deletion of Rules The Exchange proposes to delete the following rules and chapters from its rulebook: • Rule 2.40—Market-Maker Surcharge for Brokerage. Rule 2.40 operated as a pilot program until March 30, 2000, at which time the program expired (and the Exchange did not request renewal). The Exchange does not impose a surcharge on MarketMaker transactions pursuant to this rule. Any fees and rebates applicable to any Market-Maker transactions are included in the Cboe Options Fees Schedule. • Rule 6.2—Trading Rotations. Rule 6.2 states the Exchange may use the procedures described in current Rules 6.2, 6.2A, or 6.2B to conduct trading rotations in all options listed on the Exchange. Currently, the Exchange only uses the procedures set forth in current Rule 6.2B to conduct trading rotations, and no longer conducts trading rotations pursuant to current Rule 6.2. Therefore, this provision no longer applies to trading on the Exchange.3 • Rule 6.2A—Rapid Opening System (‘‘ROS’’). The Exchange used ROS prior to open options prior to implementation of the Exchange’s Hybrid Trading System, which includes the Hybrid 3.0 Platform. Currently, all options listed on the Exchange trade on its Exchange’s Hybrid Trading System. As stated in Rule 6.2A, ROS does not apply to series trading on the Hybrid Trading System, which open on the Cboe Options Hybrid Opening System (‘‘HOSS’’) (pursuant to Rule 6.2B). Therefore, Rule 6.2A no longer applies to any options listed for trading on the Exchange.4 • Rules 6.8—RAES Operations and 6.9—Automatic ORS Order Execution Against Booked Orders. The Exchange’s Retail Automatic Execution System (‘‘RAES’’) was an automated execution system feature of the Exchange’s Order Routing System (‘‘ORS’’) operated by the Exchange and that provided automated order execution and reporting services for options. RAES and ORS are no longer used, as all options [FR Doc. 2018–01208 Filed 1–23–18; 8:45 am] daltland on DSKBBV9HB2PROD with NOTICES BILLING CODE 8011–01–P 4 See Securities Exchange Act Release No. 82180 (November 30, 2017), 82 FR 57632 (December 6, 2017) (‘‘Notice’’). 5 See Letters to Brent J. Fields, Secretary, Commission, from Michael Kitlas, dated November 30, 2017 (‘‘Kitlas Letter’’) and Jeffrey P. Mahoney, General Counsel, Council of Institutional Investors, dated December 20, 2017 (‘‘CII Letter’’). 6 15 U.S.C. 78s(b)(2). 7 Id. 8 17 CFR 200.30–3(a)(31). VerDate Sep<11>2014 20:25 Jan 23, 2018 Jkt 244001 Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Delete Obsolete Rules January 18, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 3, 2018, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to delete Rules that no longer apply to the Exchange and make other nonsubstantive changes to the Rules. The text of the proposed rule change is available on the Exchange’s website (https://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this rule change is to delete Rules that no longer apply to the 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00078 Fmt 4703 Sfmt 4703 3 The proposed rule change makes corresponding changes to the following rules to delete references to ROS and the rule proposed to be deleted: Rules 6.6, 6.18, 6.25(b)(1), 6.73(c), 8.60(c)(7) and Interpretation and Policy .02, 21.11, 22.11, and 24.13. 4 The proposed rule change makes corresponding changes to the following rules to delete references to ROS and the rule proposed to be deleted: Rules 1.1(fff) and (ggg), 6.2, 6.6, 6.18, 6.25(b)(1), 8.60(c)(7) and Interpretation and Policy .02, 22.11, 24.13. Because the proposed rule change deletes both Rules 6.2 and 6.2A, the proposed rule change also renumbers Rule 6.2B to be Rule 6.2, and makes corresponding changes throughout the Rules. E:\FR\FM\24JAN1.SGM 24JAN1 Federal Register / Vol. 83, No. 16 / Wednesday, January 24, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES trading on the Exchange currently occurs on the Hybrid Trading System, which includes Exchange’s Order Handling System (‘‘OHS’’). Therefore, RAES and ORS no longer apply to any options listed for trading on the Exchange.5 • Rule 6.10—LOU System Operations. The Large Order Utility (‘‘LOU’’) System was a facility of the Exchange that provided order routing, handling, and execution for eligible options orders routed electronically to the Exchange. The LOU System is no longer used, as all options trading on the Exchange trade on the Hybrid Trading System. Therefore, the LOU System no longer applies to any options listed for trading on the Exchange. • Rule 6.13B—Penny Price Improvement. Pursuant to Rule 6.13B, the Exchange may designate one or more options trading on the Hybrid Trading System in a Penny Price Improvement Program, which allows Trading Permit Holders to provide price improvement beyond the Exchange’s disseminated quote for classes not already quote in penny increments and for which the simple auction liaison system is not in effect. The Exchange currently has not designated, and has no intention to designate, any options for participation in this program. Therefore, this program no longer applies to any options listed for trading on the Exchange.6 • Rule 6.54(a)—Accommodation Liquidation (Cabinet Trades) for Classes Not Trading on the Cboe Options Hybrid 5 The proposed rule change makes corresponding changes to the following rules to delete references to RAES and ORS, change references from ORS to OHS, and the rules proposed to be deleted: Rules 1.1(fff) and (ggg), 6.3, Interpretation and Policy .05, 6.6(b) and (e) and Interpretation and Policy .01, 6.7(b) (the Hybrid System includes OHS and the book), 6.8C (which the proposed rule change renumbers as 6.8), 6.13(a) and (c), 6.18, 8.7(b)(iii) and Interpretations and Policies .07 (which is being deleted in its entirety, as described below) .11(a) (the Exchange deleted the paragraph letter for current paragraph (b), as it will be the only paragraph in that Interpretation and Policy, as well as the introduction to that paragraph regarding its applicability to classes on the Hybrid System, because all classes are on the Hybrid System), 8.13, 8.16, 8.51(c)(1)(a)(iii), 8.60(c)(7) (the proposed rule change renumbers provisions (8) through (10) as (7) through (9)) and Interpretation and Policy .02, 8.85(a)(ix) (the proposed rule change renumbers subparagraphs (x) and (xi) as (ix) and (x), and deletes from current subparagraph (x) (proposed subparagraph (xi) the introduction to that paragraph regarding its applicability to classes on the Hybrid System, because all classes are on the Hybrid System), 23.7, 24.15, 24.17, 24.21(j)(1), and 24B.15. 6 The proposed rule change makes corresponding changes to the following rules to delete references to the Penny Price Improvement Program and the rules proposed to be deleted: Rules 1.1(fff) and (ggg), 6.45, Interpretations and Policies .01 and .02, Rule 6.47, Interpretation and Policy .02, and Rule 6.74, Interpretation and Policy .09. VerDate Sep<11>2014 20:25 Jan 23, 2018 Jkt 244001 System. Rule 6.54 describes cabinet trading permitted on the Exchange. Paragraph (a) describes cabinet trading for classes not trading on the Hybrid System, while paragraph (b) describes cabinet trading for classes trading on the Hybrid System. All options trading on the Exchange currently trade on the Hybrid Trading System, and thus Rule 6.54 (a) no longer applies to any options listed for trading on the Exchange.7 • Chapter VII—Order Book Officials. Order Book Officials were Exchange employees responsible for maintaining the book with respect to classes assigned to them, effecting proper executions of orders placed with them, displaying bids and offers, and monitoring the market for classes assigned to them. The Exchange currently has no employees designated as, and does not intend to designate any employees as, Order Book Officials, as Order Book Official functions are generally obsolete now that most trading occurs electronically. The proposed rule change deletes Rules 7.1 through 7.3, 7.4 except for subparagraph (a)(1) (which is being moved to Rule 6.11, with some modifications described below), 7.5, 7.7 through 7.10, and Chapter VII, Section B, as they relate solely to responsibilities of Order Book Officials. Rule 7.4(a)(1) states public customer orders in Hybrid and Hybrid 3.0 classes are eligible for entry into the electronic book, and the Exchange may determine on a class-by-class basis other orders that are eligible for entry into the electronic book. Currently, after a class is open for trading (see Rule 6.2B for a description of orders the System accepts prior to opening), the System accepts for entry into the Book (1) quotes of all Market-Makers and order of any origin code in Hybrid classes and (2) quotes of Lead Market-Makers (‘‘LMMs’’) and orders of priority customers in Hybrid 3.0 classes, while the Exchange continues to have flexibility to permit orders of other origin codes be eligible for book entry. The Exchange proposes to codify this current book eligibility (which is consistent with the Exchange’s authority in current Rule 7.4(a)(1)) in Rule 6.11. The proposed rule change also deletes the provision in current Rule 7.4(a)(1) that states Trading Permit Holders submitting orders or quotes for entry in to the book must do so electronically and in the format 7 The proposed rule change makes a corresponding change to current paragraph (b), eliminates paragraph lettering for paragraph (b) (as that will be the only paragraph in the rule), and reletters subparagraphs (i) and (ii) as (a) and (b), consistent with paragraph lettering throughout the rules. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 3373 announced by the Exchange. It is redundant to state orders and quotes for entry in the electronic book must be submitted electronically, and Rule 6.53A describes the types of order formats Trading Permit Holders must use.8 Rule 7.5, Interpretation and Policy .03 states every Floor Broker who represents a Market-Maker with an order in any options class must, by public outcry at the post, indicate the identify of such Market-Maker at the request of any Trading Permit Holder or Order Book Official. The proposed rule change moves this provision (with the reference to Order Book Official deleted) to Rule 6.73, which relates to responsibilities of Floor Brokers. Rule 7.6 regarding the requirement for PAR Official to report unusual activity is proposed to move to Rule 6.12B(b)(vi).9 The proposed rule change moves currently applicable provisions in Rule 7.12 (regarding PAR Officials) to Rule 6.12B (with some nonsubstantive changes).10 PAR Officials are Exchange employees or independent contractors whom the Exchange may designate as being responsible for operating a PAR workstation and effecting proper executions of orders placed with them. PAR Officials no longer maintain the book with respect to assigned classes, as the electronic book manages electronic 8 The proposed rule change makes corresponding changes to the following rules to change crossreferences to Rule 7.4 to Rule 6.11: Rules 6.13(b)(i)(A)(2) and (iii), 23.3(b), and 24.11A (the proposed rule change also deletes the Interpretations and Policies section of this rule, as there are currently none). 9 The proposed rule change makes corresponding changes to the following rules to delete references to Order Book Officials and the rules proposed to be deleted: Rules 6.2 and Interpretation and Policy .01 (the proposed rule change also indicates the exchange may direct how trading rotations occur in Interpretation and Policy .01, which is consistent with the remainder of Rule 6.2), 6.3, Interpretations and Policies .01 and .02 (these interpretations also delete references to post directors, which are no longer used at the Exchange), 6.6(b) and (e) (which also deletes references to post directors, which are no longer used at the Exchange), 6.12A, 6.20(a) and Interpretations and Policies .02 and .04(ii), 6.43(A), 6.45, Interpretations and Policies .01 and .02 (the proposed rule change replaces references to Order Book Officials to PAR Officials, consistent with Interpretation and policy .02, which indicates PAR Officials may perform the functions of Order Book Officials for purposes of that rule), 6.73 Interpretation and Policy .01, 8.7(c) (the Exchange notes Market-Makers not permitted to enter a trading station in a floor brokerage capacity, as set forth in Rule 8.8) and Interpretation and Policy .09 (changes cross-reference to Rule 7.5 to Rule 8.7(d)(iv), which describes current Market-Maker obligations, including the obligation of MarketMaker to provide a quote upon Exchange request), and 24.13 and Interpretation and Policy .03 (which the proposed rule change renumbers to .02). 10 The proposed rule change makes corresponding changes to the following rules to change cross-references to Rule 7.12 to Rule 6.12B: Rules 6.12A, 6.18(d)(i), and 6.20(a). E:\FR\FM\24JAN1.SGM 24JAN1 3374 Federal Register / Vol. 83, No. 16 / Wednesday, January 24, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES orders and quotes. The proposed rule change deletes the provision in current Rule 7.12(b)(i) regarding the definition of customer limit orders, as customer orders are now defined in Rule 1.1(www) and (yyy) (which are proposed to be relettered as (yyy) and (zzz), as described below). The proposed rule change deletes current Rule 7.12(b)(i)(C) and (e), which apply to the Intermarket Options Linkage Plan that no longer exists,11 and Rule 7.12(b)(1)(E), which relates to orders received during a trading rotation pursuant to Rule 6.2 or HOSS pursuant to Rule 6.2B, as those rules describe how orders received prior or before a rotation are handled. The proposed rule change deletes Rule 7.12(b)(iii), as PAR Officials no longer maintain the book (as described above) and do not have the ability to remove orders from the book. The proposed rule change replaces the term ‘‘senior Trading Operations official’’ with ‘‘senior Help Desk personnel’’ in current Rule 7.12(b)(iv) (proposed Rule 6.12B(b)(iii), which term is used throughout the rules. The proposed rule change deletes Rule 7.12, Interpretation and Policy .01, as it relates to the Exchange’s responsibility to appoint PAR Officials to trading stations prior to March 24, 2006. The Exchange currently has PAR Officials appointed to all trading stations on the trading floor. • Autoquote. Autoquote was an Exchange electronic quotation system that automatically monitored and updated market quotes using a mathematical formula measuring certain characteristics of the option and underlying interest. Rules related to LMMs and DPMs require them to provide continuous electronic quotes in appointed classes using Autoquote or a proprietary automated quotation updating system. Currently, all MarketMakers that submit electronic quotes use a proprietary system, and Autoquote is no longer used. The proposed rule change deletes Rule 8.7, Interpretation and Policy .07, which describes Autoquote, as well as the requirement of LMMs and DPMs to provide electronic quotes, which requirement is included in Rules 8.15 and 8.85, respectively.12 11 Chapter VI, Section E describes Exchange responsibilities pursuant to the current linkage plan, the Options Order Protection and Locked/ Crossed Market Plan. 12 The proposed rule change also deletes references to Autoquote in Rules 6.43(b), 8.15(c), 8.51(c)(1)(a)(iii), 8.60 Interpretation and Policy .02. Rules 8.7, Interpretation and Policy .07, 8.15(c), and 8.85(a)(x) provide components of a formulate used for automated quoting by Market-Makers using proprietary automated quoting systems will be disclosed unless the Exchange exempts them from disclosing this information. For competitive VerDate Sep<11>2014 20:25 Jan 23, 2018 Jkt 244001 • S&P 100 Modified Opening Rotation. Rule 24.13, Interpretation and Policy .02 provides a modified opening rotation that the Exchange may use for S&P 100 options, but the rule also provides the Exchange with the authority to open this class using HOSS pursuant to Rule 6.2B. The Exchange currently uses HOSS to open S&P 100 options, and does not intend to use the modified opening in the future. Therefore, this provision no longer applies to the opening of S&P 100 options.13 • Rule 8.7(c)—Market-Maker Entry into Trading Station in Unappointed Class other than As Floor Broker. Rule 8.7(c) states whenever a Market-Maker enters the trading station for a class of options contracts in a class in which it is not appointed, in other than a floor brokerage capacity, the Market-Maker must fulfill obligations established in Rule 8.7(b) and, for the rest of the trading day, as well as undertake certain additional obligations. This rule text essentially requires a Market-Maker to act like a Market-Maker when it enters a trading station in the capacity of a Market-Maker in an unappointed class. However, pursuant to Rule 8.3, on the trading floor, Market-Makers have an appointment to trade in all hybrid classes, so if it goes to any trading station on the floor as a Market-Maker, it has an appointment for the classes at that station and is subject to Marketmaker obligations. That provision, in conjunction with the restriction on acting as a Market-Maker and Floor Broker on the same day, make the provision in Rule 8.7(c) unnecessary and duplicative. Therefore, the proposed rule change deletes this provision. • Chapter XXIVA—Flexible Exchange Options (‘‘FLEX Options’’). When the Exchange began offering FLEX Options for trading, FLEX Options traded pursuant to Rule XXIVA on the trading floor. The Exchange then developed the FLEX Hybrid Trading System on which FLEX Options could trade both on the trading floor and electronically. Chapter XXIVB describes FLEX Options trading on this system, and provides the Exchange with ability to permit FLEX trading pursuant to Chapter XXIVA or XXIVB. The open outcry rules in Chapter XXIVA are substantially similar to those in Chapter XXIVB. The Exchange has determined all FLEX trading must occur on the FLEX Hybrid reasons, the Exchange exempts all Market-Makers from disclosing this information, so the proposed rule change deletes those provisions. 13 The proposed rule change also renumbers current Interpretation and Policy .03 to .02. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 Trading System pursuant to Chapter XXIVB. Therefore, Chapter XXIVB no longer applies to the trading of any FLEX Options.14 • Chapter XXVI—Market Baskets. Chapter XXVI describes rules applicable to market basket contracts, which are contracts obligating the seller to sell and the purchaser to purchase a designated number of shares of each of the stocks comprising the index on which the market basket is based. The Exchange currently does not list, and does not intend to list in the future, market basket contracts for trading. Therefore, Chapter XXVI no longer applies to any options trading on the Exchange.15 • Chapter XXVII—Buy-Write Option Unitary Derivatives (‘‘BOUNDS’’). Chapter XXVIII describes rules applicable to BOUNDS, which are securities issued, or subject to issuance, by the Options Clearing Corporation pursuant to its rules, which gives holders and writers thereof such rights and obligations as may be provided in its rules. The Exchange currently does not list, and does not intend to list in the future, BOUNDS for trading. Therefore, Chapter XXVII no longer applies to any options trading on the Exchange. • Chapter XXXI—Approval of Securities for Original Listing. Chapter XXXI describes rules pursuant to which the Exchange may list equity securities for listing on the Exchange. The Exchange currently does not list any equity securities on the Exchange. Therefore, Chapter XXXI currently applies to no securities listed on the Exchange.16 Section 957 of the Dodd-Frank adopted Section 6(b)(10) of the Act,17 which requires the rules of each national securities exchange to prohibit any member that is not the beneficial owner of a security registered under Section 12 of the Act 18 from granting a proxy to vote the security in connection 14 The proposed rule change also deletes references to Chapter XXIVA in the following rules: Rules 3.2(b), 5.9, 6.1A(c), 6.20A, Interpretation and Policy .05, 6.49A(c)(6), Introduction to Chapter XX, 20.12, Introduction to Chapter XXII, 22.16, Introduction to Chapter XXIVB, 24B.3, 28.17, 29.18, and Introduction to Chapter XXIX. 15 The proposed rule change also deletes references to market baskets and the rules proposed to be deleted in: Rules 8.8, Interpretation and Policy .02 and 24B.10 (which is proposed to be renumbered as 24A.10). 16 Options may be listed for trading on the Exchange pursuant to Chapter V and XXIV. The proposed rule change leaves a placeholder in Chapters XXX and XXXI for rules related to listing and trading of equity securities. The Exchange would file a proposed rule change to adopt new rules if it determines to list and trade equity securities in the future. 17 15 U.S.C. 78f(b)(10). 18 15 U.S.C. 78l. E:\FR\FM\24JAN1.SGM 24JAN1 Federal Register / Vol. 83, No. 16 / Wednesday, January 24, 2018 / Notices with certain shareholder votes, unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instructions of the beneficial owner. The shareholder votes covered by Section 957 include any vote with respect to (1) the election of a member of the board of directors of an issuer (except for a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940 (the ‘‘Investment Company Act’’), (2) executive compensation, or (3) any other significant matter, as determined by the Commission, by rule.19 Rules 31.82 through 31.88 currently include provisions that cover these proxy voting requirements with respect to Trading Permit Holders. However, because this proposed rule change deletes Chapter XXXI, the proposed rule change adds Rule 4.25 to retain these provisions in accordance with Section 957. • Chapters XL through XLIX—ScreenBased Trading. Chapters XL through XLIX describe trading on the Exchange’s screen-based trading system. The screen-based trading system is no longer used, as all options trading on the Exchange trade on the Hybrid Trading System. Therefore, the screen-based trading rules no longer apply to any options listed for trading on the Exchange.20 • Chapters L through LIV—CBOE Stock Exchange (‘‘CBSX’’). Chapters L through LIV describe trading on CBSX, which is the Exchange’s facility for trading stocks, warrants, IPRs, IPSs, and Trust Issued Receipts (non-options securities). CBSX ceased market operations on April 30, 2014. Therefore, the CBSX rules no longer apply to any trading on the Exchange.21 The Exchange would file a proposed rule change to adopt new rules if it determines to list and trade non-options securities in the future. Additional Nonsubstantive Changes In addition to nonsubstantive changes described above, the proposed rule change makes the following nonsubstantive changes: • The proposed rule change moves Interpretation and Policy .01 to the daltland on DSKBBV9HB2PROD with NOTICES 19 15 U.S.C. 78f(b)(10)(B). proposed rule change makes corresponding changes to the following rules to delete references to screen-based trading and the rules proposed to be deleted: Rules 1.1(fff) and (ggg), 3.2(b), and 3.3. 21 The proposed rule change makes corresponding changes to the following rules to delete references to CBSX and the rules proposed to be deleted: Rules 3.1A, 3.2(b), 3.3, and 6.20A, Interpretation and Policy .01. 20 The VerDate Sep<11>2014 20:25 Jan 23, 2018 Jkt 244001 definition of Professional in Rule 1.1(ggg) to Interpretation and Policy .06 to Rule 1.1, so that all Interpretations and Policies to Rule 1.1 are in the same place. • Currently, there are two paragraphs erroneously lettered as (mmm) and (ppp). The proposed rule change corrects this lettering and updates the paragraph lettering to reflect these corrections. • The proposed rule change makes updates throughout the rules to conform paragraph lettering and numbering to other rules, as well as to reflect deleted rule provisions. • Rule 6.2, Interpretation and Policy .01(b) and (c) erroneously refer to LMMs as LLMs. The proposed rule change corrects those erroneous references. • The proposed rule change amends Rule 6.43(b) to indicate it only applies to Hybrid 3.0 classes, which is consistent with the current rule text and current trading practices. • Renumber Chapter XXIVB and the rules in that chapter to Chapter XXIVA, and update cross-references throughout the rules. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.22 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 23 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 24 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In particular, by deleting rules that no longer apply to Cboe Options trading (which rules have generally not been applicable in years), and making other nonsubstantive changes to better organize and more consistently number 22 15 23 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 24 Id. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 3375 and letter rules, the rules will more clearly identify currently applicable rules, which the Exchange believes removes impediments to and perfects the mechanism of a free and open market. The Exchange believes the proposed rule change will eliminate confusion regarding which rules apply to current trading, which ultimately protects investors and the public interest. The proposed rule change has no impact on current trading on Cboe Options. B. Self-Regulatory Organization’s Statement on Burden on Competition Cboe Options does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change deletes rules that no longer apply to Cboe Options trading and makes other nonsubstantive changes, and thus has no impact on current trading on Cboe Options. Therefore, the proposed rule change has no impact on competition. The proposed rule change eliminates confusion with respect to rules applicable to current trading on Cboe Options. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: A. Significantly affect the protection of investors or the public interest; B. impose any significant burden on competition; and C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 25 and Rule 19b–4(f)(6) 26 thereunder.27 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 25 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 27 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 26 17 E:\FR\FM\24JAN1.SGM 24JAN1 3376 Federal Register / Vol. 83, No. 16 / Wednesday, January 24, 2018 / Notices it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. to make available publicly. All submissions should refer to File Number SR–CBOE–2018–003 and should be submitted on or before February 14, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–01206 Filed 1–23–18; 8:45 am] Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2018–003 on the subject line. daltland on DSKBBV9HB2PROD 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: Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Designation of Longer Period for Commission Action on Proposed Rule Change Related to The Options Clearing Corporation’s Margin Methodology Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2018–003. 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 January 18, 2018. VerDate Sep<11>2014 20:25 Jan 23, 2018 Jkt 244001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82534; File No. SR–OCC– 2017–022] On November 13, 2017, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–OCC–2017–022 (‘‘Proposed Rule Change’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 related to OCC’s margin methodology.3 The Proposed Rule Change was published for comment in the Federal Register on December 4, 2017.4 To date, the 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 On November 13, 2017, OCC also filed this proposal as advance notice SR–OCC–2017–811 (‘‘Advance Notice’’) with the Commission pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, entitled the Payment, Clearing, and Settlement Supervision Act of 2010 (12 U.S.C. 5465(e)(1)) and Rule 19b–4(n)(1)(i) of the Act (17 CFR 240.19b– 4(n)(1)(i)). Notice of filing of the Advance Notice was published for comment in the Federal Register on December 26, 2017. Securities Exchange Act Release No. 82355 (Dec. 19, 2017), 82 FR 61060 (Dec. 26, 2017) (SR–OCC–2017–811). On January 11, 2018, the Commission sent OCC a request for additional information, which tolls the Commission’s 60-day review period for the Advance Notice. See Memorandum from Office of Clearance and Settlement, Division of Trading and Markets, dated January 12, 2018, available at https://www.sec.gov/comments/sr-occ-2017-022/ occ2017022.htm. The new review period will be 60 days from the date the Commission receives the information requested. See Section 806(e)(1). The proposal in the Proposed Rule Change and the Advance Notice shall not take effect until all regulatory actions required with respect to the proposal are completed. 4 Securities Exchange Act Release No. 82161 (Nov. 28, 2017), 82 FR 57306 (Dec. 4, 2017) (SR– OCC–2017–022). 1 15 PO 00000 Frm 00082 Fmt 4703 Sfmt 9990 Commission has received one comment letter to the Proposed Rule Change.5 Section 19(b)(2) of the Act 6 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this Proposed Rule Change is January 18, 2018. The Commission is extending this 45-day time period. In order to provide the Commission with sufficient time to consider the Proposed Rule Change, the Commission finds that it is appropriate to designate a longer period within which to take action on the Proposed Rule Change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,7 designates March 4, 2018 as the date by which the Commission shall either approve, disapprove, or institute proceedings to determine whether to disapprove proposed rule change SR– OCC–2017–022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–01210 Filed 1–23–18; 8:45 am] BILLING CODE 8011–01–P 5 See letter from Michael Kitlas, dated November 28, 2017, to Eduardo A. Aleman, Assistant Secretary, Commission, available at https:// www.sec.gov/comments/sr-occ-2017-022/ occ2017022.htm. Since the proposal contained in the Proposed Rule Change was also filed as an Advance Notice, the Commission is considering all public comments received on the proposal regardless of whether the comments are submitted to the Proposed Rule Change or the Advance Notice. 6 15 U.S.C. 78s(b)(2). 7 Id. 8 17 CFR 200.30–3(a)(31). E:\FR\FM\24JAN1.SGM 24JAN1

Agencies

[Federal Register Volume 83, Number 16 (Wednesday, January 24, 2018)]
[Notices]
[Pages 3372-3376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82529; File No. SR-CBOE-2018-003]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Delete 
Obsolete Rules

January 18, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 3, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete Rules that no longer apply to the 
Exchange and make other nonsubstantive changes to the Rules. The text 
of the proposed rule change is available on the Exchange's website 
(https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the 
Exchange's Office of the Secretary, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this rule change is to delete Rules that no longer 
apply to the Exchange and to make other nonsubstantive changes to the 
Rules.
Deletion of Rules
    The Exchange proposes to delete the following rules and chapters 
from its rulebook:
     Rule 2.40--Market-Maker Surcharge for Brokerage. Rule 2.40 
operated as a pilot program until March 30, 2000, at which time the 
program expired (and the Exchange did not request renewal). The 
Exchange does not impose a surcharge on Market-Maker transactions 
pursuant to this rule. Any fees and rebates applicable to any Market-
Maker transactions are included in the Cboe Options Fees Schedule.
     Rule 6.2--Trading Rotations. Rule 6.2 states the Exchange 
may use the procedures described in current Rules 6.2, 6.2A, or 6.2B to 
conduct trading rotations in all options listed on the Exchange. 
Currently, the Exchange only uses the procedures set forth in current 
Rule 6.2B to conduct trading rotations, and no longer conducts trading 
rotations pursuant to current Rule 6.2. Therefore, this provision no 
longer applies to trading on the Exchange.\3\
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    \3\ The proposed rule change makes corresponding changes to the 
following rules to delete references to ROS and the rule proposed to 
be deleted: Rules 6.6, 6.18, 6.25(b)(1), 6.73(c), 8.60(c)(7) and 
Interpretation and Policy .02, 21.11, 22.11, and 24.13.
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     Rule 6.2A--Rapid Opening System (``ROS''). The Exchange 
used ROS prior to open options prior to implementation of the 
Exchange's Hybrid Trading System, which includes the Hybrid 3.0 
Platform. Currently, all options listed on the Exchange trade on its 
Exchange's Hybrid Trading System. As stated in Rule 6.2A, ROS does not 
apply to series trading on the Hybrid Trading System, which open on the 
Cboe Options Hybrid Opening System (``HOSS'') (pursuant to Rule 6.2B). 
Therefore, Rule 6.2A no longer applies to any options listed for 
trading on the Exchange.\4\
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    \4\ The proposed rule change makes corresponding changes to the 
following rules to delete references to ROS and the rule proposed to 
be deleted: Rules 1.1(fff) and (ggg), 6.2, 6.6, 6.18, 6.25(b)(1), 
8.60(c)(7) and Interpretation and Policy .02, 22.11, 24.13. Because 
the proposed rule change deletes both Rules 6.2 and 6.2A, the 
proposed rule change also renumbers Rule 6.2B to be Rule 6.2, and 
makes corresponding changes throughout the Rules.
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     Rules 6.8--RAES Operations and 6.9--Automatic ORS Order 
Execution Against Booked Orders. The Exchange's Retail Automatic 
Execution System (``RAES'') was an automated execution system feature 
of the Exchange's Order Routing System (``ORS'') operated by the 
Exchange and that provided automated order execution and reporting 
services for options. RAES and ORS are no longer used, as all options

[[Page 3373]]

trading on the Exchange currently occurs on the Hybrid Trading System, 
which includes Exchange's Order Handling System (``OHS''). Therefore, 
RAES and ORS no longer apply to any options listed for trading on the 
Exchange.\5\
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    \5\ The proposed rule change makes corresponding changes to the 
following rules to delete references to RAES and ORS, change 
references from ORS to OHS, and the rules proposed to be deleted: 
Rules 1.1(fff) and (ggg), 6.3, Interpretation and Policy .05, 6.6(b) 
and (e) and Interpretation and Policy .01, 6.7(b) (the Hybrid System 
includes OHS and the book), 6.8C (which the proposed rule change 
renumbers as 6.8), 6.13(a) and (c), 6.18, 8.7(b)(iii) and 
Interpretations and Policies .07 (which is being deleted in its 
entirety, as described below) .11(a) (the Exchange deleted the 
paragraph letter for current paragraph (b), as it will be the only 
paragraph in that Interpretation and Policy, as well as the 
introduction to that paragraph regarding its applicability to 
classes on the Hybrid System, because all classes are on the Hybrid 
System), 8.13, 8.16, 8.51(c)(1)(a)(iii), 8.60(c)(7) (the proposed 
rule change renumbers provisions (8) through (10) as (7) through 
(9)) and Interpretation and Policy .02, 8.85(a)(ix) (the proposed 
rule change renumbers subparagraphs (x) and (xi) as (ix) and (x), 
and deletes from current subparagraph (x) (proposed subparagraph 
(xi) the introduction to that paragraph regarding its applicability 
to classes on the Hybrid System, because all classes are on the 
Hybrid System), 23.7, 24.15, 24.17, 24.21(j)(1), and 24B.15.
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     Rule 6.10--LOU System Operations. The Large Order Utility 
(``LOU'') System was a facility of the Exchange that provided order 
routing, handling, and execution for eligible options orders routed 
electronically to the Exchange. The LOU System is no longer used, as 
all options trading on the Exchange trade on the Hybrid Trading System. 
Therefore, the LOU System no longer applies to any options listed for 
trading on the Exchange.
     Rule 6.13B--Penny Price Improvement. Pursuant to Rule 
6.13B, the Exchange may designate one or more options trading on the 
Hybrid Trading System in a Penny Price Improvement Program, which 
allows Trading Permit Holders to provide price improvement beyond the 
Exchange's disseminated quote for classes not already quote in penny 
increments and for which the simple auction liaison system is not in 
effect. The Exchange currently has not designated, and has no intention 
to designate, any options for participation in this program. Therefore, 
this program no longer applies to any options listed for trading on the 
Exchange.\6\
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    \6\ The proposed rule change makes corresponding changes to the 
following rules to delete references to the Penny Price Improvement 
Program and the rules proposed to be deleted: Rules 1.1(fff) and 
(ggg), 6.45, Interpretations and Policies .01 and .02, Rule 6.47, 
Interpretation and Policy .02, and Rule 6.74, Interpretation and 
Policy .09.
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     Rule 6.54(a)--Accommodation Liquidation (Cabinet Trades) 
for Classes Not Trading on the Cboe Options Hybrid System. Rule 6.54 
describes cabinet trading permitted on the Exchange. Paragraph (a) 
describes cabinet trading for classes not trading on the Hybrid System, 
while paragraph (b) describes cabinet trading for classes trading on 
the Hybrid System. All options trading on the Exchange currently trade 
on the Hybrid Trading System, and thus Rule 6.54 (a) no longer applies 
to any options listed for trading on the Exchange.\7\
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    \7\ The proposed rule change makes a corresponding change to 
current paragraph (b), eliminates paragraph lettering for paragraph 
(b) (as that will be the only paragraph in the rule), and reletters 
subparagraphs (i) and (ii) as (a) and (b), consistent with paragraph 
lettering throughout the rules.
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     Chapter VII--Order Book Officials. Order Book Officials 
were Exchange employees responsible for maintaining the book with 
respect to classes assigned to them, effecting proper executions of 
orders placed with them, displaying bids and offers, and monitoring the 
market for classes assigned to them. The Exchange currently has no 
employees designated as, and does not intend to designate any employees 
as, Order Book Officials, as Order Book Official functions are 
generally obsolete now that most trading occurs electronically.
    The proposed rule change deletes Rules 7.1 through 7.3, 7.4 except 
for subparagraph (a)(1) (which is being moved to Rule 6.11, with some 
modifications described below), 7.5, 7.7 through 7.10, and Chapter VII, 
Section B, as they relate solely to responsibilities of Order Book 
Officials.
    Rule 7.4(a)(1) states public customer orders in Hybrid and Hybrid 
3.0 classes are eligible for entry into the electronic book, and the 
Exchange may determine on a class-by-class basis other orders that are 
eligible for entry into the electronic book. Currently, after a class 
is open for trading (see Rule 6.2B for a description of orders the 
System accepts prior to opening), the System accepts for entry into the 
Book (1) quotes of all Market-Makers and order of any origin code in 
Hybrid classes and (2) quotes of Lead Market-Makers (``LMMs'') and 
orders of priority customers in Hybrid 3.0 classes, while the Exchange 
continues to have flexibility to permit orders of other origin codes be 
eligible for book entry. The Exchange proposes to codify this current 
book eligibility (which is consistent with the Exchange's authority in 
current Rule 7.4(a)(1)) in Rule 6.11. The proposed rule change also 
deletes the provision in current Rule 7.4(a)(1) that states Trading 
Permit Holders submitting orders or quotes for entry in to the book 
must do so electronically and in the format announced by the Exchange. 
It is redundant to state orders and quotes for entry in the electronic 
book must be submitted electronically, and Rule 6.53A describes the 
types of order formats Trading Permit Holders must use.\8\
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    \8\ The proposed rule change makes corresponding changes to the 
following rules to change cross-references to Rule 7.4 to Rule 6.11: 
Rules 6.13(b)(i)(A)(2) and (iii), 23.3(b), and 24.11A (the proposed 
rule change also deletes the Interpretations and Policies section of 
this rule, as there are currently none).
---------------------------------------------------------------------------

    Rule 7.5, Interpretation and Policy .03 states every Floor Broker 
who represents a Market-Maker with an order in any options class must, 
by public outcry at the post, indicate the identify of such Market-
Maker at the request of any Trading Permit Holder or Order Book 
Official. The proposed rule change moves this provision (with the 
reference to Order Book Official deleted) to Rule 6.73, which relates 
to responsibilities of Floor Brokers.
    Rule 7.6 regarding the requirement for PAR Official to report 
unusual activity is proposed to move to Rule 6.12B(b)(vi).\9\ The 
proposed rule change moves currently applicable provisions in Rule 7.12 
(regarding PAR Officials) to Rule 6.12B (with some nonsubstantive 
changes).\10\ PAR Officials are Exchange employees or independent 
contractors whom the Exchange may designate as being responsible for 
operating a PAR workstation and effecting proper executions of orders 
placed with them. PAR Officials no longer maintain the book with 
respect to assigned classes, as the electronic book manages electronic

[[Page 3374]]

orders and quotes. The proposed rule change deletes the provision in 
current Rule 7.12(b)(i) regarding the definition of customer limit 
orders, as customer orders are now defined in Rule 1.1(www) and (yyy) 
(which are proposed to be relettered as (yyy) and (zzz), as described 
below). The proposed rule change deletes current Rule 7.12(b)(i)(C) and 
(e), which apply to the Intermarket Options Linkage Plan that no longer 
exists,\11\ and Rule 7.12(b)(1)(E), which relates to orders received 
during a trading rotation pursuant to Rule 6.2 or HOSS pursuant to Rule 
6.2B, as those rules describe how orders received prior or before a 
rotation are handled. The proposed rule change deletes Rule 
7.12(b)(iii), as PAR Officials no longer maintain the book (as 
described above) and do not have the ability to remove orders from the 
book. The proposed rule change replaces the term ``senior Trading 
Operations official'' with ``senior Help Desk personnel'' in current 
Rule 7.12(b)(iv) (proposed Rule 6.12B(b)(iii), which term is used 
throughout the rules. The proposed rule change deletes Rule 7.12, 
Interpretation and Policy .01, as it relates to the Exchange's 
responsibility to appoint PAR Officials to trading stations prior to 
March 24, 2006. The Exchange currently has PAR Officials appointed to 
all trading stations on the trading floor.
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    \9\ The proposed rule change makes corresponding changes to the 
following rules to delete references to Order Book Officials and the 
rules proposed to be deleted: Rules 6.2 and Interpretation and 
Policy .01 (the proposed rule change also indicates the exchange may 
direct how trading rotations occur in Interpretation and Policy .01, 
which is consistent with the remainder of Rule 6.2), 6.3, 
Interpretations and Policies .01 and .02 (these interpretations also 
delete references to post directors, which are no longer used at the 
Exchange), 6.6(b) and (e) (which also deletes references to post 
directors, which are no longer used at the Exchange), 6.12A, 6.20(a) 
and Interpretations and Policies .02 and .04(ii), 6.43(A), 6.45, 
Interpretations and Policies .01 and .02 (the proposed rule change 
replaces references to Order Book Officials to PAR Officials, 
consistent with Interpretation and policy .02, which indicates PAR 
Officials may perform the functions of Order Book Officials for 
purposes of that rule), 6.73 Interpretation and Policy .01, 8.7(c) 
(the Exchange notes Market-Makers not permitted to enter a trading 
station in a floor brokerage capacity, as set forth in Rule 8.8) and 
Interpretation and Policy .09 (changes cross-reference to Rule 7.5 
to Rule 8.7(d)(iv), which describes current Market-Maker 
obligations, including the obligation of Market-Maker to provide a 
quote upon Exchange request), and 24.13 and Interpretation and 
Policy .03 (which the proposed rule change renumbers to .02).
    \10\ The proposed rule change makes corresponding changes to the 
following rules to change cross-references to Rule 7.12 to Rule 
6.12B: Rules 6.12A, 6.18(d)(i), and 6.20(a).
    \11\ Chapter VI, Section E describes Exchange responsibilities 
pursuant to the current linkage plan, the Options Order Protection 
and Locked/Crossed Market Plan.
---------------------------------------------------------------------------

     Autoquote. Autoquote was an Exchange electronic quotation 
system that automatically monitored and updated market quotes using a 
mathematical formula measuring certain characteristics of the option 
and underlying interest. Rules related to LMMs and DPMs require them to 
provide continuous electronic quotes in appointed classes using 
Autoquote or a proprietary automated quotation updating system. 
Currently, all Market-Makers that submit electronic quotes use a 
proprietary system, and Autoquote is no longer used. The proposed rule 
change deletes Rule 8.7, Interpretation and Policy .07, which describes 
Autoquote, as well as the requirement of LMMs and DPMs to provide 
electronic quotes, which requirement is included in Rules 8.15 and 
8.85, respectively.\12\
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    \12\ The proposed rule change also deletes references to 
Autoquote in Rules 6.43(b), 8.15(c), 8.51(c)(1)(a)(iii), 8.60 
Interpretation and Policy .02. Rules 8.7, Interpretation and Policy 
.07, 8.15(c), and 8.85(a)(x) provide components of a formulate used 
for automated quoting by Market-Makers using proprietary automated 
quoting systems will be disclosed unless the Exchange exempts them 
from disclosing this information. For competitive reasons, the 
Exchange exempts all Market-Makers from disclosing this information, 
so the proposed rule change deletes those provisions.
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     S&P 100 Modified Opening Rotation. Rule 24.13, 
Interpretation and Policy .02 provides a modified opening rotation that 
the Exchange may use for S&P 100 options, but the rule also provides 
the Exchange with the authority to open this class using HOSS pursuant 
to Rule 6.2B. The Exchange currently uses HOSS to open S&P 100 options, 
and does not intend to use the modified opening in the future. 
Therefore, this provision no longer applies to the opening of S&P 100 
options.\13\
---------------------------------------------------------------------------

    \13\ The proposed rule change also renumbers current 
Interpretation and Policy .03 to .02.
---------------------------------------------------------------------------

     Rule 8.7(c)--Market-Maker Entry into Trading Station in 
Unappointed Class other than As Floor Broker. Rule 8.7(c) states 
whenever a Market-Maker enters the trading station for a class of 
options contracts in a class in which it is not appointed, in other 
than a floor brokerage capacity, the Market-Maker must fulfill 
obligations established in Rule 8.7(b) and, for the rest of the trading 
day, as well as undertake certain additional obligations. This rule 
text essentially requires a Market-Maker to act like a Market-Maker 
when it enters a trading station in the capacity of a Market-Maker in 
an unappointed class. However, pursuant to Rule 8.3, on the trading 
floor, Market-Makers have an appointment to trade in all hybrid 
classes, so if it goes to any trading station on the floor as a Market-
Maker, it has an appointment for the classes at that station and is 
subject to Market-maker obligations. That provision, in conjunction 
with the restriction on acting as a Market-Maker and Floor Broker on 
the same day, make the provision in Rule 8.7(c) unnecessary and 
duplicative. Therefore, the proposed rule change deletes this 
provision.
     Chapter XXIVA--Flexible Exchange Options (``FLEX 
Options''). When the Exchange began offering FLEX Options for trading, 
FLEX Options traded pursuant to Rule XXIVA on the trading floor. The 
Exchange then developed the FLEX Hybrid Trading System on which FLEX 
Options could trade both on the trading floor and electronically. 
Chapter XXIVB describes FLEX Options trading on this system, and 
provides the Exchange with ability to permit FLEX trading pursuant to 
Chapter XXIVA or XXIVB. The open outcry rules in Chapter XXIVA are 
substantially similar to those in Chapter XXIVB. The Exchange has 
determined all FLEX trading must occur on the FLEX Hybrid Trading 
System pursuant to Chapter XXIVB. Therefore, Chapter XXIVB no longer 
applies to the trading of any FLEX Options.\14\
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    \14\ The proposed rule change also deletes references to Chapter 
XXIVA in the following rules: Rules 3.2(b), 5.9, 6.1A(c), 6.20A, 
Interpretation and Policy .05, 6.49A(c)(6), Introduction to Chapter 
XX, 20.12, Introduction to Chapter XXII, 22.16, Introduction to 
Chapter XXIVB, 24B.3, 28.17, 29.18, and Introduction to Chapter 
XXIX.
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     Chapter XXVI--Market Baskets. Chapter XXVI describes rules 
applicable to market basket contracts, which are contracts obligating 
the seller to sell and the purchaser to purchase a designated number of 
shares of each of the stocks comprising the index on which the market 
basket is based. The Exchange currently does not list, and does not 
intend to list in the future, market basket contracts for trading. 
Therefore, Chapter XXVI no longer applies to any options trading on the 
Exchange.\15\
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    \15\ The proposed rule change also deletes references to market 
baskets and the rules proposed to be deleted in: Rules 8.8, 
Interpretation and Policy .02 and 24B.10 (which is proposed to be 
renumbered as 24A.10).
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     Chapter XXVII--Buy-Write Option Unitary Derivatives 
(``BOUNDS''). Chapter XXVIII describes rules applicable to BOUNDS, 
which are securities issued, or subject to issuance, by the Options 
Clearing Corporation pursuant to its rules, which gives holders and 
writers thereof such rights and obligations as may be provided in its 
rules. The Exchange currently does not list, and does not intend to 
list in the future, BOUNDS for trading. Therefore, Chapter XXVII no 
longer applies to any options trading on the Exchange.
     Chapter XXXI--Approval of Securities for Original Listing. 
Chapter XXXI describes rules pursuant to which the Exchange may list 
equity securities for listing on the Exchange. The Exchange currently 
does not list any equity securities on the Exchange. Therefore, Chapter 
XXXI currently applies to no securities listed on the Exchange.\16\
---------------------------------------------------------------------------

    \16\ Options may be listed for trading on the Exchange pursuant 
to Chapter V and XXIV. The proposed rule change leaves a placeholder 
in Chapters XXX and XXXI for rules related to listing and trading of 
equity securities. The Exchange would file a proposed rule change to 
adopt new rules if it determines to list and trade equity securities 
in the future.
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    Section 957 of the Dodd-Frank adopted Section 6(b)(10) of the 
Act,\17\ which requires the rules of each national securities exchange 
to prohibit any member that is not the beneficial owner of a security 
registered under Section 12 of the Act \18\ from granting a proxy to 
vote the security in connection

[[Page 3375]]

with certain shareholder votes, unless the beneficial owner of the 
security has instructed the member to vote the proxy in accordance with 
the voting instructions of the beneficial owner. The shareholder votes 
covered by Section 957 include any vote with respect to (1) the 
election of a member of the board of directors of an issuer (except for 
a vote with respect to the uncontested election of a member of the 
board of directors of any investment company registered under the 
Investment Company Act of 1940 (the ``Investment Company Act''), (2) 
executive compensation, or (3) any other significant matter, as 
determined by the Commission, by rule.\19\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b)(10).
    \18\ 15 U.S.C. 78l.
    \19\ 15 U.S.C. 78f(b)(10)(B).
---------------------------------------------------------------------------

    Rules 31.82 through 31.88 currently include provisions that cover 
these proxy voting requirements with respect to Trading Permit Holders. 
However, because this proposed rule change deletes Chapter XXXI, the 
proposed rule change adds Rule 4.25 to retain these provisions in 
accordance with Section 957.
     Chapters XL through XLIX--Screen-Based Trading. Chapters 
XL through XLIX describe trading on the Exchange's screen-based trading 
system. The screen-based trading system is no longer used, as all 
options trading on the Exchange trade on the Hybrid Trading System. 
Therefore, the screen-based trading rules no longer apply to any 
options listed for trading on the Exchange.\20\
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    \20\ The proposed rule change makes corresponding changes to the 
following rules to delete references to screen-based trading and the 
rules proposed to be deleted: Rules 1.1(fff) and (ggg), 3.2(b), and 
3.3.
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     Chapters L through LIV--CBOE Stock Exchange (``CBSX''). 
Chapters L through LIV describe trading on CBSX, which is the 
Exchange's facility for trading stocks, warrants, IPRs, IPSs, and Trust 
Issued Receipts (non-options securities). CBSX ceased market operations 
on April 30, 2014. Therefore, the CBSX rules no longer apply to any 
trading on the Exchange.\21\ The Exchange would file a proposed rule 
change to adopt new rules if it determines to list and trade non-
options securities in the future.
---------------------------------------------------------------------------

    \21\ The proposed rule change makes corresponding changes to the 
following rules to delete references to CBSX and the rules proposed 
to be deleted: Rules 3.1A, 3.2(b), 3.3, and 6.20A, Interpretation 
and Policy .01.
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Additional Nonsubstantive Changes
    In addition to nonsubstantive changes described above, the proposed 
rule change makes the following nonsubstantive changes:
     The proposed rule change moves Interpretation and Policy 
.01 to the definition of Professional in Rule 1.1(ggg) to 
Interpretation and Policy .06 to Rule 1.1, so that all Interpretations 
and Policies to Rule 1.1 are in the same place.
     Currently, there are two paragraphs erroneously lettered 
as (mmm) and (ppp). The proposed rule change corrects this lettering 
and updates the paragraph lettering to reflect these corrections.
     The proposed rule change makes updates throughout the 
rules to conform paragraph lettering and numbering to other rules, as 
well as to reflect deleted rule provisions.
     Rule 6.2, Interpretation and Policy .01(b) and (c) 
erroneously refer to LMMs as LLMs. The proposed rule change corrects 
those erroneous references.
     The proposed rule change amends Rule 6.43(b) to indicate 
it only applies to Hybrid 3.0 classes, which is consistent with the 
current rule text and current trading practices.
     Renumber Chapter XXIVB and the rules in that chapter to 
Chapter XXIVA, and update cross-references throughout the rules.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\22\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \23\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \24\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ Id.
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    In particular, by deleting rules that no longer apply to Cboe 
Options trading (which rules have generally not been applicable in 
years), and making other nonsubstantive changes to better organize and 
more consistently number and letter rules, the rules will more clearly 
identify currently applicable rules, which the Exchange believes 
removes impediments to and perfects the mechanism of a free and open 
market. The Exchange believes the proposed rule change will eliminate 
confusion regarding which rules apply to current trading, which 
ultimately protects investors and the public interest. The proposed 
rule change has no impact on current trading on Cboe Options.

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

    Cboe Options does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change 
deletes rules that no longer apply to Cboe Options trading and makes 
other nonsubstantive changes, and thus has no impact on current trading 
on Cboe Options. Therefore, the proposed rule change has no impact on 
competition. The proposed rule change eliminates confusion with respect 
to rules applicable to current trading on Cboe Options.

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

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

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

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \25\ and 
Rule 19b-4(f)(6) \26\ thereunder.\27\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if

[[Page 3376]]

it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f)(6).
    \27\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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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-CBOE-2018-003 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-CBOE-2018-003. 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-CBOE-2018-003 and should be submitted on 
or before February 14, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-01206 Filed 1-23-18; 8:45 am]
BILLING CODE 8011-01-P
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