Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending Rules Regarding Market-Maker Quoting Obligations, 14685-14689 [2018-06915]
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14685
Federal Register / Vol. 83, No. 66 / Thursday, April 5, 2018 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82974; File No. SR–CBOE–
2018–021]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Amending Rules
Regarding Market-Maker Quoting
Obligations
March 30, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on March 27,
2018, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
rules regarding Market-Maker quoting
obligations. (additions are italicized;
deletions are [bracketed])
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Cboe Exchange, Inc.
Rules
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Rule 1.1. Definitions
(a)–(bbb) (No change).
Continuous Electronic Quotes
(ccc) With respect to a Market-Maker who
is obligated to provide continuous electronic
quotes on the Hybrid Trading System
(‘‘Hybrid Market-Maker’’), the Hybrid
Market-Maker shall be deemed to have
provided ‘‘continuous electronic quotes’’ if
the Hybrid Market-Maker provides electronic
two-sided quotes for 90% of the time that the
Hybrid Market-Maker is required to provide
electronic quotes in an appointed option
class on a given trading day during the
applicable trading session. Compliance with
this quoting obligation applies to all of a
Hybrid Market-Maker’s appointed classes
collectively (with respect to each MarketMaker type as the Hybrid Market-Maker is
approved to act). The Exchange will
determine compliance by a Hybrid MarketMaker with this quoting obligation on a
monthly basis. However, determining
compliance with this obligation on a monthly
basis does not relieve a Hybrid Market-Maker
from meeting this obligation on a daily basis,
nor does it prohibit the Exchange from taking
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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disciplinary action against a Hybrid MarketMaker for failing to meet this obligation each
trading day. Hybrid Market-Maker
continuous electronic quoting obligations
may be satisfied by Market-Makers either
individually or collectively with MarketMakers of the same TPH organization.
If a technical failure or limitation of a
system of the Exchange prevents the Hybrid
Market-Maker from maintaining, or prevents
the Hybrid Market-Maker from
communicating to the Exchange, timely and
accurate electronic quotes in a class, the
duration of such failure shall not be
considered in determining whether the
Hybrid Market-Maker has satisfied the 90%
quoting standard with respect to that option
class. The Exchange may consider other
exceptions to this continuous electronic
quote obligation based on demonstrated legal
or regulatory requirements or other
mitigating circumstances.
(ddd)–(cccc) (No change).
. . . Interpretations and Policies:
.01–.06 (No change).
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Rule 8.7. Obligations of Market-Makers
(a)–(c) (No change).
(d) Market-Making Obligations in
Applicable Hybrid Classes
The following obligations in this paragraph
(d) are only applicable to Market-Makers
trading classes on the Cboe Options Hybrid
System and only in those Hybrid classes.
Unless otherwise provided in this Rule,
Market-Makers trading classes on the Hybrid
System remain subject to all obligations
imposed by Cboe Options Rule 8.7. To the
extent another obligation contained
elsewhere in Rule 8.7 is inconsistent with an
obligation contained in paragraph (d) of Rule
8.7 with respect to a class trading on Hybrid,
this paragraph (d) shall govern trading in the
Hybrid class.
For Regular Trading Hours, these
requirements are applicable on a per class
basis, except as set forth in paragraph (ii)(B)
below, depending upon the percentage of
volume a Market-Maker transacts in an
appointed class during Regular Trading
Hours electronically versus in open outcry.
With respect to making this determination,
the Exchange will monitor a Market-Maker’s
trading activity in each appointed class
during Regular Trading Hours every calendar
quarter to determine whether it exceeds the
threshold established in paragraph (d)(i). If a
Market-Maker exceeds the threshold
established below, the obligations contained
in (d)(ii) will be effective the next calendar
quarter.
For a period of ninety (90) days
commencing immediately after a class begins
trading on the Hybrid system, the provisions
of paragraph (d)(i) shall govern trading in
that class.
(i) (No change).
(ii) Market-Maker Trades More Than 20%
Contract Volume in an Appointed Class
Electronically:
If a Market-Maker on the Cboe Options
Hybrid System transacts more than 20% of
the Market-Maker’s contract volume
electronically in an appointed Hybrid class
during Regular Trading Hours during any
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calendar quarter, commencing the next
calendar quarter the Market-Maker will be
subject to the following quoting obligations
in that class for as long as the Market-Maker
maintains an appointment in that class:
(A) (No change).
(B) Continuous Electronic Quoting
Obligation: A Market-Maker will be required
to maintain continuous electronic quotes (as
defined in Rule 1.1(ccc)) in 60% of the nonadjusted option series of the Market-Maker’s
appointed classes that have a time to
expiration of less than nine months.
Compliance with this quoting obligation
applies to all of a Market-Maker’s appointed
classes collectively (for which it must
maintain continuous electronic quotes
pursuant to this paragraph (ii)(B)). The
Exchange will determine compliance by a
Market-Maker with this quoting obligation on
a monthly basis. However, determining
compliance with this quoting obligation on a
monthly basis does not relieve a MarketMaker from meeting this obligation on a daily
basis, nor does it prohibit the Exchange from
taking disciplinary action against a MarketMaker for failing to meet this obligation each
trading day. The initial size of a MarketMaker’s quote must be for the minimum
number of contracts determined by the
Exchange on a class by class basis, which
minimum shall be at least one contract. This
obligation does not apply to intra-day add-on
series on the day during which such series
are added for trading. Market-Maker
continuous electronic quoting obligations
may be satisfied by Market-Makers either
individually or collectively with MarketMakers of the same TPH organization.
(C) (No change).
(iii)–(iv) (No change).
. . . Interpretations and Policies:
.01–.12 (No change).
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Rule 8.13. Preferred Market-Maker Program
(a)–(c) (No change).
(d) Quoting Obligations: The Preferred
Market-Maker must comply with the quoting
obligations applicable to its Market-Maker
type under Exchange rules and must provide
continuous electronic quotes (as defined in
Rule 1.1(ccc)) in at least the lesser of 99% of
the non-adjusted option series that have a
time to expiration of less than nine months
or 100% of the non-adjusted option series
that have a time to expiration of less than
nine months minus one call-put pair, with
the term ‘‘call-put pair’’ referring to one call
and one put that cover the same underlying
instrument and have the same expiration
date and exercise price. This obligation does
not apply to intra-day add-on series on the
day during which such series are added for
trading. Compliance with this quoting
obligation applies to all of a Preferred
Market-Maker’s classes for which it receives
Preferred Market-Maker orders collectively.
The Exchange will determine compliance by
a Preferred Market-Maker with this quoting
obligation on a monthly basis. However,
determining compliance with this obligation
on a monthly basis does not relieve a
Preferred Market-Maker from meeting this
quoting obligation on a daily basis, nor does
it prohibit the Exchange from taking
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disciplinary action against a Preferred
Market-Maker for failing to meet this
obligation each trading day. Preferred
Market-Maker continuous electronic quoting
obligations may be satisfied by Preferred
Market-Makers either individually or
collectively with Preferred Market-Makers of
the same TPH organization.
. . . Interpretations and Policies:
.01–.03 (No change).
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Rule 8.15. Lead Market-Makers
(a) (No change).
(b) LMM Obligations: Each LMM must
fulfill all the obligations of a Market-Maker
under the Rules and satisfy each of the
following requirements:
(i) provide continuous electronic quotes (as
defined in Rule 1.1 (ccc)) in at least the lesser
of 99% of the non-adjusted option series or
100% of the non-adjusted option series
minus one call-put pair, with the term ‘‘callput pair’’ referring to one call and one put
that cover the same underlying instrument
and have the same expiration date and
exercise price. This obligation does not apply
to intra-day add-on series on the day during
which such series are added for trading.
Compliance with this quoting obligation
applies to all of an LMM’s appointed classes
on each platform collectively. The Exchange
will determine compliance by an LMM with
this quoting obligation on a monthly basis.
However, determining compliance with this
obligation on a monthly basis does not
relieve an LMM from meeting this obligation
on a daily basis, nor does it prohibit the
Exchange from taking disciplinary action
against an LMM for failing to meet this
obligation each trading day. In option classes
in which both an On-Floor LMM and an OffFloor DPM or Off-Floor LMM have been
appointed, the On-Floor LMM will not be
obligated to comply with this paragraph (b)(i)
and instead will be obligated to comply with
the obligations of Market-Makers in Rule
8.7(d). [. ]In an option class in which the
Exchange appointed an On-Floor LMM that
has open-outcry obligations only, that OnFloor LMM will not be obligated to comply
with this paragraph (b)(i) and instead will be
obligated to comply with the obligations of
Market-Makers in Rule 8.7(d) and have a
designee in the class’s crowd on the trading
floor for the entire trading day (except for a
de minimis amount of time). Lead MarketMaker continuous electronic quoting
obligations may be satisfied by Lead MarketMakers either individually or collectively
with Lead Market-Makers of the same TPH
organization;
(ii)–(viii) (No change).
(c)–(d) (No change).
. . . Interpretations and Policies:
.01–.04 (No change).
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Rule 8.85. DPM Obligations
(a) Dealer Transactions. Each DPM must
fulfill all of the obligations of a Market-Maker
under the Rules, and must satisfy each of the
following requirements in respect of each of
the securities allocated to the DPM. To the
extent that there is any inconsistency
between the specific obligations of a DPM set
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forth in subparagraphs (a)(i) through (a)(xi) of
this Rule and the general obligations of a
Market-Maker under the Rules,
subparagraphs (a)(i) through (a)(xi) of this
Rule will govern. Each DPM must:
(i) provide continuous electronic quotes (as
defined in Rule 1.1(ccc)) in at least the lesser
of 99% of the non-adjusted option series or
100% of the non-adjusted option series
minus one call-put pair, with the term ‘‘callput pair’’ referring to one call and one put
that cover the same underlying instrument
and have the same expiration date and
exercise price, and assure that its
disseminated market quotations are accurate.
This obligation does not apply to intra-day
add-on series on the day during which such
series are added for trading. Compliance with
this quoting obligation applies to all of a
DPM’s allocated classes collectively. The
Exchange will determine compliance by a
DPM with this quoting obligation on a
monthly basis. However, determining
compliance with this obligation on a monthly
basis does not relieve a DPM from meeting
this obligation on a daily basis, nor does it
prohibit the Exchange from taking
disciplinary action against DPM for failing to
meet this obligation each trading day. DPM
continuous electronic quoting obligations
may be satisfied by DPM either individually
or collectively with DPM Market-Makers of
the same TPH organization;
(ii)–(x) (No change).
(b)–(e) (No change).
. . .Interpretations and Policies:
.01–.02 (No change).
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The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.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, and B 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 Options Rules 8.7(d)(ii)(B),
8.13(d), 8.15(b)(i), and 8.85(a)(i) set forth
continuous electronic quoting
obligations of Market-Makers, Preferred
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Market-Makers (‘‘PMMs’’), Lead MarketMakers (‘‘LMMs’’), and Designated
Primary Market-Makers (‘‘DPMs’’),
respectively. Additionally, Rule 1.1(ccc)
defines continuous electronic quotes as
that term is used in those rules. Rule 8.1
defines a Market-Maker as an individual
Trading Permit Holder or a TPH
organization that is registered with the
Exchange for the purpose of making
transactions as a dealer-specialist on the
Exchange in accordance with the
provisions of Chapter VIII of the Rules.
PMMs, LMMs, and DPMs are types of
Market-Makers.
Historically, Cboe Options has
interpreted the term ‘‘Market-Maker’’
with respect to continuous quoting
obligations to apply on an individual
basis. This interpretation is consistent
with the previous definition of MarketMaker—Cboe Options Rule 8.1
previously defined a Market-Maker as
an individual member or nominee of a
member organization.3
After the Exchange amended its rules
to state a Market-Maker may also be a
TPH organization, it continued its
interpretation of the term ‘‘MarketMaker’’ as referring to an individual
Market-Maker with respect to
continuous quoting obligations. This is
implied by Rule 8.7, Interpretation and
Policy .03(B)(i), which states the inperson requirements for Market-Makers
in Hybrid 3.0 classes set forth in
paragraph (B) may be satisfied by
Market-Makers individually or
collectively with the Market-Makers of
the same TPH organization. In the filing
in which the Exchange proposed to
adopt that provision, the Exchange
indicated it was proposing that
provision in response to the Exchange’s
expansion of the definition of MarketMaker to include TPH organizations.4
This implies the Exchange previously
interpreted Market-Maker consistent
with the previous definition, which was
an individual. Limiting that provision to
the in-person requirements for MarketMakers in Hybrid 3.0 classes also
indicates the Exchange’s intention to
only interpret Market-Maker as an
individual or TPH organization for the
purposes of those in-person obligations,
but not change its interpretation of the
term Market-Maker with respect to other
3 See Securities Exchange Act Release No. 57615
(April 3, 2008), 73 FR 19537 (April 10, 2008) (SR–
CBOE–2008–120) (order approving proposed rule
change relating to Market-Makers and Remote
Market-Makers, which rule change amended the
definition of Market-Maker in Rule 8.1 to include
member (which are now known as Trading Permit
Holders) organizations).
4 See Securities Exchange Act Release No. 57996
(June 20, 2008), 73 FR 36937 (June 30, 2008) (SR–
CBOE–2008–59) (proposed rule change to adopt
Rule 8.7, Interpretation and Policy .03(B)(i)).
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obligations. As a result, the Exchange
has continued to interpret the term
Market-Maker with respect to
continuous quoting obligations to mean
an individual, despite the change to the
definition of Market-Maker.
Cboe Options proposes to modify its
interpretation of the term ‘‘MarketMaker’’ with respect to Market-Maker
continuous electronic quoting
obligations and instead interpret the
term Market-Maker in a manner
consistent with its definition, which
includes both individuals and TPH
organizations. Specifically, the
proposed rule change amends the
above-referenced rules regarding
continuous electronic quoting
obligations to state Market-Maker (or
PMM, LMM, or DPM, as applicable)
continuous electronic quoting
obligations may be satisfied by MarketMakers either individually or
collectively with Market-Makers of the
same TPH organization. The Exchange
believes it is reasonable to interpret the
term Market-Maker with respect to
continuous electronic quoting in this
manner, as that is consistent with the
current definition. The proposed
interpretation is consistent with the
current structure of TPH organizations
registered as Market-Makers (as
currently all individual Market-Makers
are affiliated with a TPH organization,
and thus TPH organizations are
ultimately responsible for those MarketMakers) and will ensure a more
consistent application of the definition
of Market-Maker within the Cboe Rules.
Additionally, the proposed
interpretation provides Market-Makers
with flexibility to quote in their
appointed classes in a manner
consistent with their business
operations, particularly in classes with
a large number of series. For example,
the Exchange intends to convert trading
of SPX options from the Hybrid 3.0
trading platform to the Hybrid trading
system. There are currently over 7,000
series within the SPX option group
trading on the Hybrid 3.0 platform, on
which Market-Makers may not stream
electronic quotes. Upon conversion of
SPX to Hybrid, Market-Makers will be
able to select electronic appointments in
this group and stream electronic quotes,
subject to continuous electronic quoting
obligations in Rule 8.7(d). Given the
large number of SPX series, the
Exchange understands a Market-Maker
firm may decide to have individuals
associated with the firm submit SPX
quotes in different series using different
acronyms. On an aggregate basis, the
quotes submitted through those various
acronyms would satisfy the firm’s
electronic quoting obligations. For
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example, a Market-Maker firm has
acronyms ABC, DEF, and GHI registered
for three individuals associated with
that firm. The firm’s plan is for these
individuals to stream quotes in class
XYZ as follows: ABC will quote in the
near three month series (months one
through three), DEF will quote in the
middle three month series (months four
through six), and GHI will quote in the
far three month series (months seven
through nine).5 Assume each acronym
submits electronic quotes in 300 series
for 90% of the trading day, which
combines for 900 series out of 1,000
total series listed for trading in class
XYZ (i.e., 90% of series) for the MarketMaker firm. On an aggregate basis, this
satisfies the firm’s obligation to quote in
at least 60% of series for 90% of the
trading day.
Modifying the interpretation of the
term Market-Maker to apply on a firm
basis with respect to continuous
electronic quoting obligations is also
consistent with rules of other
exchanges. For example, under the rules
of Cboe-affiliated options exchanges
Cboe BZX Exchange, Inc. (‘‘BZX
Options’’) and Cboe EDGX Exchange,
Inc. (‘‘EDGX Options’’), a Market-Maker
by definition may only be an entity,6
and thus the rules with respect to
continuous electronic quoting
obligations apply on a firm basis.
Additionally, Cboe-affiliated options
exchange Cboe C2 Exchange, Inc. has
historically only had trading firms
registered as Market-Makers, and thus
has interpreted the term Market-Maker
to mean Trading Permit Holder
organization.7 Cboe Options is
modifying its interpretation of the term
Market-Maker with respect to
continuous electronic quoting
obligations to mean TPH organization
where applicable to provide greater
5 Rule 8.7(d)(ii) requires continuous electronic
quotes in the series with expirations no further than
nine months.
6 See BZX and EDGX Rules 16.1(a)(38) (defining
‘‘Options Member’’ as a firm, or organization
registered with the Exchange pursuant to Chapter
XVII of EDGX rules, for purposes of participating
in EDGX Options as an ‘‘Options Order Entry Firm’’
or ‘‘Options Market-Maker’’) and (37) (defining
‘‘Options Market Maker’’ as an Options Member,
which may only be a firm, registered with the
Exchange for the purpose of making markets in
options contracts traded on the Exchange and that
is vested with the rights and responsibilities
specified in Chapter XXII of the EDGX rules); see
also BZX and EDGX Rules 22.2 (stating that Options
Members (which may only be firms) may register
as Market Makers) and 22.5 (describing obligations
of Market-Makers, which may only be firms by
virtue of the definitions of Market-Maker and
Options Member).
7 Various Trading Permit Holders have also
informed the Exchange that other options
exchanges similarly interpret their continuous
electronic quoting rules to apply on a firm basis
rather than individual basis.
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harmonization between the rules of the
Cboe-affiliated Exchanges and simplify
the regulatory requirements of MarketMakers subject to Market-Maker
continuous electronic quoting
obligations across multiple Cboeaffiliated Exchanges. Additionally, as
noted above, the Exchange’s current inperson quoting requirements may be
satisfied by Market-Makers individually
or collectively with Market-Makers of
the same TPH organization.
While the proposed rule change is a
modification of a current interpretation
to Exchange rules, the Exchange
proposes to include the interpretation in
the applicable rules to provide clarity to
Market-Makers regarding their
obligations.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.8 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 9 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) 10 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed
interpretation is consistent with the
current definition of Market-Maker,
which provides a Market-Maker may be
an individual or a TPH organization.
The proposed interpretation is also
consistent with the current structure of
TPH organizations registered as MarketMakers (as all individual Market-Makers
are currently associated with TPH
organizations) and will ensure a more
consistent application of the definition
of Market-Maker within the Cboe Rules.
The Exchange does not propose to
modify continuous electronic quoting
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 Id.
9 15
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obligations, and does not believe the
proposed modification to the
interpretation of the term Market-Maker
in those rules will diminish MarketMakers’ obligations to provide
continuous electronic quotes in a
significant percentage of series for a
significant part of the trading day.
Rather, the proposed interpretation
provides Market-Makers with flexibility
to quote in their appointed classes in a
manner consistent with their business
operations, particularly in classes with
a large number of series. The Exchange
believes this may benefit efficiency of
Market-Makers’ quoting operations in
those classes, as they can manage their
quoting operations as they deem
appropriate based on the nature of their
businesses. The Exchange does not
believe this proposed interpretation
would reduce liquidity, because to the
extent continuous quoting obligations
may be satisfied collectively among
Market-Makers associated with a TPH
organization, the TPH organization
would have to take into account the
quotes of all associated Market-Makers
when determining whether it is
satisfying its continuous electronic
quoting obligations.
The proposed interpretation removes
impediments to and perfects the
mechanisms of a free and open market
and national market system, because
other exchanges (e.g. BZX and EDGX)
interpret the term Market-Maker to
mean a member organization with
respect to continuous quoting
obligations. Cboe Options is modifying
its interpretation of the term MarketMaker with respect to continuous
electronic quoting obligations to mean
THP organization where applicable in
order to provide greater harmonization
between the rules of the Cboe-affiliated
Exchanges and simplify the regulatory
requirements of Market-Makers subject
to Market-Maker continuous electronic
quoting obligations across multiple
Cboe-affiliated Exchanges. Additionally,
as noted above, the proposed
interpretation is consistent with the
Exchange’s current in-person quoting
requirements, which may be satisfied by
Market-Makers individually or
collectively with Market-Makers of the
same TPH organization.
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 will not impose
any burden on intramarket competition,
because the modified interpretation will
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apply in the same manner to all MarketMakers subject to continuous electronic
quoting obligations and is consistent
with the current definition of MarketMaker. The Exchange does not propose
to modify continuous electronic quoting
obligations, and does not believe the
proposed modification to the
interpretation of the term Market-Maker
in those rules will diminish MarketMakers’ obligations to provide
continuous electronic quotes in a
significant percentage of series for a
significant part of the trading day, and
thus does not impact the balance of
Market-Maker obligations and benefits.
Rather, the proposed interpretation
provides Market-Makers with flexibility
to quote in their appointed classes in a
manner consistent with their business
operations, particularly in classes with
a large number of series. The Exchange
believes this may benefit efficiency of
Market-Makers’ quoting operations,
particularly in those classes, as they can
manage their quoting operations as they
deem appropriate based on the nature of
their businesses.
The proposed rule change regarding
the interpretation of the term MarketMaker will not impose any burden on
intermarket competition, because the
modified interpretation of the term
Market-Maker to mean TPH
organization where applicable is
consistent with that of other options
exchanges, as noted above. Cboe
Options is modifying its interpretation
of the term Market-Maker with respect
to continuous electronic quoting
obligations to mean TPH organization
where applicable in order to provide
greater harmonization between the rules
of the Cboe-affiliated Exchanges and
simplify the regulatory requirements of
Market-Makers subject to Market-Maker
continuous electronic quoting
obligations across multiple Cboeaffiliated Exchanges. Additionally, the
proposed interpretation is consistent
with the Exchange’s in-person quoting
requirements.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
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) 11 of the Act and Rule 19b–
4(f)(6) thereunder.12
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 13 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 14
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. As discussed above, the Exchange
notes that its proposal is consistent with
rules of other exchanges.15 Because the
proposal does not raise any new or
novel issues, the Commission believes
that waiver of the operative delay is
consistent with the protection of
investors and the public interest.
Therefore, the Commission hereby
waives the operative delay and
designates the proposal operative upon
filing.16
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
13 17 CFR 240.19b–4(f)(6).
14 17 CFR 240.19b–4(f)(6)(iii).
15 See supra note 6 and accompanying text.
16 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
12 17
E:\FR\FM\05APN1.SGM
05APN1
Federal Register / Vol. 83, No. 66 / Thursday, April 5, 2018 / Notices
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2018–021 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.
amozie on DSK30RV082PROD with NOTICES
All submissions should refer to File
Number SR–CBOE–2018–021. 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–2018–021 and
should be submitted on or before April
26, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2018–06915 Filed 4–4–18; 8:45 am]
BILLING CODE 8011–01–P
17 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:33 Apr 04, 2018
Jkt 244001
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33063]
Notice of Applications for
Deregistration Under Section 8(f) of the
Investment Company Act of 1940
March 30, 2018.
The following is a notice of
applications for deregistration under
section 8(f) of the Investment Company
Act of 1940 for the month of March
2018. A copy of each application may be
obtained via the Commission’s website
by searching for the file number, or for
an applicant using the Company name
box, at https://www.sec.gov/search/
search.htm or by calling (202) 551–
8090. An order granting each
application will be issued unless the
SEC orders a hearing. Interested persons
may request a hearing on any
application by writing to the SEC’s
Secretary at the address below and
serving the relevant applicant with a
copy of the request, personally or by
mail. Hearing requests should be
received by the SEC by 5:30 p.m. on
April 24, 2018, and should be
accompanied by proof of service on
applicants, in the form of an affidavit or,
for lawyers, a certificate of service.
Pursuant to Rule 0–5 under the Act,
hearing requests should state the nature
of the writer’s interest, any facts bearing
upon the desirability of a hearing on the
matter, the reason for the request, and
the issues contested. Persons who wish
to be notified of a hearing may request
notification by writing to the
Commission’s Secretary.
The Commission: Secretary,
U.S. Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Shawn Davis, Branch Chief, at (202)
551–6413 or Chief Counsel’s Office at
(202) 551–6821; SEC, Division of
Investment Management, Chief
Counsel’s Office, 100 F Street NE,
Washington, DC 20549–8010.
Croft Funds Corporation [File No. 811–
08652]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On December 1,
2017, applicant made a liquidating
distribution to its shareholders, based
on net asset value. Expenses of $3,764
incurred in connection with the
liquidation were paid by the applicant’s
investment adviser.
PO 00000
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Fmt 4703
Sfmt 4703
14689
Filing Dates: The application was
filed on January 24, 2018, and amended
on February 22, 2018.
Applicant’s Address: Canton House,
300 Water Street, Baltimore, Maryland
21202.
Meehan Mutual Funds, Inc. [File No.
811–09575]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. The applicant has
transferred its assets to Meehan Focus
Fund, a series of Ultimus Managers
Trust, and, on October 20, 2017, made
a final distribution to its shareholders
based on net asset value. Expenses of
$133,418 incurred in connection with
the reorganization were paid by the
applicant’s investment adviser.
Filing Date: The application was filed
on February 22, 2018.
Applicant’s Address: c/o Edgemoor
Investment Advisors Inc., 7250
Woodmont Avenue, Suite 315,
Bethesda, Maryland 20814.
LocalShares Investment Trust [File No.
811–22755]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. On February 16,
2018, applicant made a liquidating
distribution to its shareholders, based
on net asset value. Expenses of $46,500
incurred in connection with the
liquidation were paid by the applicant’s
investment adviser.
Filing Date: The application was filed
on March 5, 2018.
Applicant’s Address: 4535 Harding
Pike, Suite 201, Nashville, Tennessee
37205.
Transamerica AUIM Opportunistic
Bond [File No. 811–22765]
Summary: Applicant, a closed-end
investment company, seeks an order
declaring that it has ceased to be an
investment company. Applicant has
never made a public offering of its
securities and does not propose to make
a public offering or engage in business
of any kind.
Filing Dates: The application was
filed on January 24, 2018, and amended
on March 7, 2018.
Applicant’s Address: 1801 California
Street, Suite 5200, Denver, Colorado
80202.
Waddell & Reed Advisors Funds [811–
09435]
Summary: Applicant seeks an order
declaring that it has ceased to be an
investment company. Each series of
applicant has transferred its assets to a
corresponding series of Ivy Funds and,
on October 10, 2017 and February 20,
E:\FR\FM\05APN1.SGM
05APN1
]]>Agencies
[Federal Register Volume 83, Number 66 (Thursday, April 5, 2018)]
[Notices]
[Pages 14685-14689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06915]
[[Page 14685]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82974; File No. SR-CBOE-2018-021]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Amending
Rules Regarding Market-Maker Quoting Obligations
March 30, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 27, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend rules regarding Market-Maker quoting
obligations. (additions are italicized; deletions are [bracketed])
* * * * *
Cboe Exchange, Inc.
Rules
* * * * *
Rule 1.1. Definitions
(a)-(bbb) (No change).
Continuous Electronic Quotes
(ccc) With respect to a Market-Maker who is obligated to provide
continuous electronic quotes on the Hybrid Trading System (``Hybrid
Market-Maker''), the Hybrid Market-Maker shall be deemed to have
provided ``continuous electronic quotes'' if the Hybrid Market-Maker
provides electronic two-sided quotes for 90% of the time that the
Hybrid Market-Maker is required to provide electronic quotes in an
appointed option class on a given trading day during the applicable
trading session. Compliance with this quoting obligation applies to
all of a Hybrid Market-Maker's appointed classes collectively (with
respect to each Market-Maker type as the Hybrid Market-Maker is
approved to act). The Exchange will determine compliance by a Hybrid
Market-Maker with this quoting obligation on a monthly basis.
However, determining compliance with this obligation on a monthly
basis does not relieve a Hybrid Market-Maker from meeting this
obligation on a daily basis, nor does it prohibit the Exchange from
taking disciplinary action against a Hybrid Market-Maker for failing
to meet this obligation each trading day. Hybrid Market-Maker
continuous electronic quoting obligations may be satisfied by
Market-Makers either individually or collectively with Market-Makers
of the same TPH organization.
If a technical failure or limitation of a system of the Exchange
prevents the Hybrid Market-Maker from maintaining, or prevents the
Hybrid Market-Maker from communicating to the Exchange, timely and
accurate electronic quotes in a class, the duration of such failure
shall not be considered in determining whether the Hybrid Market-
Maker has satisfied the 90% quoting standard with respect to that
option class. The Exchange may consider other exceptions to this
continuous electronic quote obligation based on demonstrated legal
or regulatory requirements or other mitigating circumstances.
(ddd)-(cccc) (No change).
. . . Interpretations and Policies:
.01-.06 (No change).
* * * * *
Rule 8.7. Obligations of Market-Makers
(a)-(c) (No change).
(d) Market-Making Obligations in Applicable Hybrid Classes
The following obligations in this paragraph (d) are only
applicable to Market-Makers trading classes on the Cboe Options
Hybrid System and only in those Hybrid classes. Unless otherwise
provided in this Rule, Market-Makers trading classes on the Hybrid
System remain subject to all obligations imposed by Cboe Options
Rule 8.7. To the extent another obligation contained elsewhere in
Rule 8.7 is inconsistent with an obligation contained in paragraph
(d) of Rule 8.7 with respect to a class trading on Hybrid, this
paragraph (d) shall govern trading in the Hybrid class.
For Regular Trading Hours, these requirements are applicable on
a per class basis, except as set forth in paragraph (ii)(B) below,
depending upon the percentage of volume a Market-Maker transacts in
an appointed class during Regular Trading Hours electronically
versus in open outcry. With respect to making this determination,
the Exchange will monitor a Market-Maker's trading activity in each
appointed class during Regular Trading Hours every calendar quarter
to determine whether it exceeds the threshold established in
paragraph (d)(i). If a Market-Maker exceeds the threshold
established below, the obligations contained in (d)(ii) will be
effective the next calendar quarter.
For a period of ninety (90) days commencing immediately after a
class begins trading on the Hybrid system, the provisions of
paragraph (d)(i) shall govern trading in that class.
(i) (No change).
(ii) Market-Maker Trades More Than 20% Contract Volume in an
Appointed Class Electronically:
If a Market-Maker on the Cboe Options Hybrid System transacts
more than 20% of the Market-Maker's contract volume electronically
in an appointed Hybrid class during Regular Trading Hours during any
calendar quarter, commencing the next calendar quarter the Market-
Maker will be subject to the following quoting obligations in that
class for as long as the Market-Maker maintains an appointment in
that class:
(A) (No change).
(B) Continuous Electronic Quoting Obligation: A Market-Maker
will be required to maintain continuous electronic quotes (as
defined in Rule 1.1(ccc)) in 60% of the non-adjusted option series
of the Market-Maker's appointed classes that have a time to
expiration of less than nine months. Compliance with this quoting
obligation applies to all of a Market-Maker's appointed classes
collectively (for which it must maintain continuous electronic
quotes pursuant to this paragraph (ii)(B)). The Exchange will
determine compliance by a Market-Maker with this quoting obligation
on a monthly basis. However, determining compliance with this
quoting obligation on a monthly basis does not relieve a Market-
Maker from meeting this obligation on a daily basis, nor does it
prohibit the Exchange from taking disciplinary action against a
Market-Maker for failing to meet this obligation each trading day.
The initial size of a Market-Maker's quote must be for the minimum
number of contracts determined by the Exchange on a class by class
basis, which minimum shall be at least one contract. This obligation
does not apply to intra-day add-on series on the day during which
such series are added for trading. Market-Maker continuous
electronic quoting obligations may be satisfied by Market-Makers
either individually or collectively with Market-Makers of the same
TPH organization.
(C) (No change).
(iii)-(iv) (No change).
. . . Interpretations and Policies:
.01-.12 (No change).
* * * * *
Rule 8.13. Preferred Market-Maker Program
(a)-(c) (No change).
(d) Quoting Obligations: The Preferred Market-Maker must comply
with the quoting obligations applicable to its Market-Maker type
under Exchange rules and must provide continuous electronic quotes
(as defined in Rule 1.1(ccc)) in at least the lesser of 99% of the
non-adjusted option series that have a time to expiration of less
than nine months or 100% of the non-adjusted option series that have
a time to expiration of less than nine months minus one call-put
pair, with the term ``call-put pair'' referring to one call and one
put that cover the same underlying instrument and have the same
expiration date and exercise price. This obligation does not apply
to intra-day add-on series on the day during which such series are
added for trading. Compliance with this quoting obligation applies
to all of a Preferred Market-Maker's classes for which it receives
Preferred Market-Maker orders collectively. The Exchange will
determine compliance by a Preferred Market-Maker with this quoting
obligation on a monthly basis. However, determining compliance with
this obligation on a monthly basis does not relieve a Preferred
Market-Maker from meeting this quoting obligation on a daily basis,
nor does it prohibit the Exchange from taking
[[Page 14686]]
disciplinary action against a Preferred Market-Maker for failing to
meet this obligation each trading day. Preferred Market-Maker
continuous electronic quoting obligations may be satisfied by
Preferred Market-Makers either individually or collectively with
Preferred Market-Makers of the same TPH organization.
. . . Interpretations and Policies:
.01-.03 (No change).
* * * * *
Rule 8.15. Lead Market-Makers
(a) (No change).
(b) LMM Obligations: Each LMM must fulfill all the obligations
of a Market-Maker under the Rules and satisfy each of the following
requirements:
(i) provide continuous electronic quotes (as defined in Rule 1.1
(ccc)) in at least the lesser of 99% of the non-adjusted option
series or 100% of the non-adjusted option series minus one call-put
pair, with the term ``call-put pair'' referring to one call and one
put that cover the same underlying instrument and have the same
expiration date and exercise price. This obligation does not apply
to intra-day add-on series on the day during which such series are
added for trading. Compliance with this quoting obligation applies
to all of an LMM's appointed classes on each platform collectively.
The Exchange will determine compliance by an LMM with this quoting
obligation on a monthly basis. However, determining compliance with
this obligation on a monthly basis does not relieve an LMM from
meeting this obligation on a daily basis, nor does it prohibit the
Exchange from taking disciplinary action against an LMM for failing
to meet this obligation each trading day. In option classes in which
both an On-Floor LMM and an Off-Floor DPM or Off-Floor LMM have been
appointed, the On-Floor LMM will not be obligated to comply with
this paragraph (b)(i) and instead will be obligated to comply with
the obligations of Market-Makers in Rule 8.7(d). [. ]In an option
class in which the Exchange appointed an On-Floor LMM that has open-
outcry obligations only, that On-Floor LMM will not be obligated to
comply with this paragraph (b)(i) and instead will be obligated to
comply with the obligations of Market-Makers in Rule 8.7(d) and have
a designee in the class's crowd on the trading floor for the entire
trading day (except for a de minimis amount of time). Lead Market-
Maker continuous electronic quoting obligations may be satisfied by
Lead Market-Makers either individually or collectively with Lead
Market-Makers of the same TPH organization;
(ii)-(viii) (No change).
(c)-(d) (No change).
. . . Interpretations and Policies:
.01-.04 (No change).
* * * * *
Rule 8.85. DPM Obligations
(a) Dealer Transactions. Each DPM must fulfill all of the
obligations of a Market-Maker under the Rules, and must satisfy each
of the following requirements in respect of each of the securities
allocated to the DPM. To the extent that there is any inconsistency
between the specific obligations of a DPM set forth in subparagraphs
(a)(i) through (a)(xi) of this Rule and the general obligations of a
Market-Maker under the Rules, subparagraphs (a)(i) through (a)(xi)
of this Rule will govern. Each DPM must:
(i) provide continuous electronic quotes (as defined in Rule
1.1(ccc)) in at least the lesser of 99% of the non-adjusted option
series or 100% of the non-adjusted option series minus one call-put
pair, with the term ``call-put pair'' referring to one call and one
put that cover the same underlying instrument and have the same
expiration date and exercise price, and assure that its disseminated
market quotations are accurate. This obligation does not apply to
intra-day add-on series on the day during which such series are
added for trading. Compliance with this quoting obligation applies
to all of a DPM's allocated classes collectively. The Exchange will
determine compliance by a DPM with this quoting obligation on a
monthly basis. However, determining compliance with this obligation
on a monthly basis does not relieve a DPM from meeting this
obligation on a daily basis, nor does it prohibit the Exchange from
taking disciplinary action against DPM for failing to meet this
obligation each trading day. DPM continuous electronic quoting
obligations may be satisfied by DPM either individually or
collectively with DPM Market-Makers of the same TPH organization;
(ii)-(x) (No change).
(b)-(e) (No change).
. . .Interpretations and Policies:
.01-.02 (No change).
* * * * *
The text of the proposed rule change is also 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, and B 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 Options Rules 8.7(d)(ii)(B), 8.13(d), 8.15(b)(i), and
8.85(a)(i) set forth continuous electronic quoting obligations of
Market-Makers, Preferred Market-Makers (``PMMs''), Lead Market-Makers
(``LMMs''), and Designated Primary Market-Makers (``DPMs''),
respectively. Additionally, Rule 1.1(ccc) defines continuous electronic
quotes as that term is used in those rules. Rule 8.1 defines a Market-
Maker as an individual Trading Permit Holder or a TPH organization that
is registered with the Exchange for the purpose of making transactions
as a dealer-specialist on the Exchange in accordance with the
provisions of Chapter VIII of the Rules. PMMs, LMMs, and DPMs are types
of Market-Makers.
Historically, Cboe Options has interpreted the term ``Market-
Maker'' with respect to continuous quoting obligations to apply on an
individual basis. This interpretation is consistent with the previous
definition of Market-Maker--Cboe Options Rule 8.1 previously defined a
Market-Maker as an individual member or nominee of a member
organization.\3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 57615 (April 3,
2008), 73 FR 19537 (April 10, 2008) (SR-CBOE-2008-120) (order
approving proposed rule change relating to Market-Makers and Remote
Market-Makers, which rule change amended the definition of Market-
Maker in Rule 8.1 to include member (which are now known as Trading
Permit Holders) organizations).
---------------------------------------------------------------------------
After the Exchange amended its rules to state a Market-Maker may
also be a TPH organization, it continued its interpretation of the term
``Market-Maker'' as referring to an individual Market-Maker with
respect to continuous quoting obligations. This is implied by Rule 8.7,
Interpretation and Policy .03(B)(i), which states the in-person
requirements for Market-Makers in Hybrid 3.0 classes set forth in
paragraph (B) may be satisfied by Market-Makers individually or
collectively with the Market-Makers of the same TPH organization. In
the filing in which the Exchange proposed to adopt that provision, the
Exchange indicated it was proposing that provision in response to the
Exchange's expansion of the definition of Market-Maker to include TPH
organizations.\4\ This implies the Exchange previously interpreted
Market-Maker consistent with the previous definition, which was an
individual. Limiting that provision to the in-person requirements for
Market-Makers in Hybrid 3.0 classes also indicates the Exchange's
intention to only interpret Market-Maker as an individual or TPH
organization for the purposes of those in-person obligations, but not
change its interpretation of the term Market-Maker with respect to
other
[[Page 14687]]
obligations. As a result, the Exchange has continued to interpret the
term Market-Maker with respect to continuous quoting obligations to
mean an individual, despite the change to the definition of Market-
Maker.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 57996 (June 20,
2008), 73 FR 36937 (June 30, 2008) (SR-CBOE-2008-59) (proposed rule
change to adopt Rule 8.7, Interpretation and Policy .03(B)(i)).
---------------------------------------------------------------------------
Cboe Options proposes to modify its interpretation of the term
``Market-Maker'' with respect to Market-Maker continuous electronic
quoting obligations and instead interpret the term Market-Maker in a
manner consistent with its definition, which includes both individuals
and TPH organizations. Specifically, the proposed rule change amends
the above-referenced rules regarding continuous electronic quoting
obligations to state Market-Maker (or PMM, LMM, or DPM, as applicable)
continuous electronic quoting obligations may be satisfied by Market-
Makers either individually or collectively with Market-Makers of the
same TPH organization. The Exchange believes it is reasonable to
interpret the term Market-Maker with respect to continuous electronic
quoting in this manner, as that is consistent with the current
definition. The proposed interpretation is consistent with the current
structure of TPH organizations registered as Market-Makers (as
currently all individual Market-Makers are affiliated with a TPH
organization, and thus TPH organizations are ultimately responsible for
those Market-Makers) and will ensure a more consistent application of
the definition of Market-Maker within the Cboe Rules.
Additionally, the proposed interpretation provides Market-Makers
with flexibility to quote in their appointed classes in a manner
consistent with their business operations, particularly in classes with
a large number of series. For example, the Exchange intends to convert
trading of SPX options from the Hybrid 3.0 trading platform to the
Hybrid trading system. There are currently over 7,000 series within the
SPX option group trading on the Hybrid 3.0 platform, on which Market-
Makers may not stream electronic quotes. Upon conversion of SPX to
Hybrid, Market-Makers will be able to select electronic appointments in
this group and stream electronic quotes, subject to continuous
electronic quoting obligations in Rule 8.7(d). Given the large number
of SPX series, the Exchange understands a Market-Maker firm may decide
to have individuals associated with the firm submit SPX quotes in
different series using different acronyms. On an aggregate basis, the
quotes submitted through those various acronyms would satisfy the
firm's electronic quoting obligations. For example, a Market-Maker firm
has acronyms ABC, DEF, and GHI registered for three individuals
associated with that firm. The firm's plan is for these individuals to
stream quotes in class XYZ as follows: ABC will quote in the near three
month series (months one through three), DEF will quote in the middle
three month series (months four through six), and GHI will quote in the
far three month series (months seven through nine).\5\ Assume each
acronym submits electronic quotes in 300 series for 90% of the trading
day, which combines for 900 series out of 1,000 total series listed for
trading in class XYZ (i.e., 90% of series) for the Market-Maker firm.
On an aggregate basis, this satisfies the firm's obligation to quote in
at least 60% of series for 90% of the trading day.
---------------------------------------------------------------------------
\5\ Rule 8.7(d)(ii) requires continuous electronic quotes in the
series with expirations no further than nine months.
---------------------------------------------------------------------------
Modifying the interpretation of the term Market-Maker to apply on a
firm basis with respect to continuous electronic quoting obligations is
also consistent with rules of other exchanges. For example, under the
rules of Cboe-affiliated options exchanges Cboe BZX Exchange, Inc.
(``BZX Options'') and Cboe EDGX Exchange, Inc. (``EDGX Options''), a
Market-Maker by definition may only be an entity,\6\ and thus the rules
with respect to continuous electronic quoting obligations apply on a
firm basis. Additionally, Cboe-affiliated options exchange Cboe C2
Exchange, Inc. has historically only had trading firms registered as
Market-Makers, and thus has interpreted the term Market-Maker to mean
Trading Permit Holder organization.\7\ Cboe Options is modifying its
interpretation of the term Market-Maker with respect to continuous
electronic quoting obligations to mean TPH organization where
applicable to provide greater harmonization between the rules of the
Cboe-affiliated Exchanges and simplify the regulatory requirements of
Market-Makers subject to Market-Maker continuous electronic quoting
obligations across multiple Cboe-affiliated Exchanges. Additionally, as
noted above, the Exchange's current in-person quoting requirements may
be satisfied by Market-Makers individually or collectively with Market-
Makers of the same TPH organization.
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\6\ See BZX and EDGX Rules 16.1(a)(38) (defining ``Options
Member'' as a firm, or organization registered with the Exchange
pursuant to Chapter XVII of EDGX rules, for purposes of
participating in EDGX Options as an ``Options Order Entry Firm'' or
``Options Market-Maker'') and (37) (defining ``Options Market
Maker'' as an Options Member, which may only be a firm, registered
with the Exchange for the purpose of making markets in options
contracts traded on the Exchange and that is vested with the rights
and responsibilities specified in Chapter XXII of the EDGX rules);
see also BZX and EDGX Rules 22.2 (stating that Options Members
(which may only be firms) may register as Market Makers) and 22.5
(describing obligations of Market-Makers, which may only be firms by
virtue of the definitions of Market-Maker and Options Member).
\7\ Various Trading Permit Holders have also informed the
Exchange that other options exchanges similarly interpret their
continuous electronic quoting rules to apply on a firm basis rather
than individual basis.
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While the proposed rule change is a modification of a current
interpretation to Exchange rules, the Exchange proposes to include the
interpretation in the applicable rules to provide clarity to Market-
Makers regarding their obligations.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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In particular, the proposed interpretation is consistent with the
current definition of Market-Maker, which provides a Market-Maker may
be an individual or a TPH organization. The proposed interpretation is
also consistent with the current structure of TPH organizations
registered as Market-Makers (as all individual Market-Makers are
currently associated with TPH organizations) and will ensure a more
consistent application of the definition of Market-Maker within the
Cboe Rules.
The Exchange does not propose to modify continuous electronic
quoting
[[Page 14688]]
obligations, and does not believe the proposed modification to the
interpretation of the term Market-Maker in those rules will diminish
Market-Makers' obligations to provide continuous electronic quotes in a
significant percentage of series for a significant part of the trading
day. Rather, the proposed interpretation provides Market-Makers with
flexibility to quote in their appointed classes in a manner consistent
with their business operations, particularly in classes with a large
number of series. The Exchange believes this may benefit efficiency of
Market-Makers' quoting operations in those classes, as they can manage
their quoting operations as they deem appropriate based on the nature
of their businesses. The Exchange does not believe this proposed
interpretation would reduce liquidity, because to the extent continuous
quoting obligations may be satisfied collectively among Market-Makers
associated with a TPH organization, the TPH organization would have to
take into account the quotes of all associated Market-Makers when
determining whether it is satisfying its continuous electronic quoting
obligations.
The proposed interpretation removes impediments to and perfects the
mechanisms of a free and open market and national market system,
because other exchanges (e.g. BZX and EDGX) interpret the term Market-
Maker to mean a member organization with respect to continuous quoting
obligations. Cboe Options is modifying its interpretation of the term
Market-Maker with respect to continuous electronic quoting obligations
to mean THP organization where applicable in order to provide greater
harmonization between the rules of the Cboe-affiliated Exchanges and
simplify the regulatory requirements of Market-Makers subject to
Market-Maker continuous electronic quoting obligations across multiple
Cboe-affiliated Exchanges. Additionally, as noted above, the proposed
interpretation is consistent with the Exchange's current in-person
quoting requirements, which may be satisfied by Market-Makers
individually or collectively with Market-Makers of the same TPH
organization.
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
will not impose any burden on intramarket competition, because the
modified interpretation will apply in the same manner to all Market-
Makers subject to continuous electronic quoting obligations and is
consistent with the current definition of Market-Maker. The Exchange
does not propose to modify continuous electronic quoting obligations,
and does not believe the proposed modification to the interpretation of
the term Market-Maker in those rules will diminish Market-Makers'
obligations to provide continuous electronic quotes in a significant
percentage of series for a significant part of the trading day, and
thus does not impact the balance of Market-Maker obligations and
benefits. Rather, the proposed interpretation provides Market-Makers
with flexibility to quote in their appointed classes in a manner
consistent with their business operations, particularly in classes with
a large number of series. The Exchange believes this may benefit
efficiency of Market-Makers' quoting operations, particularly in those
classes, as they can manage their quoting operations as they deem
appropriate based on the nature of their businesses.
The proposed rule change regarding the interpretation of the term
Market-Maker will not impose any burden on intermarket competition,
because the modified interpretation of the term Market-Maker to mean
TPH organization where applicable is consistent with that of other
options exchanges, as noted above. Cboe Options is modifying its
interpretation of the term Market-Maker with respect to continuous
electronic quoting obligations to mean TPH organization where
applicable in order to provide greater harmonization between the rules
of the Cboe-affiliated Exchanges and simplify the regulatory
requirements of Market-Makers subject to Market-Maker continuous
electronic quoting obligations across multiple Cboe-affiliated
Exchanges. Additionally, the proposed interpretation is consistent with
the Exchange's in-person quoting requirements.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) \11\ of the Act and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and the text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. As discussed
above, the Exchange notes that its proposal is consistent with rules of
other exchanges.\15\ Because the proposal does not raise any new or
novel issues, the Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest. Therefore, the Commission hereby waives the operative delay
and designates the proposal operative upon filing.\16\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ See supra note 6 and accompanying text.
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 14689]]
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-2018-021 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-2018-021. 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-2018-021 and should be submitted on
or before April 26, 2018.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2018-06915 Filed 4-4-18; 8:45 am]
BILLING CODE 8011-01-P
