80 FR 19378 - Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Proposed Rule Change Regarding Open Interest Reporting

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 69 (April 10, 2015)

[Federal Register Volume 80, Number 69 (Friday, April 10, 2015)]
[Notices]
[Pages 19378-19380]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-08200]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74652; File No. SR-CFE-2015-003]


Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Proposed Rule Change Regarding Open Interest Reporting

April 6, 2015.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 23, 2015 CBOE 
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
Items have been prepared by CFE. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons. CFE also has filed this proposed rule change with the 
Commodity Futures Trading Commission (``CFTC''). CFE filed a written 
certification with the CFTC under Section 5c(c) of the Commodity 
Exchange Act (``CEA'') \2\ on March 20, 2015.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to amend its rules related to open interest 
reporting. The scope of this filing is limited solely

[[Page 19379]]

to the application of the rule amendments to security futures traded on 
CFE. The only security futures currently traded on CFE are traded under 
Chapter 16 of CFE's Rulebook which is applicable to Individual Stock 
Based and Exchange-Traded Fund Based Volatility Index security futures. 
The text of the proposed rule change is attached as Exhibit 4 to the 
filing but is not attached to the publication of this notice.

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

    In its filing with the Commission, CFE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. CFE has prepared 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 the proposed CFE rule amendments included as part of 
this rule change is to add CFE Rule 410A (Reporting Open Interest to 
the Clearing Corporation) to make clear that all CFE clearing members 
\3\ must report open interest information to The Options Clearing 
Corporation (``OCC'') in conformance with OCC rules. The rule 
amendments included as part of this rule change are to apply to all 
products traded on CFE, including both non-security futures and 
security futures.
---------------------------------------------------------------------------

    \3\ CFE Rule 121 defines ``Clearing Member'' to mean a member of 
OCC that is a CFE TPH and that is authorized under OCC Rules to 
clear trades in any or all contracts.
---------------------------------------------------------------------------

    CFE has contracted with and uses OCC for clearing and settlement 
services for all transactions conducted on the Exchange. CFE clearing 
members are required by OCC Rule 401, Interpretation and Policy .01 to 
submit gross position adjustment information to OCC as necessary to 
identify the actual open interest in clearing member accounts at the 
end of each trading day based upon the day's trading activity and any 
applicable rules of an exchange. Clearing members are not required to 
provide this information for market maker accounts at OCC or when a 
futures exchange like CFE identifies a transaction as opening or 
closing in matching trade information that the exchange provides to 
OCC.
    The amendments make clear that CFE clearing members must report 
gross position adjustment information to OCC to the extent required by, 
and in accordance with, OCC rules by including this requirement in new 
CFE Rule 410A. The amendments also provide that gross position 
adjustment information is not required to be reported to OCC pursuant 
to Rule 410A for market maker accounts at OCC or for transactions with 
respect to which a CFE Trading Privilege Holder (``TPH'') has 
designated as part of the applicable order submission to CFE whether 
the transaction is opening or closing. These two exceptions exist 
because in each case OCC will already have this information and thus 
does not need to receive it from clearing members. Specifically, with 
respect to the second exception, when a TPH submits an order to CFE's 
trading system, the TPH may choose to designate the transaction as 
opening or closing, though this field is not required. CFE provides 
such opening and closing designations by its TPHs to OCC, and OCC will 
then know that it does not need to receive this information regarding 
the order from the applicable clearing member.
    By adding Rule 410A to the CFE Rulebook, the amendments make clear 
that a failure to report open interest information pursuant to OCC 
rules is an independent violation of CFE rules. These amendments are 
based upon a recommendation by the CFTC Division of Market Oversight in 
a recent rule enforcement review of the market surveillance program of 
ICE Futures U.S., Inc.\4\
---------------------------------------------------------------------------

    \4\ See CFTC, Div. of Mkt. Oversight, Rule Enforcement Review of 
ICE Futures U.S. at pp. 9, 32 (July 22, 2014), available at http://www.cftc.gov/ucm/groups/public/@iodcms/documents/file/rericefutures072214.pdf.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Sections 6(b)(5) \6\ and 6(b)(7) \7\ in particular in 
that it is designed:
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(7).
---------------------------------------------------------------------------

     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 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, and
     to provide a fair procedure for the disciplining of 
members.
    The Exchange believes that the proposed rule change will strengthen 
its ability to carry out its responsibilities as a self-regulatory 
organization by clarifying that CFE clearing members must report gross 
position adjustment information to OCC to the extent required by, and 
in accordance with, OCC rules by including this requirement in new CFE 
Rule 410A. The proposed rule change also provides that that gross 
position adjustment information is not required to be reported to OCC 
pursuant to Rule 410A for market maker accounts at OCC or for 
transactions with respect to which a TPH has designated as part of the 
applicable order submission to CFE whether the transaction is opening 
or closing. This change will strengthen CFE's regulatory and 
disciplinary program as well as serve as an effective deterrent to 
potential conduct that violates OCC's open interest reporting rule by 
making clear that a failure to report open interest information 
pursuant to OCC rules is an independent violation of CFE rules. CFE 
additionally believes that this change enables CFE to conform with 
recent guidance issued by the CFTC's Division of Market 
Oversight.

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

    CFE does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act, in that the rule change will enhance CFE's 
ability to carry out its responsibilities as a self-regulatory 
organization. The Exchange believes that the proposed rule change is 
equitable and not unfairly discriminatory because the clarification of 
CFE clearing members' responsibility to report open interest to OCC in 
conformance with OCC rules would apply equally to all parties that are 
subject to the applicable requirements.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The proposed rule change will become effective on April 3, 2015.

[[Page 19380]]

    At any time within 60 days of the date of effectiveness of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Act.\8\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CFE-2015-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CFE-2015-003. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices of the Exchange. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-CFE-2015-003, 
and should be submitted on or before May 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Brent J. Fields,
Secretary.
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(73).
---------------------------------------------------------------------------

[FR Doc. 2015-08200 Filed 4-9-15; 8:45 am]
 BILLING CODE 8011-01-P