80 FR 37700 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change Relating to Floor Broker Due Diligence
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 126 (July 1, 2015)
Federal Register Volume 80, Issue 126 (July 1, 2015)
| Page Range | 37700-37701 | |
| FR Document | 2015-16087 |
[Federal Register Volume 80, Number 126 (Wednesday, July 1, 2015)] [Notices] [Pages 37700-37701] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-16087] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75299; File No. SR-CBOE-2015-047] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change Relating to Floor Broker Due Diligence June 25, 2015. I. Introduction On May 5, 2015, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (the ``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to amend Exchange rules related to Floor Broker due diligence. The proposed rule change was published for comment in the Federal Register on May 22, 2015.\4\ The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. \4\ See Securities Exchange Act Release No. 74990 (May 18, 2015), 80 FR 29767 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposal CBOE proposes to amend several rules to address certain order handling obligations on the part of its Floor Brokers. Specifically, whether orders sent to Floor Brokers are presumed to be ``Held'' or ``Not Held.'' A ``Not Held'' order generally is one where the customer gives the Floor Broker discretion in executing the order, both with respect to the time of execution and the price (though the customer may specify a limit price), and the Floor Broker works the order over a period of time to avoid market impact while seeking best execution of the order. A ``Held'' order generally is one where the customer seeks a prompt execution at the best currently available price or prices. Currently, CBOE Rule 6.53 (Certain Order Types Defined) defines a ``Not Held Order'' as an order that is marked as ``not held'' or ``take time,'' or ``which bears any qualifying notation giving discretion as to the price or time at which such order is to be executed.'' CBOE Rule 6.75 (Discretionary Transactions) further provides that ``[u]nder normal market conditions, and in the absence of a `not held' instruction, a Floor Broker may not exercise time discretion on market or marketable limit orders and shall immediately execute such orders at the best price or prices available.'' CBOE now proposes to amend Exchange Rule 6.75, as well as Rules 6.53 and 6.73, to establish a different default status for orders sent to Floor Brokers. Specifically, CBOE proposes to add a new Interpretation and Policy .06 to CBOE Rule 6.73 (Responsibilities of Floor Brokers) to specify that an order entrusted to a Floor Broker will be considered a Not Held Order unless (i) a Floor Broker's customer otherwise specifies or (ii) the order was electronically received by the Exchange and subsequently routed to a Floor Broker or PAR Official pursuant to the order entry firm's routing instructions. The Exchange also proposes to add additional language to the Not Held Order definition in CBOE Rule 6.53(g) that mirrors the language it proposes to add to Rule 6.73. Finally, the Exchange proposes to amend CBOE Rule 6.75, which addresses a Floor Broker's discretion in executing orders, to delete the sentence that specifies that a Floor Broker may not exercise time discretion on an order under normal market conditions unless the order was marked ``not held.'' The consequence of these proposes changes, taken together, will result in a change to the default order handling obligations for orders sent to Floor Brokers. Whereas Floor Brokers are currently obligated by CBOE Rule 6.75 to immediately execute orders at the best available prices under normal market conditions unless the customer provides a Not Held instruction on the order, CBOE's proposal will consider all orders sent to Floor Brokers to be ``Not Held'' by default unless the customer specifies or if the order is delivered to CBOE electronically in such a manner as to suggest that the customer is seeking a prompt execution of a marketable order at the best available prices. In its filing, the Exchange states that CBOE Rules 6.73 and 6.75 were adopted prior to electronic trading and thus did not contemplate the interaction between an electronic trading environment and a manual trading floor.\5\ The Exchange believes that, at present, customers who submit orders to Floor Brokers likely are seeking to rely on a Floor Broker's expertise and discretion.\6\ The Exchange believes that customers place orders with Floor Brokers because Floor Brokers can exercise discretion in executing a client's order and can potentially provide higher execution quality.\7\ The Exchange states that a customer would otherwise electronically submit an order to the Exchange for automatic handling and an electronic execution.\8\ --------------------------------------------------------------------------- \5\ See Notice, supra note 4, 80 FR at 29768. \6\ See id. \7\ See id. \8\ See id. --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.\9\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\10\ which requires that the rules of the exchange be designed, among other things, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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. --------------------------------------------------------------------------- \9\ In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \10\ 15 U.S.C. 78(b)(5). --------------------------------------------------------------------------- The Commission believes that the Exchange has articulated a reasonable basis for changing the current default presumption of whether a customer intends to provide a Floor Broker with the ability to exercise time and price discretion on its behalf as long as the order is not otherwise marked, or received electronically, in a manner to suggest that the customer did not intend for its order to be treated as Not Held. Other than changing the default presumption to ``Not Held'' for most orders sent to Floor Brokers, CBOE is not proposing to change any other order handling obligations applicable to Floor Brokers. CBOE's proposal responds to its understanding of the changing role of Floor Brokers on its trading floor since it adopted Rule 6.75, and its understanding of how customers today use, and intend to continue to use, the services of Floor Brokers on the CBOE exchange. Accordingly, the Commission finds that the proposed rule change is consistent with the Act and is designed [[Page 37701]] to promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market. IV. Conclusion IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-CBOE-2015-047) be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2015-16087 Filed 6-30-15; 8:45 am] BILLING CODE 8011-01-P
![37700 Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Notices
For the Commission, by the Division of bears any qualifying notation giving submit orders to Floor Brokers likely are
Trading and Markets, pursuant to delegated discretion as to the price or time at seeking to rely on a Floor Broker’s
authority.31 which such order is to be executed.’’ expertise and discretion.6 The Exchange
Robert W. Errett, CBOE Rule 6.75 (Discretionary believes that customers place orders
Deputy Secretary. Transactions) further provides that with Floor Brokers because Floor
[FR Doc. 2015–16083 Filed 6–30–15; 8:45 am] ‘‘[u]nder normal market conditions, and Brokers can exercise discretion in
BILLING CODE 8011–01–P in the absence of a ‘not held’ executing a client’s order and can
instruction, a Floor Broker may not potentially provide higher execution
exercise time discretion on market or quality.7 The Exchange states that a
SECURITIES AND EXCHANGE marketable limit orders and shall customer would otherwise
COMMISSION immediately execute such orders at the electronically submit an order to the
[Release No. 34–75299; File No. SR–CBOE– best price or prices available.’’ Exchange for automatic handling and an
2015–047] CBOE now proposes to amend electronic execution.8
Exchange Rule 6.75, as well as Rules
Self-Regulatory Organizations; 6.53 and 6.73, to establish a different
Chicago Board Options Exchange, default status for orders sent to Floor III. Discussion and Commission
Incorporated; Order Approving Brokers. Specifically, CBOE proposes to Findings
Proposed Rule Change Relating to add a new Interpretation and Policy .06 After careful review, the Commission
Floor Broker Due Diligence to CBOE Rule 6.73 (Responsibilities of finds that the proposed rule change is
Floor Brokers) to specify that an order consistent with the Act and the rules
June 25, 2015. entrusted to a Floor Broker will be and regulations thereunder applicable to
I. Introduction considered a Not Held Order unless (i) a national securities exchange.9 In
a Floor Broker’s customer otherwise particular, the Commission finds that
On May 5, 2015, Chicago Board the proposed rule change is consistent
specifies or (ii) the order was
Options Exchange, Incorporated (the with Section 6(b)(5) of the Act,10 which
electronically received by the Exchange
‘‘Exchange’’ or ‘‘CBOE’’) filed with the requires that the rules of the exchange
and subsequently routed to a Floor
Securities and Exchange Commission be designed, among other things, to
Broker or PAR Official pursuant to the
(the ‘‘Commission’’), pursuant to prevent fraudulent and manipulative
order entry firm’s routing instructions.
Section 19(b)(1) 1 of the Securities acts and practices, to promote just and
The Exchange also proposes to add
Exchange Act of 1934 (the ‘‘Act’’),2 and equitable principles of trade, to remove
additional language to the Not Held
Rule 19b–4 thereunder,3 a proposed rule impediments to and perfect the
Order definition in CBOE Rule 6.53(g)
change to amend Exchange rules related mechanism of a free and open market
that mirrors the language it proposes to
to Floor Broker due diligence. The and a national market system, and, in
add to Rule 6.73. Finally, the Exchange
proposed rule change was published for general, to protect investors and the
proposes to amend CBOE Rule 6.75,
comment in the Federal Register on public interest.
which addresses a Floor Broker’s
May 22, 2015.4 The Commission The Commission believes that the
discretion in executing orders, to delete
received no comment letters on the Exchange has articulated a reasonable
the sentence that specifies that a Floor
proposed rule change. This order basis for changing the current default
Broker may not exercise time discretion
approves the proposed rule change. presumption of whether a customer
on an order under normal market
II. Description of the Proposal conditions unless the order was marked intends to provide a Floor Broker with
‘‘not held.’’ the ability to exercise time and price
CBOE proposes to amend several discretion on its behalf as long as the
rules to address certain order handling The consequence of these proposes
changes, taken together, will result in a order is not otherwise marked, or
obligations on the part of its Floor received electronically, in a manner to
Brokers. Specifically, whether orders change to the default order handling
obligations for orders sent to Floor suggest that the customer did not intend
sent to Floor Brokers are presumed to be for its order to be treated as Not Held.
‘‘Held’’ or ‘‘Not Held.’’ A ‘‘Not Held’’ Brokers. Whereas Floor Brokers are
currently obligated by CBOE Rule 6.75 Other than changing the default
order generally is one where the presumption to ‘‘Not Held’’ for most
customer gives the Floor Broker to immediately execute orders at the
best available prices under normal orders sent to Floor Brokers, CBOE is
discretion in executing the order, both not proposing to change any other order
market conditions unless the customer
with respect to the time of execution handling obligations applicable to Floor
provides a Not Held instruction on the
and the price (though the customer may Brokers. CBOE’s proposal responds to
order, CBOE’s proposal will consider all
specify a limit price), and the Floor its understanding of the changing role of
orders sent to Floor Brokers to be ‘‘Not
Broker works the order over a period of Floor Brokers on its trading floor since
Held’’ by default unless the customer
time to avoid market impact while it adopted Rule 6.75, and its
specifies or if the order is delivered to
seeking best execution of the order. A understanding of how customers today
CBOE electronically in such a manner
‘‘Held’’ order generally is one where the use, and intend to continue to use, the
as to suggest that the customer is
customer seeks a prompt execution at services of Floor Brokers on the CBOE
seeking a prompt execution of a
the best currently available price or exchange. Accordingly, the Commission
marketable order at the best available
prices. finds that the proposed rule change is
Currently, CBOE Rule 6.53 (Certain prices.
In its filing, the Exchange states that consistent with the Act and is designed
Order Types Defined) defines a ‘‘Not
CBOE Rules 6.73 and 6.75 were adopted
Held Order’’ as an order that is marked
tkelley on DSK3SPTVN1PROD with NOTICES
prior to electronic trading and thus did 6 See id.
as ‘‘not held’’ or ‘‘take time,’’ or ‘‘which 7 See id.
not contemplate the interaction between
8 See id.
1 15 U.S.C. 78s(b)(1).
an electronic trading environment and a
9 In approving this proposed rule change, the
2 15 U.S.C. 78a. manual trading floor.5 The Exchange Commission notes that it has considered the
3 17 CFR 240.19b–4. believes that, at present, customers who proposed rule’s impact on efficiency, competition,
4 See Securities Exchange Act Release No. 74990 and capital formation. See 15 U.S.C. 78c(f).
(May 18, 2015), 80 FR 29767 (‘‘Notice’’). 5 See Notice, supra note 4, 80 FR at 29768. 10 15 U.S.C. 78(b)(5).
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![Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Notices 37701
to promote just and equitable principles Series, Federated International Series, applicants with a copy of the request,
of trade and remove impediments to and Inc., Federated Investment Series personally or by mail. Hearing requests
perfect the mechanism of a free and Funds, Inc., Federated MDT Series, should be received by the Commission
open market. Federated MDT Stock Trust, Federated by 5:30 p.m. on July 17, 2015, and
Managed Pool Series, Federated should be accompanied by proof of
IV. Conclusion
Municipal Securities Fund, Inc., service on applicants, in the form of an
IT IS THEREFORE ORDERED, Federated Municipal Securities Income affidavit or, for lawyers, a certificate of
pursuant to Section 19(b)(2) of the Act, Trust, Federated Premier Intermediate service. Pursuant to rule 0–5 under the
that the proposed rule change (SR– Municipal Income Fund, Federated Act, hearing requests should state the
CBOE–2015–047) be, and hereby is, Premier Municipal Income Fund, nature of the writer’s interest, any facts
approved. Federated Short-Intermediate Duration bearing upon the desirability of a
For the Commission, by the Division of Municipal Trust, Federated Total Return hearing on the matter, the reason for the
Trading and Markets, pursuant to delegated Government Bond Fund, Federated request, and the issues contested.
authority.11 Total Return Series, Inc., Federated U.S. Persons who wish to be notified of a
Robert W. Errett, Government Securities Fund: 1–3 Years, hearing may request notification by
Deputy Secretary. Federated U.S. Government Securities writing to the Commission’s Secretary.
[FR Doc. 2015–16087 Filed 6–30–15; 8:45 am] Fund: 2–5 Years, Federated World ADDRESSES: Secretary, U.S. Securities
BILLING CODE 8011–01–P Investment Series, Inc., Intermediate and Exchange Commission, 100 F Street
Municipal Trust, Edward Jones Money NE., Washington, DC 20549–1090.
Market Fund, Money Market Applicants, c/o Peter Germain,
SECURITIES AND EXCHANGE Obligations Trust (each such registered Federated Investors, Inc., Federated
COMMISSION management investment company or Investors Tower, 1001 Liberty Avenue,
[Investment Company Act Release No. series thereof, a ‘‘Federated Fund’’); Pittsburgh, PA 15222–3779.
31697; File No. 812–13875–47] Federated Advisory Services Company, FOR FURTHER INFORMATION CONTACT:
Federated Equity Management Company Bruce R. MacNeil, Senior Counsel, at
Cash Trust Series, Inc., et al.; Notice of of Pennsylvania, Federated Global (202) 551–6817 or Daniele Marchesani,
Application Investment Management Corp., Branch Chief, at (202) 551–6821
Federated Investment Counseling, (Division of Investment Management,
June 24, 2015.
Federated Investment Management Chief Counsel’s Office).
AGENCY: Securities and Exchange Company, Federated MDTA LLC,
Commission (‘‘Commission’’). SUPPLEMENTARY INFORMATION: The
Passport Research, Ltd., Federated following is a summary of the
ACTION: Notice of an application for an Securities Corp. (each, an Adviser, and
order pursuant to sections 6(c) and 17(b) application. The complete application
collectively, the ‘‘Advisers’’) and any may be obtained via the Commission’s
of the Investment Company Act of 1940 other registered management investment
(the ‘‘Act’’) for an exemption from Web site by searching for the file
company or series thereof for which a number, or for an applicant using the
section 17(a) of the Act. person controlling, controlled by, or Company name box, at http://
SUMMARY: Summary of the Application: under common control with Federated www.sec.gov/search/search.htm or by
Applicants request an order (‘‘Order’’) Investors, Inc., a Pennsylvania calling (202) 551–8090.
that would permit certain registered corporation (‘‘Federated’’), serves as
management investment companies to investment adviser (included in the Applicants’ Representations
engage in certain primary and secondary term ‘‘Adviser,’’ and any such company 1. Each Fund is an open-end or
market transactions in fixed-income or series thereof, together with the closed-end management investment
securities (the ‘‘Securities Federated Funds, the ‘‘Funds,’’ and company registered under the Act and
Transactions’’) on a principal basis with individually, a ‘‘Fund’’).1 is organized as a statutory trust,
certain broker-dealers and banks that are DATES: Filing Dates: The application was business trust, or corporation under the
affiliated persons of the registered filed on March 1, 2011 and amended on laws of Delaware, Maryland, or
management investment companies August 29, 2011, July 3, 2012, December Massachusetts. The Funds have a
solely by virtue of non-controlling 7, 2012, August 29, 2013, June 15, 2015 variety of investment objectives, but
ownership interests in such investment and June 22, 2015. each may invest a portion of its assets
companies. Hearing or Notification of Hearing: An in fixed-income securities. The fixed-
Applicants: Cash Trust Series, Inc., order granting the application will be income securities in which the Funds
Federated Adjustable Rate Securities issued unless the Commission orders a may invest include, but are not limited
Fund, Federated Core Trust, Federated hearing. Interested persons may request to, government securities, municipal
Core Trust II, L.P., Federated Core Trust a hearing by writing to the securities, tender option bonds, taxable
III, Federated Enhanced Treasury Commission’s Secretary and serving and tax-exempt money market
Income Fund, Federated Equity Funds, securities, repurchase agreements, asset-
1 All entities that currently intend to rely on the
Federated Equity Income Fund, Inc., and mortgage-backed securities,
requested Order are named as applicants. Any other
Federated Fixed Income Securities, Inc., entity that relies on the Order in the future will corporate issues and syndicated loans,
Federated Global Allocation Fund, comply with the terms and conditions of the as the Funds’ respective investment
Federated Government Income application. No Fund may rely on the requested objectives, policies and restrictions
Securities, Inc., Federated Government Order unless the Adviser serves as the primary allow.
investment adviser to such Fund. On October 27,
tkelley on DSK3SPTVN1PROD with NOTICES
Income Trust, Federated High Income 1993, the Commission issued an exemptive order
2. The Advisers are direct or indirect
Bond Fund, Inc., Federated High Yield under section 17(b) of the Act permitting the Funds wholly-owned subsidiaries of
Trust, Federated Income Securities to engage in transactions with certain affiliated Federated. Each Adviser is registered as
Trust, Federated Index Trust, Federated banks (A.T. Ohio Tax-Free Money Fund, et al., an investment adviser under the
Investment Company Act Release Nos. 19737 (Sept.
Institutional Trust, Federated Insurance 28, 1993) (notice) and 19816 (Oct. 27, 1993) (order))
Investment Advisers Act of 1940. The
(‘‘1993 Order’’). The Order sought herein would not Advisers act as investment advisers to
11 17 CFR 200.30–3(a)(12). supersede the 1993 Order. the Funds and may supervise one or
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Document Created: 2015-12-15 13:18:53
Document Modified: 2015-12-15 13:18:53
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 37700 |
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