80 FR 62125 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Complex Orders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 199 (October 15, 2015)
Federal Register Volume 80, Issue 199 (October 15, 2015)
| Page Range | 62125-62129 | |
| FR Document | 2015-26156 |
[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)] [Notices] [Pages 62125-62129] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-26156] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76106; File No. SR-CBOE-2015-081] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Complex Orders October 8, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the [[Page 62126]] ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on October 2, 2015, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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. \3\ 15 U.S.C. 78s(b)(3)(A)(iii). \4\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange seeks to amend its rules related to complex orders. The text of the proposed rule change is provided below. (additions are in italics; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 6.53C. Complex Orders on the Hybrid System (a) Definition: No change. (b) Types of Complex Orders: No change. (c) Complex Order Book No change. (d) Process for Complex Order RFR Auction: Prior to routing to the COB or once on PAR, eligible complex orders may be subject to an automated request for responses (``RFR'') auction process. (i) For purposes of paragraph (d): (1) ``COA'' is the automated complex order RFR auction process. (2) A ``COA-eligible order'' means a complex order that, as determined by the Exchange on a class-by-class basis, is eligible for a COA considering the order's marketability (defined as a number of ticks away from the current market), size, complex order type (as defined in paragraphs (a) and (b) above) and complex order origin types (as defined in subparagraph (c)(i) above). Complex orders processed through a COA may be executed without consideration to prices of the same complex orders that might be available on other exchanges. (ii) Initiation of a COA: On receipt of (1) a COA-eligible order with two legs and request from the Trading Permit Holder representing the order or the PAR operator handling the order, as applicable, that it be COA'd or (2) a complex order with three or more legs that (A) meets the class, marketability, size, and complex order type parameters of subparagraph (d)(i)(2) or (B) is designated as immediate or cancel and meets the class, marketability, and size parameters of subparagraph (d)(i)(2), in both cases regardless of the order's routing parameters or handling instructions (except for orders routed for manual handling), the System will send an RFR message to all Trading Permit Holders who have elected to receive RFR messages. Notwithstanding clause (2) of this subparagraph (ii), the System will reject back to a Trading Permit Holder any complex order with three or more legs that includes a request pursuant to Interpretation and Policy .04 that the order not COA. Any complex order described in subparagraph (d)(ii)(2) [with three or more legs] on PAR will COA even if the PAR operator requests that the order not COA. The RFR message will identify the component series, the size and side of the market of the COA-eligible order and any contingencies, if applicable. (iii)-(ix) No change. * * * * * The text of the proposed rule change is also available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Introduction On September 4, 2014, the Securities and Exchange Commission (the ``Commission'') approved a proposal to amend Exchange rules related to complex orders (``SR-CBOE-2014-017'').\5\ SR-CBOE-2014-017 was intended to limit a potential source of unintended Market-Maker risk related to how the Exchange's Hybrid Trading System (the ``System'') \6\ calculates risk parameters under Rule 8.18 when complex orders leg into the market.\7\ SR-CBOE-2014-017 accomplished this by, among other things, providing that a COA \8\ would be initiated ``[o]n receipt of (1) a COA-eligible order with two legs and request from the Trading Permit Holder representing the order or the PAR operator handling the order, as applicable, that it be COA'd or (2) a complex order with three or more legs, regardless of the order's routing parameters or handling instructions (except for orders routed for manual handling), the System will send an RFR message to all Trading Permit Holders who have elected to receive RFR messages.'' \9\ However, the System was designed to filter complex orders [[Page 62127]] through the COA eligibility requirements of subparagraph (d)(i)(2) prior to initiating a COA pursuant to paragraph (d)(ii). Therefore, the rule change from SR-CBOE-2014-017 was not implemented; instead, the Exchange immediately began drafting this corrective filing, which proposes to amend Rule 6.53C(d)(ii) to provide that a COA will be initiated upon receipt of a complex order with three or more legs that (A) meets the class, marketability, size, and complex order type parameters of subparagraph (d)(i)(2) or (B) is designated as immediate or cancel and meets the class, marketability, and size parameters of subparagraph (d)(i)(2), in both cases (i.e., both (A) or (B)) regardless of the order's routing parameters or handling instructions (except for orders routed for manual handling). --------------------------------------------------------------------------- \5\ The Exchange filed the proposed rule change with the Securities and Exchange Commission (the ``Commission'') on February 19, 2014. On March 3, 2014, the Exchange filed Amendment No. 1 to the proposed rule change. The proposed rule change, as modified by Amendment No. 1 thereto, was published for comment in the Federal Register on March 10, 2014. See Securities Exchange Act Release No. 71648 (March 5, 2014), 79 FR 13359 (March 10, 2014) (SR-CBOE-2014- 017) (``Notice''). On June 5, 2014, the Commission instituted proceedings to determine whether to approve or disapprove the proposed rule change. After receiving two comment letters in support of the proposal, the Commission approved the proposed rule change on September 4, 2014. See Securities Exchange Act Release No. 72986, 79 FR 53798 (September 10, 2014) (SR-CBOE-2014-017). \6\ The System is a trading platform that allows automatic executions to occur electronically and open outcry trades to occur on the floor of the Exchange. To operate in this ``hybrid'' environment, the Exchange has a dynamic order handling system that has the capability to route orders to the trade engine for automatic execution and book entry, to Trading Permit Holder and PAR Official workstations located in the trading crowds for manual handling, and/ or to other order management terminals generally located in booths on the trading floor for manual handling. Where an order is routed for processing by the Exchange order handling system depends on various parameters configured by the Exchange and the order entry firm itself. \7\ As noted by the Amendment, Rule 6.53C(c)(ii)(1) provides that complex orders in the complex order book (``COB'') may execute against individual orders or quotes in the book provided the complex order can be executed in full (or a permissible ratio) by the orders and quotes in the book. Rule 6.53C(d)(v)(1) provides that orders that are eligible for the complex order auction (``COA'') may trade with individual orders and quotes in the book provided the COA- eligible order can be executed in full (or a permissible ratio) by the orders and quotes in the book. COA is an automated request for responses (``RFR'') auction process. Upon initiation of a COA, the Exchange sends an RFR message to all Trading Permit Holders who have elected to receive RFR messages, which RFR message identifies the series, size and side of the market of the COA-eligible order and any contingencies. Eligible market participants may submit responses during a response time interval. At the conclusion of the response time interval, COA-eligible orders are allocated in accordance with Rule 6.53C(d)(v), including against individual orders and quotes in the book. \8\ COA is the automated complex order RFR auction process. See Rule 6.53C(d)(i)(1). \9\ See Securities Exchange Act Release No. 71648 (March 5, 2014), 79 FR 13359 (March 10, 2014) (SR-CBOE-2014-017) (``Notice'') --------------------------------------------------------------------------- Proposal Prior to implementing SR-CBOE-2014-017, it was discovered that the filing did not reference certain System requirements that must be met before a COA would be initiated (e.g., the marketability and size requirements of Rule 6.53C(d)(i)(2), which are determined by the Exchange on a class-by-class basis). This was not the Exchange's intent. In fact, the Exchange stated in SR-CBOE-2014-017 that the Exchange may determine on a class-by-class basis which complex orders are eligible for COA, including by complex order type and origin type.\10\ The Exchange simply failed to reference the size and marketability parameters also set forth in Rule 6.53C(d)(i)(2). In addition, the System was not designed to initiate a COA even if a complex order did not meet the marketability and size requirements determined by the exchange in accordance with paragraph (d)(i)(2). The System was designed to filter complex orders through the COA eligibility requirements of paragraph (d)(i)(2) prior to initiating a COA pursuant to paragraph (d)(ii).\11\ As it was never the intention of the Exchange to COA all complex orders with three or more legs irrespective of the COA eligibility requirements of paragraph (d)(i)(2), the Exchange proposes to amend Rule 6.53(d)(ii) to provide that a COA will be initiated: --------------------------------------------------------------------------- \10\ See SR-CBOE-2014-017 at 29 (referencing some of the parameters that determine whether a complex order is eligible for COA, including order type and origin code). \11\ As noted in SR-CBOE-2014-017, Rule 6.53C(d)(i)(2) provides that the Exchange may determine on a class-by-class basis which complex orders are eligible for COA, including by complex order type and origin type; however, SR-CBOE-2014-017 inadvertently failed to reference the marketability and size of a complex order which is also a parameter under paragraph (d)(i)(2). Id. On receipt of (1) a COA-eligible order with two legs and request from the Trading Permit Holder representing the order or the PAR operator handling the order, as applicable, that it be COA'd or (2) a complex order with three or more legs that (A) meets the class, marketability, size, and complex order type parameters of subparagraph (d)(i)(2) or (B) is designated as immediate or cancel and meets the class, marketability, and size parameters of subparagraph (d)(i)(2), in both cases regardless of the order's routing parameters or handling instructions (except for orders routed for manual handling), the System will send an RFR message to all Trading Permit Holders who have elected to receive RFR messages. Notwithstanding clause (2) of this subparagraph (ii), the System will reject back to a Trading Permit Holder any complex order with three or more legs that includes a request pursuant to Interpretation and Policy .04 that the order not COA. Any complex order described in subparagraph (d)(ii)(2) on PAR will COA even if the PAR operator requests that the order not COA. The RFR message will identify the component series, the size and side of the market of the COA-eligible order and any contingencies, if applicable.\12\ --------------------------------------------------------------------------- \12\ This proposed change applies to Hybrid classes only, and not Hybrid 3.0 classes. The Exchange does not believe the risk discussed in this rule filing is present in Hybrid 3.0 classes. The proposed rule change amends Rule 6.53C, Interpretation and Policy .10 to indicate that complex orders in Hybrid 3.0 classes, regardless of the number of legs, will COA in the same manner they currently do. The Exchange notes that complex orders that are not COA-eligible are either routed to the Public Automatic Routing System (``PAR'') (e.g., orders that do not meet the size, order type, and origin type parameters are routed to PAR) or routed to COB (e.g., orders that do not meet the marketability parameter). As noted in the rule text above, the Exchange is proposing to hardcode the complex order type parameter as it relates to complex orders with three or more legs that are entered as immediate or cancel (``IOC''). Currently, the Exchange does not COA complex orders that are entered as IOC. The effect of this proposed rule will be that complex orders with three or more legs that are designated as IOC and meet the class, marketability, and size parameters will always be eligible to COA. Complex orders with three or more legs that are entered as IOC are the orders that primarily create the Market-Maker risk described in SR- CBOE-2014-017.\13\ Therefore, the Exchange believes it is appropriate for complex orders with three or more legs that are entered as IOC to COA. The Exchange notes that the class, marketability, size, and complex order type parameters will have the same settings whether the complex order has two or three or more legs, except, as noted, complex orders with three or more legs will not be prohibited from accessing COA based on an IOC designation. The Exchange notes that all market participants submitting complex orders with three or more legs that are marked IOC are treated the same--that is, assuming the complex orders with three or more legs that are marked IOC meet the class, marketability and size parameters, the orders shall COA. The Exchange also notes that market participants determine whether an order is marked IOC; thus, it is market participants that decide whether an order with three or more legs will COA. --------------------------------------------------------------------------- \13\ The Exchange notes that the rule text provided for in SR- CBOE-2014-017 essentially required all complex orders with three or more legs to COA (including orders entered as IOC), but the Exchange never implemented the requirement with regards to complex orders with three or more legs because, as previously noted, it was not the Exchange's intention to COA all complex orders with three or more legs irrespective of the COA eligibility requirements. As soon as the Exchange realized SR-CBOE-2014-017 did not accurately reflect the Exchange's intentions, the Exchange began drafting this rule filing. --------------------------------------------------------------------------- Additionally, the proposed rule does not affect the outcome of SR- CBOE-2014-017 as it relates to complex orders with three or more legs that are entered as IOC because neither SR-CBOE-2014-017 nor this proposal allow the Exchange to limit access to COA for orders with three or more legs based on the IOC designation. In other words, a market participant entering a complex order with three or more legs designated as IOC would expect (based on SR-CBOE-2014-017 providing that all complex orders with three or more legs shall COA) the order to COA. This proposed rule does not change that expectation. The only difference is that this proposed rule specifies that the complex order with three or more legs that is marked IOC must also meet the class, marketability, and size parameters in order to COA. Further, the proposed rule does not materially affect the outcome or purpose of SR-CBOE-2014-017; rather, the proposed rule seeks to clarify that a complex order must meet the eligibility requirements of Rule 6.53C(d)(i)(2) prior to the Exchange initiating a COA. The Exchange still believes the proposed rule will allow Market-Makers to better manage their risk in their appointments and that the reduced risk will encourage Market-Makers to quote larger size, which will increase liquidity and enhance competition in those classes. The Exchange also notes that regardless of marketability requirements of paragraph (d)(i)(2), an order that is not [[Page 62128]] marketable will not be executed. The proposed rule change is simply intended to clarify when a COA will be initiated and to reflect the design of the System, which is set-up to filter complex orders through the COA eligibility requirements prior to the initiation of a COA. Additionally, the Exchange believes the proposed rule is non- controversial because, as with the current rule, all market participants submitting orders with three or more legs will be treated equally (i.e., for orders with three or more legs the Exchange will not have the flexibility to limit COA-eligibility to certain origin types; rather, the Exchange will, by rule, accept all origin types for complex orders with three or more legs). The Exchange will announce the implementation date of the proposed rule change in a Regulatory Circular to be published no later than 90 days following the effective date of this filing. The implementation date will be no later than 180 days following the effective date of this filing. 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.\14\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \15\ 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)\16\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b). \15\ 15 U.S.C. 78f(b)(5). \16\ Id. --------------------------------------------------------------------------- In particular, the Exchange believes the proposed rule change serves to clarify SR-CBOE-2014-017 and does not materially affect the outcome of SR-CBOE-2014-017. As noted above, it was not the intent of SR-CBOE-2014-017 to COA all complex orders irrespective of the eligibility parameters of Rule 6.53C(d)(i)(2); rather, the filing was intended to reflect the System's design, which filters complex orders through the COA eligibility requirements of paragraph (d)(i)(2) prior to initiating a COA. Therefore, under the proposed rule, complex orders with three or more legs will need to meet the class, marketability, size, and order type parameters of subparagraph (d)(i)(2) in order to COA, except the Exchange, by rule, will not be able to limit COA- eligibility based on a complex order with three or more legs being entered as IOC. Additionally, complex Orders with three or more legs will filter through the origin type parameter of subparagraph (d)(i)(2); however, for complex orders with three or more legs the Exchange, by rule, will not have the flexibility to limit COA- eligibility to certain origin types. This is consistent with SR-CBOE- 2014-017 because SR-CBOE-2014-017 also did not provide the Exchange the flexibility to limit COA-eligibility for complex orders with three or more legs to certain origin types. B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on intramarket or intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the rule change does not materially affect the outcome or purpose of SR- CBOE-2014-017. SR-CBOE-2014-017 was designed to reduce risk to Market- Makers that are quoting in the regular market, and this proposed rule change will not affect that outcome. In addition, Rule 6.53C(d)(ii), as amended by SR-CBOE-2014-017, clearly provides that the origin type of a complex order with three or more legs has no bearing on whether the complex order will COA, and this proposed rule does not modify how different origin types will be treated for purposes of COA. This proposed rule also does not affect the outcome of SR-CBOE-2014-017 as it relates to complex orders with three or more legs that are entered as IOC because neither SR-CBOE-2014-017 nor this proposal allow the Exchange to limit access to COA for orders with three or more legs based on the IOC designation. In other words, a market participant entering a complex order with three or more legs designated as IOC would expect (based on SR-CBOE-2014-017 providing that all complex orders with three or more legs shall COA) the order to COA. This proposed rule does not change that expectation. The only difference is that this proposed rule specifies that the complex order with three or more legs that is marked IOC must also meet the class, marketability, and size parameters in order to COA. This proposed rule simply seeks to apply the class, marketability, size, and complex order type parameters of Rule 6.53C(d)(i)(2) to complex orders with three or more legs. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: A. Significantly affect the protection of investors or the public interest; B. impose any significant burden on competition; and C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) \18\ thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(3)(A). \18\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- 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 CommentsUse 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-CBOE-2015-081 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange [[Page 62129]] Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2015-081. 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 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; 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-CBOE-2015-081 and should be submitted on or before November 5, 2015. --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ Robert W. Errett, Deputy Secretary. [FR Doc. 2015-26156 Filed 10-14-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices 62125
‘‘conditionally or unconditionally purposes fairly intended by the policy 2. Notwithstanding Condition 1, the
exempt any person or transaction . . . and provisions of the Act. Contributor will be (i) permitted to
from any provision or provisions of [the 6. Applicants represent that the respond to inquiries from, and make
Advisers Act] or of any rule or Clients determined to invest with presentations to, any government entity
regulation thereunder, if and to the Applicants and established those client described in Condition 1
extent that such exemption is necessary advisory relationships on an arm’s regarding accounts already managed by
or appropriate in the public interest and length basis free from any improper the Applicants as of December 21, 2013
consistent with the protection of influence as a result of the Contribution, and (ii) permitted to respond to
investors and the purposes fairly and there was no connection between inquiries from any government entity
intended by the policy and provisions of the Contribution and any past or client regarding an account established
[the Advisers Act].’’ potential business between the Clients with the Applicants by such
3. Rule 206(4)–5(e) provides that the and the Applicants. government entity client after December
Commission may exempt an investment 7. Applicants note that causing the 21, 2013. The Applicants will maintain
adviser from the prohibition under rule Applicants to provide advisory services a log of such interactions, which will be
206(4)–5(a)(1) upon consideration of the without compensation for a two-year maintained and presented in an easily
factors listed below, among others: period would result in a financial loss accessible place for a period of not less
(1) Whether the exemption is to the Applicants of approximately $2.7 than five years, the first two years in an
necessary or appropriate in the public million—an amount that is 5,400 times appropriate office of the Applicants, and
interest and consistent with the the amount of the Contribution. will be available for inspection by the
protection of investors and the purposes Applicants contend that such a result is staff of the Commission.
fairly intended by the policy and greatly disproportionate to the violation 3. The Contributor will receive
provisions of the Advisers Act; and is not consistent with the protection written notification of these conditions
(2) Whether the investment adviser: of investors or a purpose fairly intended and will provide a quarterly
(i) Before the contribution resulting in by the policies and provisions of the certification of compliance through the
the prohibition was made, adopted and Act. Restricted Period. Copies of the
implemented policies and procedures 8. Applicants note that they had certifications will be maintained and
reasonably designed to prevent adopted and implemented the Policies preserved by the Applicants in an easily
violations of the rule; and (ii) prior to or at the time of the Contribution and had accessible place for a period of not less
at the time the contribution which the Policies in place at all times since than five years, the first two years in an
resulted in such prohibition was made, the adoption of rule 205(4)–5. appropriate office of the Applicants and
had no actual knowledge of the Applicants represent that they perform will be available for inspection by the
contribution; and (iii) after learning of compliance testing and they have a Staff of the Commission.
the contribution: (A) Has taken all rigorous and robust screening of 4. The Applicants will conduct testing
available steps to cause the contributor prospective hires and internal reasonably designed to prevent
involved in making the contribution employees being considered for covered violations of the conditions of the Order
which resulted in such prohibition to associate positions. and maintain records regarding such
obtain a return of the contribution; and 9. Applicants represent that at no time
testing, which will be maintained and
(B) has taken such other remedial or did any employees or covered associates
preserved in an easily accessible place
preventive measures as may be of the Applicants, or any executive or
for a period of not less than five years,
appropriate under the circumstances; employee of the Applicants’ affiliates,
the first two years in an appropriate
(3) Whether, at the time of the other than the Contributor, know of the
office of the Applicants, and will be
contribution, the contributor was a Contribution prior to the Contributor’s
available for inspection by staff of the
covered associate or otherwise an self-report to Applicants’ compliance
Commission.
employee of the investment adviser, or personnel.
was seeking such employment; 10. Applicants represent that the For the Commission, by the Division of
(4) The timing and amount of the Applicants and the Contributor took all Investment Management, under delegated
contribution which resulted in the available steps to promptly obtain a authority.
prohibition; return of the Contribution after the Robert W. Errett,
(5) The nature of the election (e.g., Contributor’s self-report to Applicants’ Deputy Secretary.
federal, state or local); and compliance personnel, and the full [FR Doc. 2015–26146 Filed 10–14–15; 8:45 am]
(6) The contributor’s apparent intent amount of the Contribution was fully BILLING CODE 8011–01–P
or motive in making the contribution refunded within one week of the refund
which resulted in the prohibition, as request. Applicants established an
evidenced by the facts and escrow account for all compensation for SECURITIES AND EXCHANGE
circumstances surrounding such advisory services attributable to the COMMISSION
contribution. Clients’ assets under management of the
4. Applicants request an order Applicants for the two-year period [Release No. 34–76106; File No. SR–CBOE–
pursuant to section 206A and rule beginning on the Contribution Date. 2015–081]
206(4)–5(e), exempting them from the Applicants’ Conditions:
two-year prohibition on compensation Applicants agree that the Order will Self-Regulatory Organizations;
imposed by rule 206(4)–5(a)(1) with be subject to the following conditions: Chicago Board Options Exchange,
mstockstill on DSK4VPTVN1PROD with NOTICES
respect to investment advisory services 1. The Contributor will be prohibited Incorporated; Notice of Filing and
provided to the Clients within the two- from soliciting investments from any Immediate Effectiveness of a Proposed
year period following the Contribution ‘‘government entity’’ client or Rule Change Relating to Complex
(the ‘‘Order’’). prospective ‘‘government entity’’ client Orders
5. Applicants submit that the for which the Recipient is an ‘‘official’’
exemption is necessary and appropriate as defined in rule 206(4)–5(f)(6) until October 8, 2015.
in the public interest and consistent December 21, 2015 (the ‘‘Restricted Pursuant to Section 19(b)(1) of the
with the protection of investors and the Period’’). Securities Exchange Act of 1934 (the
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![62126 Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
‘‘Act’’),1 and Rule 19b–4 thereunder,2 marketability, size, and complex order type intended to limit a potential source of
notice is hereby given that on October parameters of subparagraph (d)(i)(2) or (B) is unintended Market-Maker risk related to
2, 2015, Chicago Board Options designated as immediate or cancel and meets how the Exchange’s Hybrid Trading
the class, marketability, and size parameters System (the ‘‘System’’) 6 calculates risk
Exchange, Incorporated (the ‘‘Exchange’’
of subparagraph (d)(i)(2), in both cases
or ‘‘CBOE’’) filed with the Securities regardless of the order’s routing parameters
parameters under Rule 8.18 when
and Exchange Commission (the or handling instructions (except for orders complex orders leg into the market.7
‘‘Commission’’) the proposed rule routed for manual handling), the System will SR–CBOE–2014–017 accomplished this
change as described in Items I, II, and send an RFR message to all Trading Permit by, among other things, providing that
III below, which Items have been Holders who have elected to receive RFR a COA 8 would be initiated ‘‘[o]n receipt
prepared by the Exchange. The messages. Notwithstanding clause (2) of this of (1) a COA-eligible order with two legs
Exchange filed the proposal as a ‘‘non- subparagraph (ii), the System will reject back and request from the Trading Permit
controversial’’ proposed rule change to a Trading Permit Holder any complex Holder representing the order or the
order with three or more legs that includes PAR operator handling the order, as
pursuant to Section 19(b)(3)(A)(iii) of
a request pursuant to Interpretation and applicable, that it be COA’d or (2) a
the Act 3 and Rule 19b–4(f)(6) Policy .04 that the order not COA. Any
thereunder.4 The Commission is complex order described in subparagraph
complex order with three or more legs,
publishing this notice to solicit (d)(ii)(2) [with three or more legs] on PAR regardless of the order’s routing
comments on the proposed rule change will COA even if the PAR operator requests parameters or handling instructions
from interested persons. that the order not COA. The RFR message (except for orders routed for manual
will identify the component series, the size handling), the System will send an RFR
I. Self-Regulatory Organization’s and side of the market of the COA-eligible message to all Trading Permit Holders
Statement of the Terms of Substance of order and any contingencies, if applicable. who have elected to receive RFR
the Proposed Rule Change (iii)–(ix) No change. messages.’’ 9 However, the System was
The Exchange seeks to amend its rules * * * * * designed to filter complex orders
related to complex orders. The text of The text of the proposed rule change
the proposed rule change is provided is also available on the Exchange’s Web Release No. 71648 (March 5, 2014), 79 FR 13359
below. (March 10, 2014) (SR–CBOE–2014–017) (‘‘Notice’’).
site (http://www.cboe.com/AboutCBOE/ On June 5, 2014, the Commission instituted
(additions are in italics; deletions are CBOELegalRegulatoryHome.aspx), at proceedings to determine whether to approve or
[bracketed]) the Exchange’s Office of the Secretary, disapprove the proposed rule change. After
receiving two comment letters in support of the
* * * * * and at the Commission’s Public proposal, the Commission approved the proposed
Reference Room. rule change on September 4, 2014. See Securities
Chicago Board Options Exchange, Exchange Act Release No. 72986, 79 FR 53798
Incorporated Rules II. Self-Regulatory Organization’s (September 10, 2014) (SR–CBOE–2014–017).
* * * * * Statement of the Purpose of, and 6 The System is a trading platform that allows
Rule 6.53C. Complex Orders on the Hybrid Statutory Basis for, the Proposed Rule automatic executions to occur electronically and
Change open outcry trades to occur on the floor of the
System Exchange. To operate in this ‘‘hybrid’’ environment,
(a) Definition: No change. In its filing with the Commission, the the Exchange has a dynamic order handling system
(b) Types of Complex Orders: No change. Exchange included statements that has the capability to route orders to the trade
(c) Complex Order Book engine for automatic execution and book entry, to
concerning the purpose of and basis for Trading Permit Holder and PAR Official
No change.
the proposed rule change and discussed workstations located in the trading crowds for
(d) Process for Complex Order RFR
Auction: Prior to routing to the COB or once any comments it received on the manual handling, and/or to other order
proposed rule change. The text of these management terminals generally located in booths
on PAR, eligible complex orders may be on the trading floor for manual handling. Where an
subject to an automated request for responses statements may be examined at the order is routed for processing by the Exchange order
(‘‘RFR’’) auction process. places specified in Item IV below. The handling system depends on various parameters
(i) For purposes of paragraph (d): Exchange has prepared summaries, set configured by the Exchange and the order entry
(1) ‘‘COA’’ is the automated complex order forth in sections A, B, and C below, of firm itself.
RFR auction process. the most significant aspects of such
7 As noted by the Amendment, Rule
(2) A ‘‘COA-eligible order’’ means a 6.53C(c)(ii)(1) provides that complex orders in the
statements. complex order book (‘‘COB’’) may execute against
complex order that, as determined by the
Exchange on a class-by-class basis, is eligible individual orders or quotes in the book provided
A. Self-Regulatory Organization’s the complex order can be executed in full (or a
for a COA considering the order’s Statement of the Purpose of, and permissible ratio) by the orders and quotes in the
marketability (defined as a number of ticks Statutory Basis for, the Proposed Rule book. Rule 6.53C(d)(v)(1) provides that orders that
away from the current market), size, complex are eligible for the complex order auction (‘‘COA’’)
order type (as defined in paragraphs (a) and
Change
may trade with individual orders and quotes in the
(b) above) and complex order origin types (as 1. Purpose book provided the COA-eligible order can be
defined in subparagraph (c)(i) above). executed in full (or a permissible ratio) by the
Complex orders processed through a COA Introduction orders and quotes in the book. COA is an automated
may be executed without consideration to request for responses (‘‘RFR’’) auction process.
On September 4, 2014, the Securities Upon initiation of a COA, the Exchange sends an
prices of the same complex orders that might and Exchange Commission (the RFR message to all Trading Permit Holders who
be available on other exchanges.
(ii) Initiation of a COA: On receipt of (1)
‘‘Commission’’) approved a proposal to have elected to receive RFR messages, which RFR
amend Exchange rules related to message identifies the series, size and side of the
a COA-eligible order with two legs and market of the COA-eligible order and any
request from the Trading Permit Holder complex orders (‘‘SR–CBOE–2014– contingencies. Eligible market participants may
representing the order or the PAR operator 017’’).5 SR–CBOE–2014–017 was submit responses during a response time interval.
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handling the order, as applicable, that it be At the conclusion of the response time interval,
COA’d or (2) a complex order with three or 5 The Exchange filed the proposed rule change COA-eligible orders are allocated in accordance
more legs that (A) meets the class, with the Securities and Exchange Commission (the with Rule 6.53C(d)(v), including against individual
‘‘Commission’’) on February 19, 2014. On March 3, orders and quotes in the book.
8 COA is the automated complex order RFR
1 15
2014, the Exchange filed Amendment No. 1 to the
U.S.C. 78s(b)(1). proposed rule change. The proposed rule change, as auction process. See Rule 6.53C(d)(i)(1).
2 17 CFR 240.19b–4. modified by Amendment No. 1 thereto, was 9 See Securities Exchange Act Release No. 71648
3 15 U.S.C. 78s(b)(3)(A)(iii).
published for comment in the Federal Register on (March 5, 2014), 79 FR 13359 (March 10, 2014) (SR–
4 17 CFR 240.19b–4(f)(6). March 10, 2014. See Securities Exchange Act CBOE–2014–017) (‘‘Notice’’)
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![Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices 62129
Commission, 100 F Street NE., (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 Once a firm becomes a member of
Washington, DC 20549–1090. notice is hereby given that on October OCC, Chapter II of OCC’s Rules sets
All submissions should refer to File 2, 2015, The Options Clearing forth additional operational
Number SR–CBOE–2015–081. This file Corporation (‘‘OCC’’) filed with the requirements. In particular, OCC Rule
number should be included on the Securities and Exchange Commission 214(d) requires clearing members to
subject line if email is used. To help the (‘‘Commission’’) the proposed rule maintain their operational capabilities
Commission process and review your change as described in Items I, II and III as a continuing obligation of
comments more efficiently, please use below, which Items have been prepared membership.4 In accordance with such
only one method. The Commission will by OCC. The Commission is publishing requirements, OCC annually conducts
post all comments on the Commission’s this notice to solicit comments on the BCP Testing with certain clearing
Internet Web site (http://www.sec.gov/ proposed rule change from interested members through coordinated testing.
rules/sro.shtml.) Copies of the persons. Recently, the Commission promulgated
submission, all subsequent Regulation System Compliance and
I. Clearing Agency’s Statement of the
amendments, all written statements Integrity (‘‘Reg. SCI’’), which would
Terms of Substance of the Proposed
with respect to the proposed rule require OCC to establish standards to
Rule Change
change that are filed with the designate members 5 and require
This proposed rule change by OCC participation by such designated
Commission, and all written
codifies the requirement for clearing members in scheduled BCP Testing with
communications relating to the
members to participate in operational OCC on an annual basis.6 OCC is
proposed rule change between the
testing, including testing of OCC’s proposing to adopt Rule 218 so that
Commission and any person, other than
business continuity and disaster OCC’s Rules clearly articulate OCC’s
those that may be withheld from the
recovery plans (‘‘BCP Testing’’). requirement with respect to BCP
public in accordance with the
provisions of 5 U.S.C. 552, will be II. Clearing Agency’s Statement of the Testing.
available for Web site viewing and Purpose of, and Statutory Basis for, the Proposed Rule 218 would increase
printing in the Commission’s Public Proposed Rule Change transparency regarding and ensure
OCC’s practice with respect to BCP
Reference Room, 100 F Street NE., In its filing with the Commission, Testing is consistent with Reg. SCI by
Washington, DC 20549 on official OCC included statements concerning articulating OCC’s right to: (i) Designate
business days between the hours of the purpose of and basis for the clearing members required to participate
10:00 a.m. and 3:00 p.m. Copies of the proposed rule change and discussed any in BCP Testing; (ii) determine the scope
filing also will be available for comments it received on the proposed of such BCP Testing; and (iii) require
inspection and copying at the principal rule change. The text of these statements clearing members to comply with the
office of the Exchange. All comments may be examined at the places specified subject BCP Testing within specified
received will be posted without change; in Item IV below. OCC has prepared timeframes. In connection therewith,
the Commission does not edit personal summaries, set forth in sections (A), (B), OCC is planning to refine the criteria
identifying information from and (C) below, of the most significant that it currently uses to designate firms
submissions. You should submit only aspects of these statements. for BCP Testing. For example, while
information that you wish to make OCC will continue to rely on volume
available publicly. All submissions (A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the thresholds to mandate participation in
should refer to File Number SR–CBOE– annual BCP Testing, OCC will also take
2015–081 and should be submitted on Proposed Rule Change
into account additional factors when
or before November 5, 2015. 1. Purpose designating firms for BCP Testing,
For the Commission, by the Division of This proposed rule change would including but not limited to: (i) The
Trading and Markets, pursuant to delegated codify OCC’s current requirement for nature of interconnectedness based on a
authority.19 firm’s approved business activities; (ii)
clearing members to participate in
Robert W. Errett, operational testing, including testing of the existence of significant operational
Deputy Secretary. OCC’s BCP Testing. Article V of OCC’s issues during the past twelve months,
[FR Doc. 2015–26156 Filed 10–14–15; 8:45 am] By-Laws sets forth OCC’s initial and (iii) past performance with respect
BILLING CODE 8011–01–P membership requirements. Pursuant to to BCP Testing. Clearing members will
Interpretation and Policy .02(b) of be informed of the specific standards
Article V, Section 1 of OCC’s By-Laws, that will be used by OCC, along with
SECURITIES AND EXCHANGE an applicant for clearing membership
COMMISSION must demonstrate that it is operationally
4 See OCC Rule 214(d). OCC Rule 214(d) requires
clearing members to maintain their ability to,
[Release No. 34–76108; File No. SR–OCC– capable of: (i) Processing expected among other things: (i) Process expected volumes
2015–015] volumes and values of transactions and values of transactions cleared by the clearing
cleared by the clearing member within member within required time frames, including at
Self-Regulatory Organizations; The peak times and on peak days; (ii) fulfill collateral,
required time frames, including at peak payment, and delivery obligations as required by
Options Clearing Corporation; Notice times and on peak days; (ii) fulfilling OCC; and (iii) participate in applicable default
of Filing and Immediate Effectiveness collateral, payment, and delivery management activities, as may be required by OCC
of a Proposed Rule Change obligations as required by OCC; and (iii) and in accordance with applicable laws and
regulations.
Concerning the Requirement for participating in applicable default
mstockstill on DSK4VPTVN1PROD with NOTICES
5 17 CFR 242.1004(a). In adopting Reg. SCI, the
Clearing Members To Participate in management activities, as may be Commission determined not to require covered
Operation Testing required by OCC and in accordance entities to notify the Commission of its designations
with applicable laws and regulations.3 or the standards that will be used in designating its
October 8, 2015. members, recognizing instead that each entity’s
Pursuant to Section 19(b)(1) of the standards, designations, and updates, if applicable,
1 15 U.S.C. 78s(b)(1). would be part of its records and, therefore, available
Securities Exchange Act of 1934 2 17 CFR 240.19b–4. to the Commission and its staff upon request. See
3 See OCC’s By-Laws, Article V, Section 1, 79 FR 72350.
19 17 CFR 200.30–3(a)(12). Interpretation and Policy .02(b). 6 17 CFR 242.1004(a) and (b).
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Document Created: 2018-02-27 08:52:15
Document Modified: 2018-02-27 08:52:15
| 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 62125 |
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