81 FR 21928 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule To Amend the Fees Schedule
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 71 (April 13, 2016)
Federal Register Volume 81, Issue 71 (April 13, 2016)
| Page Range | 21928-21931 | |
| FR Document | 2016-08427 |
[Federal Register Volume 81, Number 71 (Wednesday, April 13, 2016)] [Notices] [Pages 21928-21931] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08427] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77554; File No. SR-CBOE-2016-023] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule To Amend the Fees Schedule April 7, 2016. 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 April 1, 2016, 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 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 adopt the Frequent Trader Program. The text of the proposed rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at [[Page 21929]] 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fees Schedule, effective April 1, 2016. Specifically, the Exchange proposes to adopt a program that offers transaction fee rebates to Customers (origin code ``C'') that meet certain volume thresholds in CBOE VIX Volatility Index options (``VIX options'') and S&P 500 Index options (``SPX''), weekly S&P 500 options (``SPXW'') and p.m.-settled SPX Index options (``SPXpm'') (collectively referred to as ``SPX options'') provided the Customer registers for the program (the ``Frequent Trader Program'' or ``Program''). A Customer for purposes of this program would be any non- Trading Permit Holder, non-broker dealer non-Professional. To participate in the Frequent Trader Program, Customers would have to register with the Exchange at the Frequent Trader Web site by providing certain information such as their name and contact information. Once registered, the Customer would be provided a unique identification number (``FTID'') that can be affixed to each of its orders.\3\ The FTID allows the Exchange to identify and aggregate all electronic and manual trades during both the Regular Trading Hours and Extended Trading Hours sessions from that Customer for purposes of determining whether the Customer meets any of the various volume thresholds. The Customer would have to provide its FTID to the Trading Permit Holder (``TPH'') submitting that Customer's order to the Exchange (``executing agent'' or ``executing TPH'') and that executing TPH would have to enter the Customer's FTID on each of that Customer's orders. The Exchange notes that it would be the responsibility of the Customer to request that the executing TPH affix its FTID to its order(s), but that it would be voluntarily for the executing TPH to do so. The Exchange would then aggregate the Customer's volume (for which their FTID was entered) on a monthly basis for each of VIX and SPX options. If the Customer meets the thresholds shown below, it would receive a rebate on its VIX and/or SPX options transaction fees, respectively, as indicated below.\4\ The Exchange notes that although all executed contracts with an FTID will count towards the qualifying volume thresholds, the rebates will be based on the actual amount of fees assessed in accordance with the Fees Schedule (e.g., if a Customer submits a VIX order for 30,000 contracts, pursuant to the current Fees Schedule, that customer would be assessed fees for only the first 15,000 contracts under the Customer Large Trade Discount Program. Therefore, while all 30,000 contracts would count when determining the tier, the customer's rebate would be based on the amount of the fees assessed for 15,000 contracts, not on the value of the total 30,000 contracts executed). The thresholds and rebates are as follows: --------------------------------------------------------------------------- \3\ The Exchange notes that it will not disclose the list or details of customers who have a FTID to any party, and there will be no public record of FTID owners. Any personal information provided to the Exchange in connection with the Frequent Trader Program will be handled in a manner consistent with the Frequent Trader Program Privacy Policy, a copy of which can be accessed through the Frequent Trader Program Web site at https://www.cboe.com/ftid/registration.aspx. \4\ The Exchange notes that only transaction fees would be discounted (i.e., no other surcharges, such as the Customer Priority Surcharges, would be rebated or discounted). ---------------------------------------------------------------------------------------------------------------- VIX SPX, SPXW, SPXpm ---------------------------------------------------------------------------------------------------------------- Monthly SPX, SPX, SPXW, Monthly VIX VIX fee rebate SPXW, SPXpm SPXpm fee Tier contracts (percent) Tier contracts rebate traded traded (percent) ---------------------------------------------------------------------------------------------------------------- 1........................... 5,000-9,9999... 5 1.............. 12,000-19,999.. 5 2........................... 10,000-19,999.. 10 2.............. 20,000-49,999.. 10 3........................... 20,000 and 15 3.............. 50,000 and 15 above. above. ---------------------------------------------------------------------------------------------------------------- The Exchange notes that the highest achieved threshold rebate rate will apply from the first executed contract (e.g., if a Customer executes 14,000 VIX contracts in a month, the Tier 2 10% rebate rate would apply to all 14,000 VIX contracts). The Exchange believes the tiered program incentivizes the sending of Customer orders to the Exchange while maintaining an incremental incentive for Customer's to strive for the highest tier level. The Exchange also notes that the volume thresholds for SPX options is higher than for VIX in light of its mature and established position in the industry. Lastly, the Exchange proposes to provide that it will distribute a customer's rebate pursuant to the customer's instructions, which may include receiving the rebate as a direct payment or via a distribution to one or more of its executing Clearing Trading Permit Holders. 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.\5\ Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) \6\ 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 [[Page 21930]] investors and the public interest. The Exchange also believes the proposed rule change is consistent with section 6(b)(4) of the Act,\7\ which provides that Exchange rules may provide for the equitable allocation of reasonable dues, fees, and other charges among its Trading Permit Holders. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78f(b). \6\ 15 U.S.C. 78f(b)(5). \7\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- The adoption of the Frequent Trader Program is reasonable because it will allow Customers who register for the program an opportunity to receive certain rebates for reaching certain trading volume thresholds. The Exchange notes that it is voluntary for Customers to choose whether or not to register for the program and whether to request that their unique FTID be appended to their orders. The Program is also voluntary for executing TPHs who have the option of choosing not to participate (i.e., they may decline to append FTID numbers on Customer orders). Additionally, the Exchange notes that incentive programs based on Customer volume already exist elsewhere within the industry.\8\ --------------------------------------------------------------------------- \8\ See e.g., CBOE Fees Schedule, the Volume Incentive Program; and NASDAQ PHLX LLC Pricing Schedule, Section B. Customer Rebate Program. --------------------------------------------------------------------------- The Exchange believes it's equitable and not unfairly discriminatory to establish the program for Customers only because this is designed to attract a greater number of customer VIX and SPX orders. This increased volume creates greater trading opportunities that benefit all market participants. Specifically, while only Customer orders qualify for the proposed rebates under the Frequent Trader Program, an increase in customer order flow will bring greater volume and liquidity, which benefit all market participants by providing more trading opportunities and tighter spreads. Moreover, the options industry has a long history of providing preferential pricing to Customers. In addition the Exchange believes the proposed program is equitable and not unfairly discriminatory because any Customer (that is not a CBOE TPH, broker-dealer or Professional) may avail itself of this program provided it registers with the Exchange. The Exchange believes limiting the Program to VIX and SPX options is equitable and not unfairly discriminatory because the Exchange has expended considerable time and resources in developing these products. The Frequent Trader Program is designed to encourage greater customer VIX and SPX options trading, which, along with bringing greater VIX and SPX options trading opportunities to all market participants, would bring in more fees to the Exchange, and such fees can be used to recoup the Exchange's costs and expenditures from developing and maintaining VIX and SPX options. The Exchange believes it's equitable and not unfairly discriminatory to establish higher threshold tiers for the SPX product group because the SPX product group has reached a mature and established level while VIX has not. The Exchange believes it's reasonable, equitable and not unfairly discriminatory to include all of a customer's VIX and SPX executed contracts with an FTID towards the respective qualifying thresholds because the Exchange wishes to support and encourage customers to provide greater order flow in these classes, which allows for price improvement and has a number of positive impacts on the market system. The Exchange also believes however, that it's reasonable, equitable and not unfairly discriminatory to base the rebate off the amount of transaction fees that would be assessed pursuant to the Fees Schedule (as opposed to being based off the ``theoretical'' fee value of all contracts executed) because the Exchange does not want to provide rebates on contracts for which it is not also collecting transaction fees. Lastly, the Exchange believes it's reasonable, equitable and not unfairly discriminatory to provide Customers a choice as to how their payment is delivered. Providing Customers with the option of requesting to receive their rebates under the Frequent Trader Program as separate direct payments or via a distribution to one or more of its executing Clearing Trading Permit Holders will provide Customers with a convenient manner in which to receive their rebates, which perfects the mechanism for a free and open market. B. Self-Regulatory Organization's Statement on Burden on Competition CBOE 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 because, while the rebates apply only to Customers, the Program is designed to encourage increased Customer VIX and SPX options volume, which provides greater trading opportunities for all market participants. Additionally, there is a history in the options markets of providing preferential treatment to Customers. The Exchange believes that the proposed rule change will not cause an unnecessary burden on intermarket competition because VIX and SPX products are only traded on CBOE. To the extent that the proposed changes make CBOE a more attractive marketplace for market participants at other exchanges, such market participants are welcome to become CBOE market participants. 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 The foregoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act \9\ and paragraph (f) of Rule 19b-4 \10\ 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. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78s(b)(3)(A). \10\ 17 CFR 240.19b-4(f). --------------------------------------------------------------------------- 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-2016-023 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-2016-023. 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 [[Page 21931]] 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-2016-023, and should be submitted on or before May 4, 2016. --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-08427 Filed 4-12-16; 8:45 am] BILLING CODE 8011-01-P
![21928 Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
policies and procedures according to asserting that they pose limited risks The Commission believes that FINRA
their business model and the risk profile with respect to the need to oversee gave due consideration to the proposal
of their activities’’ 44 and that requiring associated persons’ accounts.48 This and met the requirements of the
delivery of duplicate account statements commenter recommended that FINRA Exchange Act. For these reasons, the
would eliminate this flexibility. More exempt transactions in ‘‘all insurance Commission finds that the proposed
importantly, FINRA Rule 3110 regarding contracts that are securities’’ from the rule change is consistent with the
broker-dealer supervision establishes obligation to provide the employer Exchange Act and the rules and
the obligation for a member to include member with duplicate account regulations thereunder.
in its supervisory procedures a process documents.49 Although FINRA declined
for the review of securities transactions V. Conclusion
to except insurance products from the
that are/is reasonably designed to rule’s requirements, it agreed to It is therefore ordered pursuant to
identify trades that may violate the ‘‘consider whether further exceptions Exchange Act section 19(b)(2) 53 that the
provisions of the Exchange Act, the are appropriate based on the attributes proposal (SR–FINRA–2015–029), as
rules thereunder, or FINRA rules of specific insurance products.’’ 50 modified by the Amendments, be and
prohibiting insider trading and In sum, the Commission believes that hereby is approved.
manipulative and deceptive practices the proposal would help protect For the Commission, by the Division of
that are effected for, among other things, investors and the public interest by Trading and Markets, pursuant to delegated
covered accounts. establishing a framework through which authority.54
In consolidating the overlapping a member can adequately supervise Robert W. Errett,
rules, FINRA proposed deleting certain securities-related activities of their Deputy Secretary.
provisions 45 and amending other associated persons at firms other than [FR Doc. 2016–08423 Filed 4–12–16; 8:45 am]
provisions. In particular, the proposed the one with which they are BILLING CODE 8011–01–P
rule change would amend the definition associated.51 We also believe this rule
of ‘‘beneficial interest’’ to create a makes the core supervisory obligation
rebuttable presumption that an more operationally workable for SECURITIES AND EXCHANGE
associated person holds a beneficial employer firms.
interest in the financial accounts of COMMISSION
In addition, the proposal enables
certain related and other persons. The members to design a supervisory system [Release No. 34–77554; File No. SR–CBOE–
Commission recognizes commenters’ that suits their respective business 2016–023]
concerns that, as a result of this change, model and risk profiles. In this regard,
an associated person may not always be Self-Regulatory Organizations;
the proposal would allow firms to
able to obtain a spouse’s duplicate Chicago Board Options Exchange,
decide, based on their respective
account statements. Specifically, the Incorporated; Notice of Filing and
business model and potential risks,
two commenters argued that family Immediate Effectiveness of a Proposed
whether to approve outside accounts
arrangements are diverse, and that an Rule To Amend the Fees Schedule
and whether the firm wants to receive
associated person could have difficulty duplicate account statements and other April 7, 2016.
complying with the rule in the event of related account documents. For Pursuant to section 19(b)(1) of the
pending separation or divorce from a example, FINRA states that members Securities Exchange Act of 1934 (the
spouse.46 One of the commenters also could impose obligations on their ‘‘Act’’),1 and Rule 19b–4 thereunder,2
suggested that these concerns could associated persons beyond those notice is hereby given that on April 1,
extend, for example, to the accounts of required by the proposal, such as 2016, Chicago Board Options Exchange,
a child of an associated person’s ‘‘tak[ing] a more expansive view of the Incorporated (the ‘‘Exchange’’ or
spouse.47 However, we believe that accounts the associated person should ‘‘CBOE’’) filed with the Securities and
FINRA’s proposal strikes an appropriate disclose than is otherwise required by Exchange Commission (the
balance between the regulatory interests the [proposed] rule.’’ 52 ‘‘Commission’’) the proposed rule
in facilitating adequate supervision over
change as described in Items I, II, and
accounts in which the associated person 48 See Sutherland Letter. III below, which Items have been
has a beneficial interest, and the 49 Id.
prepared by the Exchange. The
possibility that an associated person 50 See FINRA Response Letter; see also Order
Commission is publishing this notice to
may not be able to obtain duplicate Instituting Proceedings.
51 FINRA Rule 3110(d) (Transaction Review and solicit comments on the proposed rule
account statements in certain limited
Investigation) requires that a member’s supervisory change from interested persons.
circumstances. procedures include a process for reviewing
Another commenter argued that securities transactions effected in, among others, I. Self-Regulatory Organization’s
additional types of transactions and accounts of their associated persons, reasonably Statement of the Terms of Substance of
accounts should be excluded from the designed to identify trades that may violate the the Proposed Rule Change
provisions of the Exchange Act, its regulations, or
obligations of the proposed rule, FINRA rules prohibiting insider trading and The Exchange proposes to adopt the
manipulative and deceptive devices. See FINRA Frequent Trader Program. The text of
44 See FINRA Response Letter; also see Notice Response Letter.
and Order Instituting Proceedings. 52 See FINRA Response Letter; see also FINRA
the proposed rule change is available on
45 For example, the proposed rule would not
Response Letter (stating that ‘‘the rule [does not] the Exchange’s Web site (http://
include existing NASD rules that affect accounts limit the employer member’s discretion to set www.cboe.com/AboutCBOE/
asabaliauskas on DSK3SPTVN1PROD with NOTICES
over which associated persons make investment requirements with respect to the holding of outside CBOELegalRegulatoryHome.aspx), at
decisions or have discretionary authority to the accounts’’); see also FINRA Response Letter (stating
proposed new rule. FINRA believes that the that ‘‘the rule does not prevent employer members
activities in these types of accounts involve private from crafting policies and procedures that require policies and procedures with respect to the account
securities transactions subject to FINRA Rule 3280, associated persons to disclose the types of activity of persons associated with other firms.’’ See
making application of the proposed new rule transactions and accounts specified under FINRA Response Letter.
53 15 U.S.C. 78s(b)(2).
redundant. See Notice and FINRA’s Response [proposed FINRA Rule 3210.03] and to provide
Letter. related information’’). 54 17 CFR 200.30–3(a)(12).
46 See SIFMA Letter; FOLIOfn Letter. 1 15 U.S.C. 78s(b)(1).
Similarly, FINRA notes that ‘‘the rule does not
47 See FOLIOfn Letter. limit the discretion of executing members to craft 2 17 CFR 240.19b–4.
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![Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices 21931
only one method. The Commission will amend its rules relating to Lead Market- that opening quotes must be entered
post all comments on the Commission’s Makers (‘‘LMMs’’), Designated Primary within one minute in any series that is
Internet Web site (http://www.sec.gov/ Market-Makers (‘‘DPMs’’) and not open due to the lack of a quote. The
rules/sro.shtml). Copies of the Supplemental Market-Makers proposed rule change also modifies the
submission, all subsequent (‘‘SMMs’’). The proposed rule change Rules’ language to provide that the
amendments, all written statements was published for comment in the timing of the opening quoting obligation
with respect to the proposed rule Federal Register on February 26, 2016.3 begins after the initiation of an opening
change that are filed with the The Commission received no comments rotation on the Exchange rather than
Commission, and all written on the proposal. This order approves the after the opening of the underlying
communications relating to the proposed rule change. security.7
proposed rule change between the CBOE also proposes to impose a
II. Description of the Proposed Rule
Commission and any person, other than continuous quoting obligation on LMMs
Change 4
those that may be withheld from the in Hybrid 3.0 classes.8 LLMs in Hybrid
public in accordance with the The Exchange proposes to (i) classes currently must provide
provisions of 5 U.S.C. 552, will be reorganize, simplify and make
continuous electronic quotes in the
available for Web site viewing and consistent certain text relating to LMM
lesser of 99% of the non-adjusted option
printing in the Commission’s Public and DPM obligations generally, (ii)
series or 100% of the non-adjusted
Reference Room, 100 F Street NE., amend its Rules related to LMMs, (iii)
option series minus one call-put pair,
Washington, DC 20549, on official delete outdated references in its Rules to
with the term ‘‘call-put pair’’ referring to
business days between the hours of SMMs and other obsolete language and
one call and one put that cover the same
10:00 a.m. and 3:00 p.m. Copies of the (iv) make other clarifying changes.
Specifically, the Exchange proposes to underlying instrument and have the
filing also will be available for same expiration date and exercise
inspection and copying at the principal make modifications to Rules 8.15
(pertaining to LMMs in Hybrid 3.0 price.9 According to CBOE, its rules
office of the Exchange. All comments currently do not prescribe for LMMs a
received will be posted without change; classes), 8.15A (pertaining to LMMs in
Hybrid classes) and 8.85 (pertaining to continuous electronic quoting
the Commission does not edit personal requirement for Hybrid 3.0 classes,
identifying information from DPMs) to modify the descriptions of
certain obligations of LMMs and DPMs though CBOE has historically assumed
submissions. You should submit only a requirement of at least 90% of the
information that you wish to make (e.g., obligations related to quote
accuracy, bid/ask differentials, series of each appointed class for 99%
available publicly. All submissions of the time.10 CBOE now proposes to
should refer to File Number SR–CBOE– minimum size and trading rotations,
competitive markets and promotion of codify for LMMs a continuous quoting
2016–023, and should be submitted on requirement for Hybrid 3.0 classes to be
or before May 4, 2016. the Exchange, and material operational
or financial change notifications) to be identical to the existing requirement for
For the Commission, by the Division of more consistent with each other.5 The LMMs assigned to Hybrid classes.11
Trading and Markets, pursuant to delegated The Exchange also proposes
authority.11 Exchange notes that LMMs and DPMs
have substantially similar functions and modifications to Rules 8.15, 8.15A, 8.83
Robert W. Errett, and 8.85 as they relate to the Off-Floor
obligations (including the same
Deputy Secretary. DPM and Off-/On-Floor LMM programs.
continuous quoting obligations, along
[FR Doc. 2016–08427 Filed 4–12–16; 8:45 am] with the same participation entitlement For instance, CBOE proposes to amend
BILLING CODE 8011–01–P percentages), and therefore, having Rule 8.83(g) to conform Hybrid 3.0
consistent language with respect to classes to Hybrid classes by providing
these obligations will simplify its rules that in a Hybrid 3.0 class in which an
SECURITIES AND EXCHANGE Off-Floor DPM has been appointed, the
and reflect the similar roles served by
COMMISSION Exchange also would be permitted to
LMMs and DPMs.6
[Release No. 34–77553; File No. SR–CBOE– Of significance, CBOE proposes to appoint an On-Floor LMM, which
2016–009] change the opening quoting obligations would be eligible to receive a
of LMMs and DPMs. CBOE Rules participation entitlement under current
Self-Regulatory Organizations; 8.15A(b)(iv) and 8.85(a)(xi) require
Chicago Board Options Exchange, LMMs and DPMs, respectively, to 7 See Notice, supra note 3, at 9913.
Incorporated; Order Approving a ensure that a trading rotation is initiated 8 See Notice, supra note 3, at 9915.
Proposed Rule Change Relating to promptly following the opening of the 9 See CBOE Rule 8.15A(b)(i).
LMMs and DPMs underlying security in 100% of the 10 See Notice, supra note 3, at 9915.
11 See id. As proposed, this obligation would not
April 7, 2016. series of each allocated class by entering apply to intra-day add-on series on the day during
opening quotes as necessary. The which such series are added for trading, and would
I. Introduction Exchange proposes to modify the apply to an LMM’s appointed classes collectively.
On February 8, 2016, Chicago Board opening quote requirement to require CBOE would determine compliance with an LMM’s
continuous electronic quoting obligation on a
Options Exchange, Incorporated (the monthly basis (however, determining compliance
3 See Securities Exchange Act Release No. 77200
‘‘Exchange’’ or ‘‘CBOE’’) filed with the with this obligation on a monthly basis would not
(February 22, 2016), 81 FR 9910 (‘‘Notice’’).
Securities and Exchange Commission 4 A more detailed description of the proposed
relieve an LMM from meeting this obligation on a
asabaliauskas on DSK3SPTVN1PROD with NOTICES
(the ‘‘Commission’’), pursuant to daily basis, nor would it prohibit the Exchange from
rule change appears in the Notice. See Notice, supra taking disciplinary action against an LMM for
Section 19(b)(1) of the Securities note 3. failing to meet these obligations each trading day).
Exchange Act of 1934 (‘‘Act’’ or 5 See Notice, supra note 3, at 9913.
Further, the proposed Rule would provide that
‘‘Exchange Act’’) 1 and Rule 19b–4 6 See id. Currently, the primary difference when the underlying security for a class is in a limit
thereunder,2 a proposed rule change to between LMMs and DPMs relates to their up-limit down state, LMMs in Hybrid 3.0 classes
appointment terms. An LMM receives an would have no quoting obligations in the class. The
appointment for a limited term (e.g., one month), Exchange represents that these obligations are
11 17 CFR 200.30–3(a)(12). while a DPM serves in that role until it resigns or identical to the obligations currently imposed on
1 15 U.S.C. 78s(b)(1). the Exchange removes it from that role pursuant to LMMs in Hybrid classes, as well as DPMs in Hybrid
2 17 CFR 240.19b–4. Rule 8.90. 3.0 classes. See Notice, supra note 3, at 9915.
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Document Created: 2016-04-13 03:11:47
Document Modified: 2016-04-13 03:11:47
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 81 FR 21928 |
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