81_FR_87872 81 FR 87639 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter VI, Section 5 To Extend the Penny Pilot Program

81 FR 87639 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter VI, Section 5 To Extend the Penny Pilot Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 233 (December 5, 2016)

Page Range87639-87641
FR Document2016-29041

Federal Register, Volume 81 Issue 233 (Monday, December 5, 2016)
[Federal Register Volume 81, Number 233 (Monday, December 5, 2016)]
[Notices]
[Pages 87639-87641]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-29041]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79420; File No. SR-BX-2016-062]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Chapter 
VI, Section 5 To Extend the Penny Pilot Program

November 29, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 16, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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 amend Chapter VI, Section 5 (Minimum 
Increments),\3\ to extend through June 30, 2017 or the date of 
permanent approval, if earlier, the Penny Pilot Program in options 
classes in certain issues (``Penny Pilot'' or ``Pilot''), and to change 
the date when delisted classes may be replaced in the Penny Pilot.
---------------------------------------------------------------------------

    \3\ References herein to Chapter and Series refer to rules of 
the BX Options Market (``BX Options''), unless otherwise noted.
---------------------------------------------------------------------------

    The text of the proposed rule change is set forth below.
    Proposed new language is italicized and deleted text is in 
brackets.

NASDAQ BX Rules

Options Rules

* * * * *

Chapter VI Trading Systems

* * * * *

Sec. 5 Minimum Increments

    (a) The Board may establish minimum quoting increments for options 
contracts traded on BX Options. Such minimum increments established by 
the Board will be designated as a stated policy, practice, or 
interpretation with respect to the administration of this Section 
within the meaning of Section 19 of the Exchange Act and will be filed 
with the SEC as a rule change for effectiveness upon filing. Until such 
time as the Board makes a change in the increments, the following 
principles shall apply:
    (1)-(2) No Change.
    (3) For a pilot period scheduled to expire on [December 31, 2016] 
June 30, 2017 or the date of permanent approval, if earlier, if the 
options series is trading pursuant to the Penny Pilot program one (1) 
cent if the options series is trading at less than $3.00, five (5) 
cents if the options series is trading at $3.00 or higher, unless for 
QQQQs, SPY and IWM where the minimum quoting increment will be one cent 
for all series regardless of price. A list of such options shall be 
communicated to membership via an Options Trader Alert (``OTA'') posted 
on the Exchange's Web site.
    The Exchange may replace any pilot issues that have been delisted 
with the next most actively traded multiply listed options classes that 
are not yet included in the pilot, based on trading activity in the 
previous six months. The replacement issues may be added to the pilot 
on the second trading day following [July 1, 2016] January 1, 2017.
    (4) No Change.
    (b) No Change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com, at the 
principal office of the Exchange, 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
    The purpose of this filing is to amend Chapter VI, Section 5, to 
extend the Penny Pilot through June 30, 2017 or the date of permanent 
approval, if earlier,\4\ and to change the date when delisted classes 
may be replaced in the Penny Pilot. The Exchange believes that 
extending the Penny Pilot will allow for further analysis of the Penny 
Pilot and a determination of how the program should be structured in 
the future.
---------------------------------------------------------------------------

    \4\ The options exchanges in the U.S. that have pilot programs 
similar to the Penny Pilot (together ``pilot programs'') are 
currently working on a proposal for permanent approval of the 
respective pilot programs.
---------------------------------------------------------------------------

    Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot is currently 
scheduled to expire on December 31, 2016.
    The Exchange proposes to extend the time period of the Penny Pilot 
through June 30, 2017 or the date of permanent approval, if earlier, 
and to provide a revised date for adding replacement issues to the 
Penny Pilot. The Exchange proposes that any Penny Pilot Program issues 
that have been delisted may be

[[Page 87640]]

replaced on the second trading day following January 1, 2017. The 
replacement issues will be selected based on trading activity in the 
previous six months.\5\
---------------------------------------------------------------------------

    \5\ The replacement issues will be announced to the Exchange's 
membership via an Options Trader Alert (OTA) posted on the 
Exchange's Web site. Penny Pilot replacement issues will be selected 
based on trading activity in the previous six months, as is the case 
today. The replacement issues would be identified based on The 
Options Clearing Corporation's trading volume data. For example, for 
the January replacement, trading volume from May 30, 2016 through 
November 30, 2016 would be analyzed. The month immediately preceding 
the replacement issues' addition to the Pilot Program (i.e., 
December) would not be used for purposes of the six-month analysis.
---------------------------------------------------------------------------

    This filing does not propose any substantive changes to the Penny 
Pilot Program; all classes currently participating in the Penny Pilot 
will remain the same and all minimum increments will remain unchanged. 
The Exchange believes the benefits to public customers and other market 
participants who will be able to express their true prices to buy and 
sell options have been demonstrated to outweigh the potential increase 
in quote traffic.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ in particular, in that it is 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 facilitating transactions in securities, and 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.
---------------------------------------------------------------------------

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

    In particular, the proposed rule change, which extends the Penny 
Pilot for an additional six months through June 30, 2017 or the date of 
permanent approval, if earlier, and changes the date for replacing 
Penny Pilot issues that were delisted to the second trading day 
following January 1, 2017, will enable public customers and other 
market participants to express their true prices to buy and sell 
options for the benefit of all market participants. This is consistent 
with the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, this proposal 
is pro-competitive because it allows Penny Pilot issues to continue 
trading on the Exchange.
    Moreover, the Exchange believes that the proposed rule change will 
allow for further analysis of the Pilot and a determination of how the 
Pilot should be structured in the future; and will serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.
    The Pilot is an industry-wide initiative supported by all other 
option exchanges. The Exchange believes that extending the Pilot will 
allow for continued competition between market participants on the 
Exchange trading similar products as their counterparts on other 
exchanges, while at the same time allowing the Exchange to continue to 
compete for order flow with other exchanges in option issues trading as 
part of the Pilot.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2016-062 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-BX-2016-062. 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-BX-2016-062 and 
should be submitted on or before December 27, 2016.


[[Page 87641]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29041 Filed 12-2-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                             Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices                                                      87639

                                                information is necessary for the proper                  Increments),3 to extend through June 30,               site at http://
                                                performance of the functions of the                      2017 or the date of permanent approval,                nasdaqomxbx.cchwallstreet.com, at the
                                                agency, including whether the                            if earlier, the Penny Pilot Program in                 principal office of the Exchange, and at
                                                information will have practical utility;                 options classes in certain issues (‘‘Penny             the Commission’s Public Reference
                                                (b) the accuracy of the agency’s estimate                Pilot’’ or ‘‘Pilot’’), and to change the               Room.
                                                of the burden of the collection of                       date when delisted classes may be
                                                                                                                                                                II. Self-Regulatory Organization’s
                                                information; (c) ways to enhance the                     replaced in the Penny Pilot.
                                                                                                            The text of the proposed rule change                Statement of the Purpose of, and
                                                quality, utility, and clarity of the
                                                                                                         is set forth below.                                    Statutory Basis for, the Proposed Rule
                                                information collected; and (d) ways to
                                                                                                            Proposed new language is italicized                 Change
                                                minimize the burden of the collection of
                                                information on respondents, including                    and deleted text is in brackets.                          In its filing with the Commission, the
                                                through the use of automated collection                                                                         Exchange included statements
                                                                                                         NASDAQ BX Rules
                                                techniques or other forms of information                                                                        concerning the purpose of and basis for
                                                technology. Consideration will be given                  Options Rules                                          the proposed rule change and discussed
                                                to comments and suggestions submitted                    *      *      *      *       *                         any comments it received on the
                                                in writing within 60 days of this                                                                               proposed rule change. The text of these
                                                publication.                                             Chapter VI Trading Systems                             statements may be examined at the
                                                  Please direct your written comments                    *      *      *      *       *                         places specified in Item IV below. The
                                                to Pamela Dyson, Director/Chief                                                                                 Exchange has prepared summaries, set
                                                                                                         Sec. 5 Minimum Increments                              forth in sections A, B, and C below, of
                                                Information Officer, Securities and
                                                Exchange Commission, C/O Remi                               (a) The Board may establish minimum                 the most significant aspects of such
                                                Pavlik-Simon, 100 F Street NE.,                          quoting increments for options contracts               statements.
                                                Washington, DC 20549; or send an email                   traded on BX Options. Such minimum
                                                                                                                                                                A. Self-Regulatory Organization’s
                                                to: PRA_Mailbox@sec.gov.                                 increments established by the Board
                                                                                                                                                                Statement of the Purpose of, and
                                                                                                         will be designated as a stated policy,
                                                  Dated: November 22, 2016.                                                                                     Statutory Basis for, the Proposed Rule
                                                                                                         practice, or interpretation with respect
                                                Robert W. Errett,                                                                                               Change
                                                                                                         to the administration of this Section
                                                Deputy Secretary.                                        within the meaning of Section 19 of the                1. Purpose
                                                [FR Doc. 2016–29085 Filed 12–2–16; 8:45 am]              Exchange Act and will be filed with the                   The purpose of this filing is to amend
                                                BILLING CODE 8011–01–P                                   SEC as a rule change for effectiveness                 Chapter VI, Section 5, to extend the
                                                                                                         upon filing. Until such time as the                    Penny Pilot through June 30, 2017 or the
                                                                                                         Board makes a change in the                            date of permanent approval, if earlier,4
                                                SECURITIES AND EXCHANGE                                  increments, the following principles
                                                COMMISSION                                                                                                      and to change the date when delisted
                                                                                                         shall apply:                                           classes may be replaced in the Penny
                                                                                                            (1)–(2) No Change.                                  Pilot. The Exchange believes that
                                                [Release No. 34–79420; File No. SR–BX–                      (3) For a pilot period scheduled to                 extending the Penny Pilot will allow for
                                                2016–062]                                                expire on [December 31, 2016] June 30,                 further analysis of the Penny Pilot and
                                                                                                         2017 or the date of permanent approval,                a determination of how the program
                                                Self-Regulatory Organizations;                           if earlier, if the options series is trading
                                                NASDAQ BX, Inc.; Notice of Filing and                                                                           should be structured in the future.
                                                                                                         pursuant to the Penny Pilot program one                   Under the Penny Pilot, the minimum
                                                Immediate Effectiveness of Proposed                      (1) cent if the options series is trading
                                                Rule Change To Amend Chapter VI,                                                                                price variation for all participating
                                                                                                         at less than $3.00, five (5) cents if the              options classes, except for the Nasdaq-
                                                Section 5 To Extend the Penny Pilot                      options series is trading at $3.00 or
                                                Program                                                                                                         100 Index Tracking Stock (‘‘QQQQ’’),
                                                                                                         higher, unless for QQQQs, SPY and                      the SPDR S&P 500 Exchange Traded
                                                November 29, 2016.                                       IWM where the minimum quoting                          Fund (‘‘SPY’’) and the iShares Russell
                                                                                                         increment will be one cent for all series              2000 Index Fund (‘‘IWM’’), is $0.01 for
                                                   Pursuant to Section 19(b)(1) of the
                                                                                                         regardless of price. A list of such                    all quotations in options series that are
                                                Securities Exchange Act of 1934
                                                                                                         options shall be communicated to                       quoted at less than $3 per contract and
                                                (‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                                                                         membership via an Options Trader Alert                 $0.05 for all quotations in options series
                                                notice is hereby given that on November
                                                                                                         (‘‘OTA’’) posted on the Exchange’s Web                 that are quoted at $3 per contract or
                                                16, 2016, NASDAQ BX, Inc. (‘‘BX’’ or
                                                                                                         site.                                                  greater. QQQQ, SPY and IWM are
                                                ‘‘Exchange’’) filed with the Securities                     The Exchange may replace any pilot
                                                and Exchange Commission (‘‘SEC’’ or                                                                             quoted in $0.01 increments for all
                                                                                                         issues that have been delisted with the
                                                ‘‘Commission’’) the proposed rule                                                                               options series. The Penny Pilot is
                                                                                                         next most actively traded multiply
                                                change as described in Items I, II, and                                                                         currently scheduled to expire on
                                                                                                         listed options classes that are not yet
                                                III below, which Items have been                                                                                December 31, 2016.
                                                                                                         included in the pilot, based on trading                   The Exchange proposes to extend the
                                                prepared by the Exchange. The                            activity in the previous six months. The
                                                Commission is publishing this notice to                                                                         time period of the Penny Pilot through
                                                                                                         replacement issues may be added to the                 June 30, 2017 or the date of permanent
                                                solicit comments on the proposed rule                    pilot on the second trading day
                                                change from interested persons.                                                                                 approval, if earlier, and to provide a
                                                                                                         following [July 1, 2016] January 1, 2017.              revised date for adding replacement
                                                I. Self-Regulatory Organization’s                           (4) No Change.
                                                                                                                                                                issues to the Penny Pilot. The Exchange
sradovich on DSK3GMQ082PROD with NOTICES




                                                Statement of the Terms of Substance of                      (b) No Change.
                                                                                                                                                                proposes that any Penny Pilot Program
                                                the Proposed Rule Change                                 *      *      *     *    *                             issues that have been delisted may be
                                                                                                            The text of the proposed rule change
                                                  The Exchange proposes to amend                         is also available on the Exchange’s Web                   4 The options exchanges in the U.S. that have
                                                Chapter VI, Section 5 (Minimum
                                                                                                                                                                pilot programs similar to the Penny Pilot (together
                                                                                                           3 References herein to Chapter and Series refer to   ‘‘pilot programs’’) are currently working on a
                                                  1 15 U.S.C. 78s(b)(1).                                 rules of the BX Options Market (‘‘BX Options’’),       proposal for permanent approval of the respective
                                                  2 17 CFR 240.19b–4.                                    unless otherwise noted.                                pilot programs.



                                           VerDate Sep<11>2014    19:12 Dec 02, 2016   Jkt 241001   PO 00000   Frm 00110   Fmt 4703   Sfmt 4703   E:\FR\FM\05DEN1.SGM   05DEN1


                                                87640                       Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices

                                                replaced on the second trading day                      of the purposes of the Act. To the                        to determine whether the proposed rule
                                                following January 1, 2017. The                          contrary, this proposal is pro-                           should be approved or disapproved.
                                                replacement issues will be selected                     competitive because it allows Penny
                                                based on trading activity in the previous               Pilot issues to continue trading on the                   IV. Solicitation of Comments
                                                six months.5                                            Exchange.                                                   Interested persons are invited to
                                                  This filing does not propose any                        Moreover, the Exchange believes that                    submit written data, views, and
                                                substantive changes to the Penny Pilot                  the proposed rule change will allow for                   arguments concerning the foregoing,
                                                Program; all classes currently                          further analysis of the Pilot and a                       including whether the proposed rule
                                                participating in the Penny Pilot will                   determination of how the Pilot should
                                                remain the same and all minimum                                                                                   change is consistent with the Act.
                                                                                                        be structured in the future; and will                     Comments may be submitted by any of
                                                increments will remain unchanged. The                   serve to promote regulatory clarity and
                                                Exchange believes the benefits to public                                                                          the following methods:
                                                                                                        consistency, thereby reducing burdens
                                                customers and other market participants                 on the marketplace and facilitating                       Electronic Comments
                                                who will be able to express their true                  investor protection.
                                                prices to buy and sell options have been                  The Pilot is an industry-wide                             • Use the Commission’s Internet
                                                demonstrated to outweigh the potential                  initiative supported by all other option                  comment form (http://www.sec.gov/
                                                increase in quote traffic.                              exchanges. The Exchange believes that                     rules/sro.shtml); or
                                                2. Statutory Basis                                      extending the Pilot will allow for                          • Send an email to rule-comments@
                                                                                                        continued competition between market                      sec.gov. Please include File Number SR–
                                                   The Exchange believes that its                       participants on the Exchange trading
                                                proposal is consistent with Section 6(b)                                                                          BX–2016–062 on the subject line.
                                                                                                        similar products as their counterparts
                                                of the Act,6 in general, and furthers the               on other exchanges, while at the same                     Paper Comments
                                                objectives of Section 6(b)(5) of the Act,7
                                                                                                        time allowing the Exchange to continue                       • Send paper comments in triplicate
                                                in particular, in that it is designed to
                                                                                                        to compete for order flow with other
                                                prevent fraudulent and manipulative                                                                               to Secretary, Securities and Exchange
                                                                                                        exchanges in option issues trading as
                                                acts and practices, to promote just and                                                                           Commission, 100 F Street, NE.,
                                                                                                        part of the Pilot.
                                                equitable principles of trade, to foster                                                                          Washington, DC 20549–1090.
                                                cooperation and coordination with                       C. Self-Regulatory Organization’s                            All submissions should refer to File
                                                persons engaged in facilitating                         Statement on Comments on the                              Number SR–BX–2016–062. This file
                                                transactions in securities, and to remove               Proposed Rule Change Received From                        number should be included on the
                                                impediments to and perfect the                          Members, Participants, or Others                          subject line if email is used. To help the
                                                mechanism of a free and open market                       No written comments were either                         Commission process and review your
                                                and a national market system and, in
                                                                                                        solicited or received.                                    comments more efficiently, please use
                                                general, to protect investors and the
                                                                                                                                                                  only one method. The Commission will
                                                public interest.                                        III. Date of Effectiveness of the
                                                   In particular, the proposed rule                     Proposed Rule Change and Timing for                       post all comments on the Commission’s
                                                change, which extends the Penny Pilot                   Commission Action                                         Internet Web site (http://www.sec.gov/
                                                for an additional six months through                                                                              rules/sro.shtml).
                                                                                                           Because the foregoing proposed rule
                                                June 30, 2017 or the date of permanent                                                                               Copies of the submission, all
                                                                                                        change does not: (i) Significantly affect
                                                approval, if earlier, and changes the date                                                                        subsequent amendments, all written
                                                                                                        the protection of investors or the public
                                                for replacing Penny Pilot issues that                                                                             statements with respect to the proposed
                                                                                                        interest; (ii) impose any significant
                                                were delisted to the second trading day                                                                           rule change that are filed with the
                                                                                                        burden on competition; and (iii) become
                                                following January 1, 2017, will enable                                                                            Commission, and all written
                                                                                                        operative for 30 days from the date on
                                                public customers and other market                                                                                 communications relating to the
                                                                                                        which it was filed, or such shorter time
                                                participants to express their true prices                                                                         proposed rule change between the
                                                                                                        as the Commission may designate, it has
                                                to buy and sell options for the benefit                                                                           Commission and any person, other than
                                                                                                        become effective pursuant to Section
                                                of all market participants. This is                                                                               those that may be withheld from the
                                                                                                        19(b)(3)(A)(iii) of the Act 8 and
                                                consistent with the Act.                                                                                          public in accordance with the
                                                                                                        subparagraph (f)(6) of Rule 19b–4
                                                B. Self-Regulatory Organization’s                       thereunder.9                                              provisions of 5 U.S.C. 552, will be
                                                Statement on Burden on Competition                         At any time within 60 days of the                      available for Web site viewing and
                                                                                                        filing of the proposed rule change, the                   printing in the Commission’s Public
                                                  The Exchange does not believe that
                                                                                                        Commission summarily may                                  Reference Room, 100 F Street, NE.,
                                                the proposed rule change will impose
                                                                                                        temporarily suspend such rule change if                   Washington, DC 20549, on official
                                                any burden on competition not
                                                                                                        it appears to the Commission that such                    business days between the hours of
                                                necessary or appropriate in furtherance
                                                                                                        action is: (i) Necessary or appropriate in                10:00 a.m. and 3:00 p.m. Copies of the
                                                   5 The replacement issues will be announced to        the public interest; (ii) for the protection              filing also will be available for
                                                the Exchange’s membership via an Options Trader         of investors; or (iii) otherwise in                       inspection and copying at the principal
                                                Alert (OTA) posted on the Exchange’s Web site.          furtherance of the purposes of the Act.                   office of the Exchange. All comments
                                                Penny Pilot replacement issues will be selected                                                                   received will be posted without change;
                                                based on trading activity in the previous six
                                                                                                        If the Commission takes such action, the
                                                months, as is the case today. The replacement           Commission shall institute proceedings                    the Commission does not edit personal
                                                issues would be identified based on The Options                                                                   identifying information from
sradovich on DSK3GMQ082PROD with NOTICES




                                                Clearing Corporation’s trading volume data. For           8 15  U.S.C. 78s(b)(3)(A)(iii).                         submissions. You should submit only
                                                example, for the January replacement, trading             9 17  CFR 240.19b–4(f)(6). In addition, Rule 19b–       information that you wish to make
                                                volume from May 30, 2016 through November 30,           4(f)(6) requires a self-regulatory organization to give
                                                2016 would be analyzed. The month immediately
                                                                                                                                                                  available publicly.
                                                                                                        the Commission written notice of its intent to file
                                                preceding the replacement issues’ addition to the       the proposed rule change at least five business days         All submissions should refer to File
                                                Pilot Program (i.e., December) would not be used for    prior to the date of filing of the proposed rule
                                                purposes of the six-month analysis.
                                                                                                                                                                  Number SR–BX–2016–062 and should
                                                                                                        change, or such shorter time as designated by the
                                                   6 15 U.S.C. 78f(b).
                                                                                                        Commission. The Exchange has satisfied this
                                                                                                                                                                  be submitted on or before December 27,
                                                   7 15 U.S.C. 78f(b)(5).                               requirement.                                              2016.


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                                                                            Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices                                                    87641

                                                  For the Commission, by the Division of                concerning the purpose of and basis for               used despite the trading floor being
                                                Trading and Markets, pursuant to delegated              the proposed rule change and discussed                operational. Specifically, as amended,
                                                authority.10                                            any comments it received on the                       Rule 6.18 provided that in the event that
                                                Robert W. Errett,                                       proposed rule change. The text of these               the Exchange were forced to switch
                                                Deputy Secretary.                                       statements may be examined at the                     operations to the back-up data center,
                                                [FR Doc. 2016–29041 Filed 12–2–16; 8:45 am]             places specified in Item IV below. The                the Exchange’s trading floor could still
                                                BILLING CODE 8011–01–P                                  Exchange has prepared summaries, set                  be used and that in the event that the
                                                                                                        forth in sections A, B, and C below, of               trading floor were inoperable, the
                                                                                                        the most significant aspects of such                  Exchange could still operate using a
                                                SECURITIES AND EXCHANGE                                 statements.                                           floorless configuration or screen-based
                                                COMMISSION                                                                                                    only environment on the Exchange’s
                                                                                                        A. Self-Regulatory Organization’s
                                                                                                                                                              primary data center. References to the
                                                [Release No. 34–79423; File No. SR–CBOE–                Statement of the Purpose of, and the
                                                2016–078]                                                                                                     DRF and other irrelevant portions of the
                                                                                                        Statutory Basis for, the Proposed Rule
                                                                                                                                                              original rule were eliminated or
                                                                                                        Change
                                                Self-Regulatory Organizations;                                                                                replaced with references to Exchange’s
                                                Chicago Board Options Exchange,                         1. Purpose                                            primary and back-up data centers as
                                                Incorporated; Notice of Filing of a                     Background                                            appropriate.
                                                Proposed Rule Change, as Modified by                                                                             In 2015, Rule 6.18 was again amended
                                                                                                           The Exchange adopted Rule 6.18 in                  to add greater detail to the Exchange’s
                                                Amendment No. 1 Thereto, Relating to
                                                                                                        2006 for the limited purpose of                       disaster recovery rules and harmonize
                                                Disaster Recovery                                       providing alternative means of                        the disaster recovery rules with newly
                                                November 29, 2016.                                      operation in the event of a physical                  implemented disaster recovery-related
                                                   Pursuant to Section 19(b)(1) of the                  disaster. In particular, Rule 6.18, as                regulatory imperatives of Regulation
                                                Securities Exchange Act of 1934                         originally adopted, was intended to deal              Systems Compliance and Integrity
                                                (‘‘Act’’) 1 and Rule 19b–4 thereunder,2                 with trading floor closures, providing                (‘‘Regulation SCI’’), which superseded
                                                notice is hereby given that on November                 for the operation of a ‘‘Disaster Recovery            and replaced the SEC’s voluntary
                                                16, 2016, Chicago Board Options                         Facility’’ (‘‘DRF’’) in the event that a              Automation Review Policy.7 In doing
                                                Exchange, Incorporated (‘‘CBOE’’ or the                 disaster or other unusual circumstance                so, the Exchange made certain changes
                                                ‘‘Exchange’’) filed with the Securities                 rendered the trading floor inoperable.4               to Rule 6.18 to provide additional
                                                and Exchange Commission                                 Under original Rule 6.18, if the                      details regarding the Exchange’s back-
                                                (‘‘Commission’’) the proposed rule                      Exchange were forced to halt trading                  up trading systems, business continuity
                                                change as described in Items I, II, and                 due to a disaster or other physical                   and disaster recovery plans, and testing
                                                III below, which Items have been                        impairment of its trading floor, the                  and update its disaster recovery rules to
                                                prepared by the Exchange. On                            Exchange and its members 5 could                      ensure consistency with Regulation SCI.
                                                November 28, 2016, the Exchange filed                   operate remotely in a screen-based only                  The Exchange now proposes to make
                                                Amendment No. 1 to the proposal.3 The                   environment from the DRF while the                    additional changes to its disaster
                                                Commission is publishing this notice to                 trading floor was unavailable. While                  recovery rules to provide the Exchange
                                                solicit comments on the proposed rule                   operating from the DRF, open outcry                   authority to take additional steps
                                                change, as modified by Amendment No.                    trading would be suspended.                           necessary to preserve the Exchange’s
                                                                                                           In 2012, Rule 6.18 was amended in                  ability to conduct business in the event
                                                1, from interested persons.
                                                                                                        connection with the Exchange’s                        that the Exchange’s data centers become
                                                I. Self-Regulatory Organization’s                       relocation of its primary data center to              inoperable or otherwise unavailable for
                                                Statement of the Terms of Substance of                  the East Coast and the consequent                     use due to a significant systems failure,
                                                the Proposed Rule Change                                conversion of its former primary data                 disaster or other unusual circumstances
                                                  The Exchange proposes to amend                        center to a back-up data center in                    and make clear in the Rules the
                                                Rule 6.18 relating to disaster recovery.                Chicago.6 Specifically, Rule 6.18 was                 intermediary steps that the Exchange
                                                                                                        amended to address other situations in                may take to disable certain systems and
                                                The text of the proposed rule change is
                                                                                                        which the primary data center could                   users’ connectivity while continuing to
                                                available on the Exchange’s Web site
                                                                                                        continue to operate despite the trading               operate its primary data center. The
                                                (http://www.cboe.com/AboutCBOE/
                                                                                                        floor being rendered inoperable or in                 Exchange believes this authority serves
                                                CBOELegalRegulatoryHome.aspx), at
                                                                                                        which the back-up data center might be                the interests of all investors and the
                                                the Exchange’s Office of the Secretary,
                                                and at the Commission’s Public                                                                                general public, because it helps the
                                                                                                           4 See Securities Exchange Act Release No. 54171
                                                Reference Room.                                                                                               Exchange ensure its continuous
                                                                                                        (July 19, 2006), 71 FR 42427 (July 26, 2006) (Order
                                                                                                        Approving Proposed Rule Change and Amendment          operation and ability to maintain fair
                                                II. Self-Regulatory Organization’s                      No. 1 Thereto Regarding a Disaster Recovery           and orderly markets in the event of a
                                                Statement of the Purpose of, and                        Facility) (SR–CBOE–2006–001).
                                                Statutory Basis for, the Proposed Rule                     5 Prior to its demutualization in 2010, the          7 See Securities Exchange Act Release No. 76203

                                                Change                                                  Exchange was a member-owned organization. See         (October 20, 2015), 80 FR 65258 (October 26, 2015)
                                                                                                        Securities Exchange Act Release No. 62382 (June       (Notice of Filing and Immediate Effectiveness of a
                                                  In its filing with the Commission, the                25, 2010), 75 FR 38164 (July 1, 2010) (Notice of      Proposed Rule Change Relating to Disaster
                                                Exchange included statements                            Filing and Immediate Effectiveness of Proposed        Recovery) (SR–CBOE–2015–088); see also
                                                                                                        Rule Change Relating to Conforming Changes in         Securities Exchange Act Release No. 73639
                                                                                                        Connection With Demutualization) (SR–CBOE–            (November 19, 2014), 79 FR at 72252 (December 5,
sradovich on DSK3GMQ082PROD with NOTICES




                                                  10 17  CFR 200.30–3(a)(12).                           2010–058). Individuals and organizations that may     2014) (Regulation Systems Compliance and
                                                  1 15  U.S.C. 78s(b)(1).                               trade on CBOE are now referred to as Trading          Integrity) (File No. S7–01–13); Securities Exchange
                                                   2 17 CFR 240.19b–4.                                  Permit Holders (‘‘TPHs’’).                            Act Release No. 27445 (November 16, 1989), 54 FR
                                                   3 In Amendment No. 1, the Exchange provided in          6 See Securities Exchange Act Release No. 68301    48703 (November 24, 1989) (Automated Systems of
                                                new footnote 11 additional explanation about how        (November 27, 2012), 77 FR 71650 (December 3,         Self-Regulatory Organizations) (File No. S7–29–89);
                                                its business continuity and disaster recovery plans     2012) (Notice of Filing and Order Granting            Securities Exchange Act Release No. 29185 (May 9,
                                                are reasonably designed to achieve two-hour             Accelerated Approval of Proposed Rule Change To       1991), 56 FR 22490 (May 15, 1991) (Automated
                                                resumption of trading systems essential to              Amend CBOE Rule 6.18 Concerning the Exchange’s        Systems of Self-Regulatory Organizations) (File No.
                                                conducting business on the Exchange.                    Disaster Recovery Facility) (SR–CBOE–2012–111).       S7–12–91).



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Document Created: 2016-12-03 00:26:08
Document Modified: 2016-12-03 00:26:08
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 87639 

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