81 FR 90012 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change To Amend Exchange Rules Related to the Automated Improvement Mechanism
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 239 (December 13, 2016)
Federal Register Volume 81, Issue 239 (December 13, 2016)
| Page Range | 90012-90015 | |
| FR Document | 2016-29804 |
[Federal Register Volume 81, Number 239 (Tuesday, December 13, 2016)] [Notices] [Pages 90012-90015] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-29804] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79499; File No. SR-CBOE-2016-084] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change To Amend Exchange Rules Related to the Automated Improvement Mechanism December 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 November 29, 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 seeks to amend Exchange Rules related to the Automated Improvement Mechanism. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * [[Page 90013]] Rule 6.74A. Automated Improvement Mechanism (``AIM'') Notwithstanding the provisions of Rule 6.74, a Trading Permit Holder that represents agency orders may electronically execute an order it represents as agent (``Agency Order'') against principal interest or against a solicited order provided it submits the Agency Order for electronic execution into the AIM auction (``Auction'') pursuant to this Rule. (a)-(b) No change. . . . Interpretations and Policies: .01-.02 No change. .03 [Initially, and for at least a Pilot Period expiring on January 18, 2017, there will be] There is no minimum size requirement for orders to be eligible for the Auction. [During this Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the Auction mechanism. Any raw data which is submitted to the Commission will be provided on a confidential basis.] .04-.05 No change. .06 [Subparagraph (b)(2)(E) of this rule will be effective for a Pilot Period until January 18, 2017. During the Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, relating to the frequency with which early termination of the Auction occurs pursuant to this provision as well as any other provision, and also the frequency with which early termination pursuant to this provision results in favorable pricing for the Agency Order. Any raw data which is submitted to the Commission will be provided on a confidential basis.] Reserved. .07-.09 No change. * * * * * Rule 24B.5A. FLEX Automated Improvement Mechanism Notwithstanding the provisions of Rule 24B.5, a FLEX Trader that represents agency orders may electronically execute an order it represents as agent (``Agency Order'') against principal interest and/ or against solicited orders provided it submits the Agency Order for execution into the automated improvement mechanism auction (``AIM Auction'') pursuant to this Rule. (a) AIM Auction Eligibility Requirements. A FLEX Trader (the ``Initiating Trading Permit Holder'') may initiate an AIM Auction provided all of the following are met: (1) the Agency Order is in a FLEX class designated as eligible for AIM Auctions as determined by the Exchange and within the designated AIM Auction order eligibility size parameters as such size parameters are determined by the Exchange; and (2) the Initiating Trading Permit Holder must stop the entire Agency Order as principal and/or with a solicited order(s) at the better of the BBO price improved by one minimum price improvement increment or the Agency Order's limit price. (b) No change. . . . Interpretations and Policies: .01-.02 No change. .03 [Initially, and for at least a Pilot Period expiring on January 18, 2017, there will be] There is no minimum size requirement for orders to be eligible for the AIM Auction. [During this Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the AIM Auction. Any raw data which is submitted to the Commission will be provided on a confidential basis.] .04-.07 No change. * * * * * The text of the proposed rule change is also available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In February 2006, CBOE obtained approval from the Securities and Exchange Commission (the ``Commission'') to adopt the AIM auction process.\3\ AIM exposes certain orders electronically to an auction process to provide these orders with the opportunity to receive an execution at an improved price. The AIM auction is available only for orders that a Trading Permit Holder represents as agent (``Agency Order'') and for which a second order of the same size as the Agency Order (and on the opposite side of the market) is also submitted (effectively stopping the Agency Order at a given price). --------------------------------------------------------------------------- \3\ See Securities Exchange Release No. 53222 (February 3, 2006), 71 FR 7089 (February 10, 2006) (SR-CBOE-2005-60). --------------------------------------------------------------------------- The Commission approved two components of AIM on a pilot basis: (1) That there is no minimum size requirement for orders to be eligible for the auction; and (2) that the auction will conclude prematurely anytime there is a quote lock on the Exchange pursuant to Rule 6.45A(d).\4\ --------------------------------------------------------------------------- \4\ A quote lock occurs when a CBOE Market-Maker's quote interacts with the quote of another CBOE Market-Maker (i.e. when internal quotes lock). --------------------------------------------------------------------------- Eleven extensions to the pilot programs have previously become effective.\5\ The pilot program is set to expire on January 18, 2017. The Exchange is seeking permanent approval of the pilot programs. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release Nos. 54147 (July 14, 2006), 71 FR 41487 (July 21, 2006) (SR-CBOE-2006-64); 56094 (July 18, 2007), 72 FR 40910 (July 25, 2007) (SR-CBOE-2007-80); 58196 (July 18, 2008), 73 FR 43803 (July 28, 2008) (SR-CBOE-2008-76); 60338 (July 17, 2009), 74 FR 36803 (July 24, 2009) (SR-CBOE-2009- 051); 62522 (July 16, 2010), 75 FR 43596 (July 26, 2010) (SR-CBOE- 2010-067); 64930 (July 20, 2011), 76 FR 44636 (July 26, 2011) (SR- CBOE-2011-066); 67302 (June 28, 2012), 77 FR 39779 (July 5, 2012) (SR-CBOE-2012-061); 69867 (June 27, 2013), 78 FR 40230 (July 3, 2013) (SR-CBOE-2013-066); 72570 (July 9, 2014), 79 FR 41337 (July 15, 2014) (SR-CBOE-2014-054); 75476 (July 16, 2015), 80 FR 43548 (July 22, 2015) (SR-CBOE-2015-068); and 78316 (July 13, 2016) 81 FR 138 (July 19, 2016). --------------------------------------------------------------------------- As evidenced by data submitted to the Commission on a monthly and confidential basis since the pilot programs inception, AIM offers meaningful competition for all size orders. Additionally, there is an active and liquid market functioning on the Exchange outside of AIM. In addition to monthly data provided to the Commission on a confidential basis, the Exchange provided the Commission [[Page 90014]] with a summary report (the ``Report''), included herein as Exhibit 3, which demonstrates the price improvement benefits of AIM. Approving the pilot programs on a permanent basis will allow AIM to continue to offer meaningful price improvement and will not have an adverse effect on the market functioning on the Exchange outside of AIM. Specifically, the Report contains eight categories of non-customer and customer auction data, as well as three categories of summary auction data, during the period January 2015 through June 2015. Each of the eight categories is divided into subcategories based on the spread of the National Best Bid or Offer (``NBBO'') at the time an auction was initiated. The data is further divided into the number of orders that were auctioned within each particular subcategory. Finally, for each subcategory, Exchange identified the per contract price improvement that occurred at each NBBO spread; the average number of participants responding to the auctions plus the initiator; the total volume the initiator received; the average percentage of orders the initiator received; and the percentage of contracts received by the auction initiator. The various categories contained in the Report include: (1) Non-Customer Auction/Under 50 Contracts/CBOE not at NBBO (2) Non-Customer Auction/Under 50 Contracts/CBOE at NBBO (3) Non-Customer Auction/50 Contracts and over/CBOE not at NBBO (4) Non-Customer Auction/50 Contracts and over/CBOE at NBBO (5) Customer Auction/Under 50 Contracts/CBOE not at NBBO (6) Customer Auction/Under 50 Contracts/CBOE at NBBO (7) Customer Auction/50 Contracts and over/CBOE not at NBBO (8) Customer Auction/50 Contracts and over/CBOE at NBBO (9) Summary of all Non-Customer Auctions for the Period (10) Summary of all Customer Auctions for the Period (11) Summary of all Auctions for the Period The summary of all auctions overwhelming demonstrates that AIM offers competition and price improvement because the vast majority of contracts traded via AIM received price improvement beyond the NBBO. Specifically, with regards to Customer AIM auctions, of the 54,243,091 contracts traded via AIM during the Report period 41,278,408 contracts received price improvement beyond the NBBO.\6\ In addition, of the 54,504,717 total contracts traded via AIM during the Report period 41,514,731 contracts received price improvement beyond the NBBO.\7\ --------------------------------------------------------------------------- \6\ See Exhibit 3, pages 46-47. \7\ See Exhibit 3, page 47. --------------------------------------------------------------------------- Furthermore, the Exchange provided the Commission with data on a monthly and confidential basis on the number of times an AIM auction was terminated early because of a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d). From January 2015 through June 2015, for example, there were less than two auctions ended early per month because of a quote lock. Thus, due to the infrequency with which a quote lock terminates an AIM auction, permanent approval of the pilot program to end AIM auctions early when there is a quote lock on the Exchange will have a de minimis impact on the marketplace. Also, modifying the ``Quote Lock'' \8\ timer, which allows quotes from two or more CBOE Market-Makers to remain locked for a given time interval prior to trading with one another, will not impact AIM. The quote lock is what triggers both the Quote Lock timer and the termination of an AIM auction; thus, the length of the Quote Lock timer will not affect AIM. --------------------------------------------------------------------------- \8\ See Rule 6.45A(d)(i)(B) and RG16-158. --------------------------------------------------------------------------- Additionally, in March 2012, CBOE obtained approval from the Commission to adopt the AIM auction process for FLEX Options.\9\ AIM for FLEX Options exposes certain FLEX Options orders electronically to an auction process to provide these orders with the opportunity to receive an execution at an improved price. The FLEX AIM auction is available only for Agency Orders and for which a second order of the same size as the Agency Order (and on the opposite side of the market) is also submitted (effectively stopping the Agency Order at a given price). --------------------------------------------------------------------------- \9\ See Securities Exchange Release No. 66702 (March 30, 2012), 77 FR 20675 (April 5, 2012) (SR-CBOE-2011-123). --------------------------------------------------------------------------- The Commission approved on a pilot basis the component of AIM for FLEX Options that there is no minimum size requirement for orders to be eligible for the auction.\10\ Although Exhibit 3 does not include data regarding AIM for FLEX Options, the Exchange has submitted to the Commission reports providing detailed FLEX AIM auction and order execution data since the Pilot's inception. Five extensions to the pilot program have previously become effective.\11\ The pilot program is set to expire on January 18, 2017. The Exchange is seeking permanent approval of the pilot program. --------------------------------------------------------------------------- \10\ The pilot for the FLEX AIM auction process was modeled after the pilot for non-FLEX Options described above, and included an initial expiration date of July 18, 2012 so that the FLEX pilot would coincide with the existing non-FLEX pilot. \11\ See Securities Exchange Act Release No. 67302 (June 28, 2012), 77 FR 39779 (July 5, 2012) (SR-CBOE-2012-061); 69938 (July 5, 2013), 78 FR 41481 (July 10, 2013) (SR-CBOE-2013-069); 72570 (July 9, 2014), 79 FR 41337 (July 15, 2014) (SR-CBOE-2014-054); 75476 (July 16, 2015), 80 FR 43548 (July 22, 2015) (SR-CBOE-2015-068); and 78316 (July 13, 2016) 81 FR 138 (July 19, 2016). --------------------------------------------------------------------------- Currently, in order to initiate a FLEX AIM auction the initiating Trading Permit Holder must stop the entire Agency Order as principal and/or with a solicited order(s) at the better of the BBO or the Agency Order's limit price. For purposes of Chapter XXIVB the term ``BBO'' means the best bid or offer, or both, as applicable, entered in response to a Request for Quotes (``RFQ'') \12\ or resting in the electronic book.\13\ Generally speaking there is no existing BBO prior to a FLEX AIM because there either has not been an RFQ or a FLEX Order with the same terms as the order to be auctioned in FLEX AIM.\14\ Thus, the monthly data submitted to the Commission does not show observable price improvement beyond the BBO because generally speaking no BBO exists prior to a FLEX AIM. Although the Exchange has agreed to modify its FLEX AIM rules to require the Agency Order to be stopped at the better of the BBO price improved by one minimum price increment or the Agency Order's limit price, the Exchange does not believe there will be any difference in the way FLEX AIM functions. It's likely that there will continue to be no BBO prior to a FLEX AIM; however, FLEX AIM will continue to offer the possibility for price improvement beyond the initiator's stop price. --------------------------------------------------------------------------- \12\ RFQ is defined as the initial request supplied by a Submitting Trading Permit Holder to initiate FLEX bidding and offering. See Rule 24B.1(r). \13\ See Rule 24B.1(a). \14\ FLEX Order is defined as (i) FLEX bids and offers entered by FLEX Market-Makers and (ii) orders to purchase and orders to sell FLEX Options entered by FLEX Traders, in each case into the electronic book. See Rule 24B.1(j). --------------------------------------------------------------------------- 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.\15\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \16\ requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and [[Page 90015]] practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \17\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78f(b). \16\ 15 U.S.C. 78f(b)(5). \17\ Id. --------------------------------------------------------------------------- In particular, the proposed rule change protects investors and the public interest because the AIM and FLEX AIM pilot programs have allowed (1) smaller non-FLEX option and FLEX Option orders to receive the opportunity for price improvement pursuant to the AIM auction, and (2) with respect to non-FLEX options, Agency Orders in AIM auctions that are concluded early because of quote lock on the Exchange to receive the benefit of the lock price. Additionally, as noted above, the AIM pilot program offers meaningful price improvement and making it permanent will not have an adverse effect on the market functioning on the Exchange outside of AIM. Furthermore, although it's likely that there will continue to be no BBO prior to a FLEX AIM, the FLEX AIM mechanism will continue to offer the possibility for price improvement beyond the initiator's stop price and making the pilot permanent will not have an adverse effect on the market functioning on the Exchange outside of AIM. 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. The Exchange does not believe the proposed rule changes impose any burden on intramarket competition because it applies to all Trading Permit Holders. In addition, the Exchange does not believe the proposed rule changes will impose any burden on intermarket competition, as they are merely making pilot programs already in existence permanent and which are available to all market participants through Trading Permit Holders. Additionally, CBOE believes that the AIM and FLEX AIM pilot programs have improved competition because the auction process provides non-customer and customer orders with the opportunity to receive an execution at an improved price. 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be 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 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-2016-084 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-2016-084. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal 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-2016-084, and should be submitted on or before January 3, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016-29804 Filed 12-12-16; 8:45 am] BILLING CODE 8011-01-P
![90012 Federal Register / Vol. 81, No. 239 / Tuesday, December 13, 2016 / Notices
cover its costs of providing routing III. Date of Effectiveness of the inspection and copying at the principal
services to such exchanges and to make Proposed Rule Change and Timing for office of the Exchange. All comments
some additional profit in exchange for Commission Action received will be posted without change;
the services it provides. The Exchange The foregoing rule change has become the Commission does not edit personal
also believes that the proposed increase effective pursuant to Section 19(b)(3)(A) identifying information from
to the fee structure for orders routed to of the Act 10 and paragraph (f) of Rule submissions. You should submit only
and executed at these away options 19b–4 thereunder.11 At any time within information that you wish to make
exchanges is fair and equitable and not 60 days of the filing of the proposed rule available publicly. All submissions
unreasonably discriminatory in that it change, the Commission summarily may should refer to File Number SR–
applies equally to all Members. Finally, temporarily suspend such rule change if BatsEDGX–2016–69, and should be
the Exchange notes that it intends to it appears to the Commission that such submitted on or before January 3, 2017.
consistently evaluate its routing fees, action is necessary or appropriate in the For the Commission, by the Division of
including profit and loss attributable to public interest, for the protection of Trading and Markets, pursuant to delegated
routing, as applicable, in connection investors, or otherwise in furtherance of authority.12
with the operation of a flat fee routing the purposes of the Act. Eduardo A. Aleman,
service, and would consider future Assistant Secretary.
adjustments to the proposed pricing IV. Solicitation of Comments
[FR Doc. 2016–29802 Filed 12–12–16; 8:45 am]
structure to the extent it was recouping Interested persons are invited to
BILLING CODE 8011–01–P
a significant profit or loss from routing submit written data, views, and
to away options exchanges. arguments concerning the foregoing,
including whether the proposed rule SECURITIES AND EXCHANGE
B. Self-Regulatory Organization’s
change is consistent with the Act. COMMISSION
Statement on Burden on Competition Comments may be submitted by any of
The Exchange believes the proposed the following methods: [Release No. 34–79499; File No. SR–CBOE–
amendments to its fee schedule would 2016–084]
Electronic Comments
not impose any burden on competition
that is not necessary or appropriate in • Use the Commission’s Internet Self-Regulatory Organizations;
furtherance of the purposes of the Act. comment form (http://www.sec.gov/ Chicago Board Options Exchange,
Rather, the proposal is a competitive rules/sro.shtml); or Incorporated; Notice of Filing of a
proposal that is seeking to further the • Send an email to rule-comments@ Proposed Rule Change To Amend
growth of the Exchange and to update sec.gov. Please include File Number SR– Exchange Rules Related to the
the Exchange’s fees for routing orders to BatsEDGX–2016–69 on the subject line. Automated Improvement Mechanism
away options exchanges based on Paper Comments December 7, 2016.
Routing Costs. Additionally, Members
• Send paper comments in triplicate Pursuant to Section 19(b)(1) of the
may opt to disfavor the Exchange’s Securities Exchange Act of 1934 (the
to Secretary, Securities and Exchange
pricing, including pricing for Commission, 100 F Street NE., ‘‘Act’’),1 and Rule 19b–4 thereunder,2
transactions on the Exchange as well as Washington, DC 20549–1090. notice is hereby given that, on
routing fees, if they believe that November 29, 2016, Chicago Board
alternatives offer them better value. In All submissions should refer to File
Number SR–BatsEDGX–2016–69. This Options Exchange, Incorporated (the
particular, with respect to routing ‘‘Exchange’’ or ‘‘CBOE’’) filed with the
file number should be included on the
services, such services are available to Securities and Exchange Commission
subject line if email is used. To help the
Members from other broker-dealers as (the ‘‘Commission’’) the proposed rule
Commission process and review your
well as other options exchanges. The change as described in Items I, II, and
comments more efficiently, please use
Exchange also notes that Members may III below, which Items have been
only one method. The Commission will
choose to mark their orders as ineligible prepared by the Exchange. The
post all comments on the Commission’s
for routing to avoid incurring routing Commission is publishing this notice to
Internet Web site (http://www.sec.gov/
fees.9 Accordingly, the Exchange does solicit comments on the proposed rule
rules/sro.shtml). Copies of the
not believe that the proposed change submission, all subsequent change from interested persons.
will impair the ability of Members or amendments, all written statements
competing venues to maintain their I. Self-Regulatory Organization’s
with respect to the proposed rule Statement of the Terms of Substance of
competitive standing in the financial change that are filed with the
markets. the Proposed Rule Change
Commission, and all written
C. Self-Regulatory Organization’s communications relating to the The Exchange seeks to amend
Statement on Comments on the proposed rule change between the Exchange Rules related to the
Proposed Rule Change Received From Commission and any person, other than Automated Improvement Mechanism.
Members, Participants, or Others those that may be withheld from the The text of the proposed rule change is
public in accordance with the provided below.
The Exchange has not solicited, and provisions of 5 U.S.C. 552, will be (additions are italicized; deletions are
does not intend to solicit, comments on available for Web site viewing and [bracketed])
this proposed rule change. The printing in the Commission’s Public
Exchange has not received any written * * * * *
pmangrum on DSK3GDR082PROD with NOTICES
Reference Room, 100 F Street NE.,
comments from members or other Washington, DC 20549 on official Chicago Board Options Exchange,
interested parties. business days between the hours of Incorporated Rules
10:00 a.m. and 3:00 p.m. Copies of such * * * * *
9 See Exchange Rule 21.1(d)(7) (describing ‘‘Book
Only’’ orders) and Exchange Rule 21.9(a)(1)
filing also will be available for
12 17 CFR 200.30–3(a)(12).
(describing the Exchange’s routing process, which
10 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1).
requires orders to be designated as available for
routing). 11 17 CFR 240.19b–4(f). 2 17 CFR 240.19b–4.
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![Federal Register / Vol. 81, No. 239 / Tuesday, December 13, 2016 / Notices 90013
Rule 6.74A. Automated Improvement initiate an AIM Auction provided all of A. Self-Regulatory Organization’s
Mechanism (‘‘AIM’’) the following are met: Statement of the Purpose of, and
Notwithstanding the provisions of (1) the Agency Order is in a FLEX Statutory Basis for, the Proposed Rule
Rule 6.74, a Trading Permit Holder that class designated as eligible for AIM Change
represents agency orders may Auctions as determined by the 1. Purpose
electronically execute an order it Exchange and within the designated In February 2006, CBOE obtained
represents as agent (‘‘Agency Order’’) AIM Auction order eligibility size approval from the Securities and
against principal interest or against a parameters as such size parameters are Exchange Commission (the
solicited order provided it submits the determined by the Exchange; and ‘‘Commission’’) to adopt the AIM
Agency Order for electronic execution auction process.3 AIM exposes certain
(2) the Initiating Trading Permit
into the AIM auction (‘‘Auction’’) orders electronically to an auction
Holder must stop the entire Agency
pursuant to this Rule. process to provide these orders with the
Order as principal and/or with a
(a)–(b) No change. opportunity to receive an execution at
solicited order(s) at the better of the
. . . Interpretations and Policies: BBO price improved by one minimum an improved price. The AIM auction is
.01–.02 No change. price improvement increment or the available only for orders that a Trading
.03 [Initially, and for at least a Pilot Agency Order’s limit price. Permit Holder represents as agent
Period expiring on January 18, 2017, (‘‘Agency Order’’) and for which a
(b) No change. second order of the same size as the
there will be] There is no minimum size
requirement for orders to be eligible for . . . Interpretations and Policies: Agency Order (and on the opposite side
the Auction. [During this Pilot Period, of the market) is also submitted
the Exchange will submit certain data, .01–.02 No change. (effectively stopping the Agency Order
periodically as required by the .03 [Initially, and for at least a Pilot at a given price).
Commission, to provide supporting Period expiring on January 18, 2017, The Commission approved two
evidence that, among other things, there there will be] There is no minimum size components of AIM on a pilot basis: (1)
is meaningful competition for all size requirement for orders to be eligible for That there is no minimum size
orders and that there is an active and the AIM Auction. [During this Pilot requirement for orders to be eligible for
liquid market functioning on the Period, the Exchange will submit certain the auction; and (2) that the auction will
Exchange outside of the Auction data, periodically as required by the conclude prematurely anytime there is a
mechanism. Any raw data which is Commission, to provide supporting quote lock on the Exchange pursuant to
submitted to the Commission will be evidence that, among other things, there Rule 6.45A(d).4
provided on a confidential basis.] Eleven extensions to the pilot
is meaningful competition for all size
.04–.05 No change. programs have previously become
orders and that there is an active and
.06 [Subparagraph (b)(2)(E) of this rule effective.5 The pilot program is set to
liquid market functioning on the expire on January 18, 2017. The
will be effective for a Pilot Period until Exchange outside of the AIM Auction.
January 18, 2017. During the Pilot Exchange is seeking permanent
Any raw data which is submitted to the approval of the pilot programs.
Period, the Exchange will submit certain Commission will be provided on a
data, periodically as required by the As evidenced by data submitted to the
confidential basis.] Commission on a monthly and
Commission, relating to the frequency
with which early termination of the .04–.07 No change. confidential basis since the pilot
Auction occurs pursuant to this * * * * * programs inception, AIM offers
provision as well as any other provision, meaningful competition for all size
The text of the proposed rule change orders. Additionally, there is an active
and also the frequency with which early is also available on the Exchange’s Web
termination pursuant to this provision and liquid market functioning on the
site (http://www.cboe.com/AboutCBOE/ Exchange outside of AIM. In addition to
results in favorable pricing for the
CBOELegalRegulatoryHome.aspx), at monthly data provided to the
Agency Order. Any raw data which is
the Exchange’s Office of the Secretary, Commission on a confidential basis, the
submitted to the Commission will be
provided on a confidential basis.] and at the Commission’s Public Exchange provided the Commission
Reserved. Reference Room.
3 See Securities Exchange Release No. 53222
.07–.09 No change. II. Self-Regulatory Organization’s (February 3, 2006), 71 FR 7089 (February 10, 2006)
* * * * * Statement of the Purpose of, and (SR–CBOE–2005–60).
4 A quote lock occurs when a CBOE Market-
Statutory Basis for, the Proposed Rule
Rule 24B.5A. FLEX Automated Maker’s quote interacts with the quote of another
Improvement Mechanism Change CBOE Market-Maker (i.e. when internal quotes
lock).
Notwithstanding the provisions of In its filing with the Commission, the 5 See Securities Exchange Act Release Nos. 54147
Rule 24B.5, a FLEX Trader that Exchange included statements (July 14, 2006), 71 FR 41487 (July 21, 2006) (SR–
represents agency orders may concerning the purpose of and basis for CBOE–2006–64); 56094 (July 18, 2007), 72 FR
40910 (July 25, 2007) (SR–CBOE–2007–80); 58196
electronically execute an order it the proposed rule change and discussed (July 18, 2008), 73 FR 43803 (July 28, 2008) (SR–
represents as agent (‘‘Agency Order’’) any comments it received on the CBOE–2008–76); 60338 (July 17, 2009), 74 FR
against principal interest and/or against proposed rule change. The text of these 36803 (July 24, 2009) (SR–CBOE–2009–051); 62522
pmangrum on DSK3GDR082PROD with NOTICES
solicited orders provided it submits the statements may be examined at the (July 16, 2010), 75 FR 43596 (July 26, 2010) (SR–
CBOE–2010–067); 64930 (July 20, 2011), 76 FR
Agency Order for execution into the places specified in Item IV below. The 44636 (July 26, 2011) (SR–CBOE–2011–066); 67302
automated improvement mechanism Exchange has prepared summaries, set (June 28, 2012), 77 FR 39779 (July 5, 2012) (SR–
auction (‘‘AIM Auction’’) pursuant to forth in sections A, B, and C below, of CBOE–2012–061); 69867 (June 27, 2013), 78 FR
this Rule. 40230 (July 3, 2013) (SR–CBOE–2013–066); 72570
the most significant aspects of such (July 9, 2014), 79 FR 41337 (July 15, 2014) (SR–
(a) AIM Auction Eligibility statements. CBOE–2014–054); 75476 (July 16, 2015), 80 FR
Requirements. A FLEX Trader (the 43548 (July 22, 2015) (SR–CBOE–2015–068); and
‘‘Initiating Trading Permit Holder’’) may 78316 (July 13, 2016) 81 FR 138 (July 19, 2016).
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![Federal Register / Vol. 81, No. 239 / Tuesday, December 13, 2016 / Notices 90015
practices, to promote just and equitable provides non-customer and customer Commission and any person, other than
principles of trade, to foster cooperation orders with the opportunity to receive those that may be withheld from the
and coordination with persons engaged an execution at an improved price. public in accordance with the
in regulating, clearing, settling, provisions of 5 U.S.C. 552, will be
C. Self-Regulatory Organization’s
processing information with respect to, available for Web site viewing and
Statement on Comments on the printing in the Commission’s Public
and facilitating transactions in
securities, to remove impediments to Proposed Rule Change Received From Reference Room, 100 F Street NE.,
and perfect the mechanism of a free and Members, Participants, or Others Washington, DC 20549 on official
open market and a national market The Exchange neither solicited nor business days between the hours of
system, and, in general, to protect received comments on the proposed 10:00 a.m. and 3:00 p.m. Copies of such
investors and the public interest. rule change. filing also will be available for
Additionally, the Exchange believes the inspection and copying at the principal
III. Date of Effectiveness of the
proposed rule change is consistent with office of the Exchange. All comments
Proposed Rule Change and Timing for
the Section 6(b)(5) 17 requirement that received will be posted without change;
Commission Action
the rules of an exchange not be designed the Commission does not edit personal
to permit unfair discrimination between Within 45 days of the date of identifying information from
customers, issuers, brokers, or dealers. publication of this notice in the Federal submissions. You should submit only
In particular, the proposed rule Register or within such longer period information that you wish to make
change protects investors and the public up to 90 days (i) as the Commission may available publicly. All submissions
interest because the AIM and FLEX AIM designate if it finds such longer period should refer to File Number SR–CBOE–
pilot programs have allowed (1) smaller to be appropriate and publishes its 2016–084, and should be submitted on
non-FLEX option and FLEX Option reasons for so finding or (ii) as to which or before January 3, 2017.
orders to receive the opportunity for the Exchange consents, the Commission For the Commission, by the Division of
price improvement pursuant to the AIM will: Trading and Markets, pursuant to delegated
auction, and (2) with respect to non- A. By order approve or disapprove authority.18
FLEX options, Agency Orders in AIM such proposed rule change, or Eduardo A. Aleman,
auctions that are concluded early B. institute proceedings to determine Assistant Secretary.
because of quote lock on the Exchange whether the proposed rule change
[FR Doc. 2016–29804 Filed 12–12–16; 8:45 am]
to receive the benefit of the lock price. should be disapproved.
BILLING CODE 8011–01–P
Additionally, as noted above, the AIM IV. Solicitation of Comments
pilot program offers meaningful price
improvement and making it permanent Interested persons are invited to
submit written data, views, and SECURITIES AND EXCHANGE
will not have an adverse effect on the COMMISSION
market functioning on the Exchange arguments concerning the foregoing,
outside of AIM. Furthermore, although including whether the proposed rule [Release No. 34–79496; File No. SR–
it’s likely that there will continue to be change is consistent with the Act. BatsBZX–2016–83]
no BBO prior to a FLEX AIM, the FLEX Comments may be submitted by any of
the following methods: Self-Regulatory Organizations; Bats
AIM mechanism will continue to offer
BZX Exchange, Inc.; Notice of Filing
the possibility for price improvement Electronic Comments and Immediate Effectiveness of a
beyond the initiator’s stop price and
making the pilot permanent will not • Use the Commission’s Internet Proposed Rule Change Related to Fees
comment form (http://www.sec.gov/ for Use of the Exchange’s Equity
have an adverse effect on the market
rules/sro.shtml); or Options Platform
functioning on the Exchange outside of
AIM. • Send an email to rule-comments@ December 7, 2016.
sec.gov. Please include File Number SR–
B. Self-Regulatory Organization’s Pursuant to Section 19(b)(1) of the
CBOE–2016–084 on the subject line.
Statement on Burden on Competition Securities Exchange Act of 1934 (the
Paper Comments ‘‘Act’’),1 and Rule 19b–4 thereunder,2
CBOE does not believe that the notice is hereby given that on November
proposed rule change will impose any • Send paper comments in triplicate
to Secretary, Securities and Exchange 30, 2016, Bats BZX Exchange, Inc. (the
burden on competition that is not ‘‘Exchange’’ or ‘‘BZX’’) filed with the
necessary or appropriate in furtherance Commission, 100 F Street NE.,
Washington, DC 20549–1090. Securities and Exchange Commission
of the purposes of the Act. The (the ‘‘Commission’’) the proposed rule
Exchange does not believe the proposed All submissions should refer to File
change as described in Items I, II, and
rule changes impose any burden on Number SR–CBOE–2016–084. This file
III below, which Items have been
intramarket competition because it number should be included on the
prepared by the Exchange. The
applies to all Trading Permit Holders. In subject line if email is used. To help the
Exchange has designated the proposed
addition, the Exchange does not believe Commission process and review your
rule change as one establishing or
the proposed rule changes will impose comments more efficiently, please use
changing a member due, fee, or other
any burden on intermarket competition, only one method. The Commission will
charge imposed by the Exchange under
as they are merely making pilot post all comments on the Commission’s
Section 19(b)(3)(A)(ii) of the Act 3 and
programs already in existence Internet Web site (http://www.sec.gov/
Rule 19b–4(f)(2) thereunder,4 which
pmangrum on DSK3GDR082PROD with NOTICES
permanent and which are available to rules/sro.shtml). Copies of the
renders the proposed rule change
all market participants through Trading submission, all subsequent
effective upon filing with the
Permit Holders. Additionally, CBOE amendments, all written statements
believes that the AIM and FLEX AIM with respect to the proposed rule 18 17 CFR 200.30–3(a)(12).
pilot programs have improved change that are filed with the 1 15 U.S.C. 78s(b)(1).
competition because the auction process Commission, and all written 2 17 CFR 240.19b–4.
communications relating to the 3 15 U.S.C. 78s(b)(3)(A)(ii).
17 Id. proposed rule change between the 4 17 CFR 240.19b–4(f)(2).
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Document Created: 2016-12-13 02:44:39
Document Modified: 2016-12-13 02:44:39
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| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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