81 FR 91967 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Related to Rules Regarding the Responsibility for Ensuring Compliance With Open Outcry Priority and Allocation Requirements and Trade-Through Prohibitions
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 243 (December 19, 2016)
Federal Register Volume 81, Issue 243 (December 19, 2016)
| Page Range | 91967-91970 | |
| FR Document | 2016-30393 |
[Federal Register Volume 81, Number 243 (Monday, December 19, 2016)] [Notices] [Pages 91967-91970] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-30393] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79540; File No. SR-CBOE-2016-082] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Related to Rules Regarding the Responsibility for Ensuring Compliance With Open Outcry Priority and Allocation Requirements and Trade-Through Prohibitions December 13, 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 December 1, 2016, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange seeks to amend Exchange rules regarding [[Page 91968]] responsibilities for ensuring compliance with open outcry priority and allocation requirements and Trade-Through prohibitions. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 6.45A.--Priority and Allocation of Equity Option Trades on the CBOE Hybrid System * * * * * . . . Interpretations and Policies: .01-.04 No change. .05 For an open outcry transaction between a Floor Broker and Market-Maker it is the responsibility of the initiator of the transaction to ensure that the transaction is executed in accordance with the priority and allocation provisions set forth in Rule 6.45A(b) and does not cause a Trade-Through (unless otherwise excepted) under Rule 6.81. For an open outcry transaction between a Floor Broker and another Floor Broker or between a Market-Maker and another Market- Maker, both parties to the transaction are responsible for ensuring the transaction is executed in accordance with the aforementioned Rules. Rule 6.45B--Priority and Allocation of Trades in Index Options and Options on ETFs on the CBOE Hybrid System * * * * * . . . Interpretations and Policies: .01-.05 No Change. .06 For an open outcry transaction between a Floor Broker and Market-Maker it is the responsibility of the initiator of the transaction to ensure that the transaction is executed in accordance with the priority and allocation provisions set forth in Rule 6.45B(b) and does not cause a Trade-Through (unless otherwise excepted) under Rule 6.81. For an open outcry transaction between a Floor Broker and another Floor Broker or between a Market-Maker and another Market- Maker, both parties to the transaction are responsible for ensuring the transaction is executed in accordance with the aforementioned Rules. * * * * * Rule 6.73. Responsibilities of Floor Brokers * * * * * . . . Interpretations and Policies: .01-.06 No change. .07 For an open outcry transaction between a Floor Broker and Market-Maker it is the responsibility of the initiator of the transaction to ensure that the transaction is executed in accordance with the priority and allocation provisions set forth in Rules 6.45A(b) and 6.45B(b) and does not cause a Trade-Through (unless otherwise excepted) under Rule 6.81. For an open outcry transaction between a Floor Broker and another Floor Broker or between a Market-Maker and another Market-Maker, both parties to the transaction are responsible for ensuring the transaction is executed in accordance with the aforementioned Rules. * * * * * 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 The Exchange proposes to amend CBOE Rules 6.45A, 6.45B, and 6.73 to identify the party to a transaction that is responsible for ensuring that a transaction is executed in accordance with the priority and allocation requirements as set forth in Rules 6.45A(b) and 6.45B(b) \3\ and does not cause a ``Trade-Through'' (unless otherwise excepted) under Rule 6.81.\4\ The Exchange does not seek to absolve TPHs of the responsibility to ensure transactions are executed in accordance with the priority and allocation provisions or the Trade-Through prohibition provisions. Rather, the Exchange seeks to specify that the party or parties responsible for ensuring transactions are executed in accordance with the priority and allocation provisions and Trade- Through prohibitions is the initiator of the transaction when a Floor Broker is trading with a Market-Maker, both parties when a Floor Broker trades with a Floor Broker, and both parties when the transaction is between Market-Makers.\5\ --------------------------------------------------------------------------- \3\ Rules 6.45A(b) and 6.45B(b) set forth the Exchange's rules related to the allocation of orders represented in open outcry. Specifically, Rules 6.45A(b) and 6.45B(b) provide, among other things, that where two or more bids (offers) for the same option contract represent the highest (lowest) price, public customer orders in the electronic book shall have first priority. \4\ A ``Trade-Through'' is a transaction in an options series, either as principal or agent, at a price that is lower than a Protected Bid or higher than a Protected Offer. CBOE Rule 6.81 provides that unless an exception applies, Trading Permit Holders (``TPHs'') shall not effect Trade-Throughs. \5\ In the case of a Floor Broker initiating a transaction with multiple counterparties, any Floor Broker counterparty would be held responsible in the same manner as a Floor Broker trading with one other Floor Broker. Similarly, in the case of a Market-Maker initiation [sic] a transaction with multiple counterparties, any Market-Maker counterparty would be held responsible in the same manner as a Market-maker initiation [sic] a transaction with one other counterparty. --------------------------------------------------------------------------- Currently, if a transaction executed on the trading floor is executed at a Trade-Through price or was executed in violation of book priority, the Trade-Through or book priority violations are enforced against both parties to the transaction. With respect to transactions between Floor Brokers and transactions between Market-Makers, both parties will continue to be held responsible for the above violations. With respect to transactions between a Floor Broker and a Market-Maker, the Exchange believes the party that should be held responsible is the party that initiated the transaction on the trading floor. Generally speaking, Floor Brokers are the parties that initiate transactions on the trading floor by representing orders and executing the orders against bids and offers of other in-crowd market participants, including Market-Makers. For example, a typical open outcry transaction consists of a Floor Broker representing an order and requesting a quote from Market-Makers in the trading crowd. Market-Makers respond to the representation by indicating they are willing to buy (bid) the particular options series at X price and sell (offer) at Y price, which are based on the Market-Makers' theoretical values for the particular options. If the quoted market meets the requirements of the order as specified by the Floor Broker's client the Floor Broker executes the order against the best quoted bid or offer price(s). The Floor Broker, as initiator, controls the order and the execution price of the order; thus, it follows that [[Page 91969]] the Floor Broker in this example should be responsible for ensuring priority and allocation consistent with the applicable rules and that Trade-Through requirements are satisfied. Floor Brokers are also in a good position to prevent Trade-Throughs and book priority violations because Floor Brokers may utilize the Public Automatic Routing System (``PAR'') to execute orders, which is not available to Market-Makers. PAR provides all of the necessary market data to avoid Trade-Throughs and book priority violations (e.g., PAR includes data related to electronic public customer books, CBOE best bid and offer (``BBO''), and national best bid and offer (``NBBO''), etc.). In addition, PAR calculates and displays a net price for complex orders held by a Floor Broker. Most importantly, however, PAR offers alerts that warn Floor Brokers that a proposed execution price for a given order may violate priority or result in a potential Trade-Through. These alerts occur via pop-up windows within PAR. When Floor Brokers trade with Market-Makers the Market-Makers are not in as good of a position to prevent Trade-Throughs and book priority violations. Although Market-Makers have access to market data via screens on the trading floor and/or their own electronic devices, they do not have access to the specific terms and conditions of a Floor Broker's order on an electronic basis and must evaluate the CBOE BBO and the NBBO without the aid of PAR. Instead, a request for quote for a given order is verbally communicated by a Floor Broker to the trading crowd and the verbal information is taken into consideration by Market- Makers (and other in-crowd market participants) when providing a responsive quote. Furthermore, Market-Makers evaluate a Floor Broker's request for a quote against the Market-Maker's theoretical values for the given options series. This process becomes even more complicated when there are multiple options series that must be evaluated for a complex order. Ultimately, the Exchange believes it is reasonable for a Market-Maker to rely on a Floor Broker to ensure that an open outcry transaction is executed in accordance with the priority and allocation provisions and Trade-Through prohibition provisions when the Floor Broker is initiating the transaction. If a Market-Maker initiates a transaction with a Floor Broker the Market-Maker will be responsible for ensuring that the transaction is executed in accordance with the priority and allocation provisions and Trade-Through prohibition provisions. The Exchange proposes to add Interpretation and Policy .05 to Rule 6.45A, .06 to Rule 6.45B, and .07 to Rule 6.73. As previously noted, the proposal does not amend who is responsible when an open outcry transaction is between Floor Brokers or between Market-Makers. As is the case today, for open outcry transactions between Floor Brokers or open outcry transactions between Market-Makers, both parties are responsible for ensuring that a transaction is executed in accordance with the priority and allocation rules and the Trade-Through prevention rules. For these scenarios the proposal simply sets forth the existing standard, which, again, calls for both parties being responsible for ensuring that a transaction is executed in accordance with the priority and allocation rules and the Trade-Through prohibition rules. The Exchange notes that this rule change, consistent with the Options Intermarket Linkage Plan, is reasonably designed to prevent Trade-Throughs \6\ as well as book priority violations because the proposal places the responsibility for ensuring transactions are executed in accordance with the rules on the specific party or parties in a good position to ensure compliance. The Exchange also notes that this rule may help limit the number of priority and Trade-Through violations because the proposal identifies a particular party or parties to each transaction (as opposed to all parties) as being responsible for ensuring compliance with the rules. Furthermore, in all cases the responsibility will fall on all parties to the transaction (i.e., when Floor Broker trades with another Floor Broker or when a Market-Maker trades with another Market-Maker) or the initiator of the transaction. --------------------------------------------------------------------------- \6\ See generally Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000) (Order approving Options Intermarket Linkage Plan). --------------------------------------------------------------------------- 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.\7\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \8\ requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \9\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(5). \9\ Id. --------------------------------------------------------------------------- In particular, the Exchange believes that the proposed rule change is appropriate because the vast majority of the time Floor Brokers are the initiators of open outcry transactions on the trading floor, and they are able to use PAR to assist them with ensuring that transactions are executed in accordance with priority and allocation rules and Trade-Through prohibition rules, which makes this proposal reasonably designed to ensure compliance with Exchange Rules. As a result, the Exchange believes this change will remove potential impediments to a free and open market and a national market system. The Exchange also believes this rule change may help limit the number of priority and Trade-Through violations, which generally helps to protect investors and the public interest, because the proposal more appropriately identifies the specific party or parties responsible for ensuring compliance with these rules (i.e., the initiator in the case of Floor Brokers trading with Market-Makers and both parties when Market-Makers trade with Market-Makers and both parties when Floor Brokers trade with Floor Brokers). Furthermore, in all cases the responsibility will fall on all parties to the transaction (i.e., when Floor Broker trades with another Floor Broker or when a Market-Maker trades with another Market- Maker) or the initiator of the transaction. 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. CBOE does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed change will apply equally to all market participants that initiate [[Page 91970]] transactions on the floor of the Exchange. Furthermore, any perceived burden on Floor Brokers or Market-Makers is misplaced because Floor Brokers and Market-makers are no worse off from this proposal as both parties are currently held responsible for book priority and trade- through violations. The Exchange does not believe that the proposed change will impose any burden on intermarket competition because it only applies to trading on CBOE. 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-2016-082 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-2016-082. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2016-082 and should be submitted on or before January 9, 2017. --------------------------------------------------------------------------- \10\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\10\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016-30393 Filed 12-16-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices 91967
(C) Self-Regulatory Organization’s some Pilot data was scheduled to be available for Web site viewing and
Statement on Comments on the published on November 30, 2016. printing in the Commission’s Public
Proposed Rule Change Received From Therefore, the Commission hereby Reference Room, 100 F Street NE.,
Members, Participants or Others waives the 30-day operative delay and Washington, DC 20549, on official
Written comments were neither designates the proposed rule change to business days between the hours of
solicited nor received.19 be operative as of November 30, 2016.24 10:00 a.m. and 3:00 p.m. Copies of such
At any time within 60 days of the filing will also be available for
III. Date of Effectiveness of the filing of the proposed rule change, the inspection and copying at the principal
Proposed Rule Change and Timing for Commission summarily may office of the Exchange. All comments
Commission Action temporarily suspend such rule change if received will be posted without change;
Because the foregoing proposed rule it appears to the Commission that such the Commission does not edit personal
change does not: (i) Significantly affect action is necessary or appropriate in the identifying information from
the protection of investors or the public public interest, for the protection of submissions. You should submit only
interest; (ii) impose any significant investors, or otherwise in furtherance of information that you wish to make
burden on competition; and (iii) become the purposes of the Act.25 If the available publicly.
operative for 30 days from the date on Commission takes such action, the All submissions should refer to File
which it was filed, or such shorter time Commission shall institute proceedings No. SR–BatsBYX–2016–37 and should
as the Commission may designate, it has to determine whether the proposed rule be submitted on or before January 9,
become effective pursuant to Section should be approved or disapproved. 2017.
19(b)(3)(A) 20 of the Act and Rule 19b– IV. Solicitation of Comments For the Commission, by the Division of
4(f)(6) thereunder.21 Trading and Markets, pursuant to delegated
A proposed rule change filed under Interested persons are invited to authority.26
Rule 19b–4(f)(6) 22 normally does not submit written data, views and Eduardo A. Aleman,
become operative prior to 30 days after arguments concerning the foregoing, Assistant Secretary.
the date of the filing. However, pursuant including whether the proposal is [FR Doc. 2016–30387 Filed 12–16–16; 8:45 am]
to Rule 19b–4(f)(6)(iii),23 the consistent with the Act. Comments may BILLING CODE 8011–01–P
Commission may designate a shorter be submitted by any of the following
time if such action is consistent with the methods:
protection of investors and the public Electronic Comments SECURITIES AND EXCHANGE
interest. The Exchange has filed the COMMISSION
proposed rule change for immediate • Use the Commission’s Internet
effectiveness and has requested that the comment form (http://www.sec.gov/ [Release No. 34–79540; File No. SR–CBOE–
rules/sro.shtml); or 2016–082]
Commission waive the requirement that
the proposed rule change not become • Send an email to rule-comments@
sec.gov. Please include File No. SR– Self-Regulatory Organizations;
operative for 30 days after the date of Chicago Board Options Exchange,
the filing so that it may become BatsBYX–2016–37 on the subject line.
Incorporated; Notice of Filing of a
operative immediately. Paper Comments Proposed Rule Change Related to
The Exchange notes that the proposed
rule change implements the provisions • Send paper comments in triplicate Rules Regarding the Responsibility for
to Secretary, Securities and Exchange Ensuring Compliance With Open
of the Plan, and is designed to assist the Outcry Priority and Allocation
Participants in meeting their regulatory Commission, 100 F Street NE.,
Washington, DC 20549–1090. Requirements and Trade-Through
obligations pursuant to the Plan. The Prohibitions
All submissions should refer to File No.
proposal is intended to address
confidentiality concerns by permitting SR–BatsBYX–2016–37. This file number
December 13, 2016.
the Exchange to delay Web site should be included on the subject line
Pursuant to Section 19(b)(1) of the
publication to provide for passage of if email is used. To help the
Securities Exchange Act of 1934 (the
additional time between the market Commission process and review your
‘‘Act’’),1 and Rule 19b–4 thereunder,2
information reflected in the data and the comments more efficiently, please use
notice is hereby given that on December
public availability of such information. only one method. The Commission will
1, 2016, Chicago Board Options
The proposal also does not alter the post all comments on the Commission’s
Exchange, Incorporated (the ‘‘Exchange’’
information required to be submitted to Internet Web site (http://www.sec.gov/
or ‘‘CBOE’’) filed with the Securities
the SEC. rules/sro.shtml). Copies of the
and Exchange Commission (the
The Commission believes that submission, all subsequent
‘‘Commission’’) the proposed rule
waiving the 30-day operative delay is amendments, all written statements
change as described in Items I, II, and
consistent with the protection of with respect to the proposed rule
III below, which Items have been
investors and the public interest change that are filed with the
prepared by the Exchange. The
because it will allow the Exchange to Commission, and all written
Commission is publishing this notice to
implement proposed changes that are communications relating to the
solicit comments on the proposed rule
intended to address confidentiality proposed rule change between the
change from interested persons.
concerns. The Commission notes that Commission and any person, other than
those that may be withheld from the I. Self-Regulatory Organization’s
public in accordance with the Statement of the Terms of Substance of
sradovich on DSK3GMQ082PROD with NOTICES
19 See Letter from Mary Lou Von Kaenel,
Managing Director, Financial Information Forum, to provisions of 5 U.S.C. 552, will be the Proposed Rule Change
David S. Shillman, Associate Director, Division of
Trading and Markets, Commission, dated August The Exchange seeks to amend
24 For purposes only of waiving the operative
16, 2016. delay for this proposal, the Commission has
Exchange rules regarding
20 15 U.S.C. 78s(b)(3)(A).
considered the proposed rule’s impact on
21 17 CFR 240.19b–4(f)(6). 26 17 CFR 200.30–3(a)(12).
efficiency, competition, and capital formation. See
22 17 CFR 240.19b–4(f)(6). 15 U.S.C. 78c(f). 1 15 U.S.C. 78s(b)(1).
23 17 CFR 240.19b–4(f)(6)(iii) 25 15 U.S.C. 78s(b)(3)(C). 2 17 CFR 240.19b–4.
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responsibilities for ensuring compliance Maker it is the responsibility of the The Exchange does not seek to absolve
with open outcry priority and allocation initiator of the transaction to ensure TPHs of the responsibility to ensure
requirements and Trade-Through that the transaction is executed in transactions are executed in accordance
prohibitions. The text of the proposed accordance with the priority and with the priority and allocation
rule change is provided below. allocation provisions set forth in Rules provisions or the Trade-Through
(additions are italicized; deletions are 6.45A(b) and 6.45B(b) and does not prohibition provisions. Rather, the
[bracketed]) cause a Trade-Through (unless Exchange seeks to specify that the party
* * * * * otherwise excepted) under Rule 6.81. or parties responsible for ensuring
For an open outcry transaction between transactions are executed in accordance
Chicago Board Options Exchange, a Floor Broker and another Floor Broker with the priority and allocation
Incorporated Rules or between a Market-Maker and another provisions and Trade-Through
* * * * * Market-Maker, both parties to the prohibitions is the initiator of the
transaction are responsible for ensuring transaction when a Floor Broker is
Rule 6.45A.—Priority and Allocation of the transaction is executed in trading with a Market-Maker, both
Equity Option Trades on the CBOE accordance with the aforementioned parties when a Floor Broker trades with
Hybrid System Rules. a Floor Broker, and both parties when
* * * * * * * * * * the transaction is between Market-
. . . Interpretations and Policies: The text of the proposed rule change Makers.5
.01–.04 No change. is also available on the Exchange’s Web Currently, if a transaction executed on
.05 For an open outcry transaction site (http://www.cboe.com/AboutCBOE/ the trading floor is executed at a Trade-
between a Floor Broker and Market- CBOELegalRegulatoryHome.aspx), at Through price or was executed in
Maker it is the responsibility of the the Exchange’s Office of the Secretary, violation of book priority, the Trade-
initiator of the transaction to ensure and at the Commission’s Public Through or book priority violations are
that the transaction is executed in Reference Room. enforced against both parties to the
accordance with the priority and transaction. With respect to transactions
allocation provisions set forth in Rule II. Self-Regulatory Organization’s between Floor Brokers and transactions
6.45A(b) and does not cause a Trade- Statement of the Purpose of, and between Market-Makers, both parties
Through (unless otherwise excepted) Statutory Basis for, the Proposed Rule will continue to be held responsible for
under Rule 6.81. For an open outcry Change the above violations. With respect to
transaction between a Floor Broker and In its filing with the Commission, the transactions between a Floor Broker and
another Floor Broker or between a Exchange included statements a Market-Maker, the Exchange believes
Market-Maker and another Market- concerning the purpose of and basis for the party that should be held
Maker, both parties to the transaction the proposed rule change and discussed responsible is the party that initiated the
are responsible for ensuring the any comments it received on the transaction on the trading floor.
transaction is executed in accordance proposed rule change. The text of these Generally speaking, Floor Brokers are
with the aforementioned Rules. statements may be examined at the the parties that initiate transactions on
places specified in Item IV below. The the trading floor by representing orders
Rule 6.45B—Priority and Allocation of and executing the orders against bids
Trades in Index Options and Options Exchange has prepared summaries, set
and offers of other in-crowd market
on ETFs on the CBOE Hybrid System forth in sections A, B, and C below, of
participants, including Market-Makers.
the most significant aspects of such
* * * * * For example, a typical open outcry
statements.
. . . Interpretations and Policies: transaction consists of a Floor Broker
.01–.05 No Change. A. Self-Regulatory Organization’s representing an order and requesting a
.06 For an open outcry transaction Statement of the Purpose of, and quote from Market-Makers in the trading
between a Floor Broker and Market- Statutory Basis for, the Proposed Rule crowd. Market-Makers respond to the
Maker it is the responsibility of the Change representation by indicating they are
initiator of the transaction to ensure willing to buy (bid) the particular
that the transaction is executed in 1. Purpose options series at X price and sell (offer)
accordance with the priority and The Exchange proposes to amend at Y price, which are based on the
allocation provisions set forth in Rule CBOE Rules 6.45A, 6.45B, and 6.73 to Market-Makers’ theoretical values for
6.45B(b) and does not cause a Trade- identify the party to a transaction that the particular options. If the quoted
Through (unless otherwise excepted) is responsible for ensuring that a market meets the requirements of the
under Rule 6.81. For an open outcry transaction is executed in accordance order as specified by the Floor Broker’s
transaction between a Floor Broker and with the priority and allocation client the Floor Broker executes the
another Floor Broker or between a requirements as set forth in Rules order against the best quoted bid or offer
Market-Maker and another Market- 6.45A(b) and 6.45B(b) 3 and does not price(s). The Floor Broker, as initiator,
Maker, both parties to the transaction cause a ‘‘Trade-Through’’ (unless controls the order and the execution
are responsible for ensuring the otherwise excepted) under Rule 6.81.4 price of the order; thus, it follows that
transaction is executed in accordance
with the aforementioned Rules. 3 Rules 6.45A(b) and 6.45B(b) set forth the unless an exception applies, Trading Permit
Exchange’s rules related to the allocation of orders Holders (‘‘TPHs’’) shall not effect Trade-Throughs.
* * * * * represented in open outcry. Specifically, Rules 5 In the case of a Floor Broker initiating a
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6.45A(b) and 6.45B(b) provide, among other things, transaction with multiple counterparties, any Floor
Rule 6.73. Responsibilities of Floor that where two or more bids (offers) for the same Broker counterparty would be held responsible in
Brokers option contract represent the highest (lowest) price, the same manner as a Floor Broker trading with one
* * * * * public customer orders in the electronic book shall other Floor Broker. Similarly, in the case of a
have first priority. Market-Maker initiation [sic] a transaction with
. . . Interpretations and Policies: 4 A ‘‘Trade-Through’’ is a transaction in an multiple counterparties, any Market-Maker
.01–.06 No change. options series, either as principal or agent, at a price counterparty would be held responsible in the same
.07 For an open outcry transaction that is lower than a Protected Bid or higher than manner as a Market-maker initiation [sic] a
between a Floor Broker and Market- a Protected Offer. CBOE Rule 6.81 provides that transaction with one other counterparty.
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![91970 Federal Register / Vol. 81, No. 243 / Monday, December 19, 2016 / Notices
transactions on the floor of the post all comments on the Commission’s Reporting Act (15 U.S.C. 1681 et seq.)
Exchange. Furthermore, any perceived Internet Web site (http://www.sec.gov/ (‘‘FCRA’’), the Securities Exchange Act
burden on Floor Brokers or Market- rules/sro.shtml). Copies of the of 1934 (15 U.S.C. 78a et seq.), the
Makers is misplaced because Floor submission, all subsequent Investment Company Act of 1940 (15
Brokers and Market-makers are no amendments, all written statements U.S.C. 80a–1 et seq.), and the
worse off from this proposal as both with respect to the proposed rule Investment Advisers Act of 1940 (15
parties are currently held responsible change that are filed with the U.S.C. 80b–1 et seq.).
for book priority and trade-through Commission, and all written Regulation S–AM implements the
violations. The Exchange does not communications relating to the requirements of Section 624 of the
believe that the proposed change will proposed rule change between the FCRA (15 U.S.C. 1681s–3) with respect
impose any burden on intermarket Commission and any person, other than to investment advisers and transfer
competition because it only applies to those that may be withheld from the agents registered with the Commission,
trading on CBOE. public in accordance with the as well as brokers, dealers and
provisions of 5 U.S.C. 552, will be investment companies (collectively,
C. Self-Regulatory Organization’s ‘‘Covered Persons’’). Section 624 and
available for Web site viewing and
Statement on Comments on the Regulation S–AM limit a Covered
printing in the Commission’s Public
Proposed Rule Change Received From Person’s use of certain consumer
Reference Room, 100 F Street NE.,
Members, Participants, or Others financial information received from an
Washington, DC 20549, on official
The Exchange neither solicited nor business days between the hours of affiliate to solicit a consumer for
received comments on the proposed 10:00 a.m. and 3:00 p.m. Copies of the marketing purposes, unless the
rule change. filing also will be available for consumer has been given notice and a
inspection and copying at the principal reasonable opportunity and a reasonable
III. Date of Effectiveness of the and simple method to opt out of such
Proposed Rule Change and Timing for office of the Exchange. All comments
received will be posted without change; solicitations. Regulation S–AM
Commission Action potentially applies to all of the
the Commission does not edit personal
Within 45 days of the date of identifying information from approximately 32,061 Covered Persons
publication of this notice in the Federal submissions. You should submit only registered with the Commission,
Register or within such longer period information that you wish to make although only approximately 17,954 of
up to 90 days (i) as the Commission may available publicly. All submissions them have one or more corporate
designate if it finds such longer period should refer to File Number SR–CBOE– affiliates, and the regulation requires
to be appropriate and publishes its 2016–082 and should be submitted on only approximately 3,206 to provide
reasons for so finding or (ii) as to which or beforeJanuary 9, 2017. consumers with an affiliate marketing
the Exchange consents, the Commission notice and an opt-out opportunity.
will: For the Commission, by the Division of The Commission staff estimates that
Trading and Markets, pursuant to delegated there are approximately 17,954 Covered
A. By order approve or disapprove
authority.10
such proposed rule change, or Persons having one or more affiliates,
B. institute proceedings to determine Eduardo A. Aleman, and that they each spend an average of
whether the proposed rule change Assistant Secretary. 0.20 hours per year to review affiliate
should be disapproved. [FR Doc. 2016–30393 Filed 12–16–16; 8:45 am] marketing practices, for, collectively, an
BILLING CODE 8011–01–P estimated annual time burden of 3,591
IV. Solicitation of Comments hours at an annual internal staff cost of
Interested persons are invited to approximately $1,798,991. The staff also
submit written data, views, and SECURITIES AND EXCHANGE estimates that approximately 3,206
arguments concerning the foregoing, COMMISSION Covered Persons provide notice and opt-
including whether the proposed rule out opportunities to consumers, and
change is consistent with the Act. Submission for OMB Review; that they each spend an average of 7.6
Comments may be submitted by any of Comment Request hours per year creating notices,
the following methods: Upon Written Request, Copies Available providing notices and opt-out
From: Securities and Exchange opportunities, monitoring the opt-out
Electronic Comments
Commission, Office of FOIA Services, notice process, making and updating
• Use the Commission’s Internet records of opt-out elections, and
100 F Street NE., Washington, DC
comment form (http://www.sec.gov/ addressing consumer questions and
20549–2736.
rules/sro.shtml); or concerns about opt-out notices, for,
• Send an email to rule-comments@ Extension: collectively, an estimated annual time
sec.gov. Please include File Number SR– Regulation S–AM, SEC File No. 270–548, burden of 24,366 hours at an annual
CBOE–2016–082 on the subject line. OMB Control No. 3235–0609.
internal staff cost of approximately
Notice is hereby given that, pursuant $4,489,806. Thus, the staff estimates
Paper Comments
to the Paperwork Reduction Act of 1995 that the collection of information
• Send paper comments in triplicate (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the requires a total of approximately 17,954
to Secretary, Securities and Exchange Securities and Exchange Commission respondents to incur an estimated
Commission, 100 F Street NE., (‘‘Commission’’) has submitted to the annual time burden of a total of 27,957
Washington, DC 20549–1090.
sradovich on DSK3GMQ082PROD with NOTICES
Office of Management and Budget hours at a total annual internal cost of
All submissions should refer to File (‘‘OMB’’) a request for approval of compliance of approximately
Number SR–CBOE–2016–082. This file extension of the previously approved $6,288,897.
number should be included on the collection of information provided for in An agency may not conduct or
subject line if email is used. To help the Regulation S–AM (17 CFR part 248, sponsor, and a person is not required to
Commission process and review your subpart B), under the Fair Credit respond to, a collection of information
comments more efficiently, please use under the PRA unless it displays a
only one method. The Commission will 10 17 CFR 200.30–3(a)(12). currently valid OMB control number.
VerDate Sep<11>2014 20:55 Dec 16, 2016 Jkt 241001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\19DEN1.SGM 19DEN1](https://thefederalregister.org/doc/81_FR_92210/page/4.svg)
Document Created: 2016-12-17 03:15:42
Document Modified: 2016-12-17 03:15:42
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 91967 |
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