82 FR 11248 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Related to the Nullification and Adjustment of Options Transactions
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 33 (February 21, 2017)
Federal Register Volume 82, Issue 33 (February 21, 2017)
| Page Range | 11248-11251 | |
| FR Document | 2017-03295 |
[Federal Register Volume 82, Number 33 (Tuesday, February 21, 2017)] [Notices] [Pages 11248-11251] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-03295] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80040; File No. SR-CBOE-2016-088] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Related to the Nullification and Adjustment of Options Transactions February 14, 2017. I. Introduction On December 14, 2016, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange Rule 6.25, relating to the adjustment and nullification of erroneous complex order and stock-option order transactions. The proposed rule change was published for comment in the Federal Register on January 3, 2017.\3\ On February 13, 2017, the Exchange submitted Amendment No. 1 to the proposed rule change.\4\ The Commission received no comments regarding the proposal. This order approves the proposed rule change, as modified by Amendment No. 1. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 79697 (December 27, 2016), 82 FR 167 (``Notice''). \4\ In Amendment No. 1, the Exchange proposed an implementation date of April 17, 2017, to allow all the other options exchanges that permit complex order or stock-option order transactions the time necessary to harmonize their obvious error rules with the proposed rule change. Because Amendment No. 1 does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, Amendment No. 1 is not subject to notice and comment. To promote transparency of its proposed amendment, when CBOE filed Amendment No. 1 with the Commission, it also submitted Amendment No. 1 as a comment letter to the file, which the Commission posted on its Web site and placed in the public comment file for SR-CBOE-2016-088 (available at https://www.sec.gov/comments/sr-cboe-2016-088/cboe2016088-1581994-131907.pdf). The Exchange also posted a copy of its Amendment No. 1 on its Web site (http://www.cboe.com/aboutcboe/legal/submittedsecfilings.aspx), when it filed it with the Commission. --------------------------------------------------------------------------- II. Description of the Proposed Rule Change The Exchange proposes to amend Rule 6.25, entitled ``Nullification and Adjustment of Options Transactions'' by adding Interpretation and Policy .07 (a)-(c) related to the adjustment and nullification of erroneous complex order and stock-option order transactions. A. Background The Exchange and other options exchanges previously adopted new, harmonized rules related to the adjustment and nullification of erroneous options transactions.\5\ The Exchange believes that the changes the options exchanges implemented with the new, harmonized rule have led to increased transparency and finality with respect to the adjustment and nullification of erroneous options transactions. However, as part of the initial initiative, the Exchange and other options exchanges deferred a few specific matters for further discussion, including how erroneous complex orders and stock-option orders should be handled. --------------------------------------------------------------------------- \5\ See, e.g., Securities Exchange Act Release Nos. 74898 (May 7, 2015), 80 FR 27354 (May 13, 2015) (SR-CBOE-2015-039); and 74556 (March 20, 2015), 80 FR 16031 (March 26, 2015) (SR-BATS-2014-067) (``BATS Order''). --------------------------------------------------------------------------- Since the adopting of the initial harmonized rule, the exchanges that offer complex orders and/or stock-option orders discussed the adoption of a rule--described below--that they collectively believe will improve the handling of erroneous options transactions that result from the execution of complex orders and stock-option orders.\6\ --------------------------------------------------------------------------- \6\ See Notice, supra note 3, at 167. An exchange that does not offer complex orders and/or stock-option orders will not adopt these new provisions until such time as the exchange offers complex orders and/or stock-option orders. See id. at 167 n.5. --------------------------------------------------------------------------- B. Proposed Rule The proposed rule applies much of the initial harmonized rule to complex orders and stock-option orders. The proposed rule, however, deviates from the initial harmonized rule to account for unique qualities of complex orders and stock-option orders. Specifically, the proposed rule reflects the fact that complex orders can execute against other complex orders or can execute against individual simple orders in the leg markets. When a complex order executes against the leg markets, there may be different counterparties on each leg of the complex order, and not every leg will necessarily be executed at an erroneous price. With regards to stock-option orders, the proposed rule reflects the fact that stock-option orders contain a stock component that is executed on a stock trading venue, and the Exchange may not be able to ensure that the stock trading venue will adjust or nullify the stock execution in the event of an obvious or catastrophic error. In order to account for the unique characteristics of complex orders and stock- option orders, [[Page 11249]] the Exchange divided proposed Interpretation and Policy .07 into three parts--paragraphs (a), (b), and (c). 1. Complex Orders Executed Against Individual Legs Proposed Interpretation and Policy .07(a) governs the review of complex orders that are executed against individual legs (as opposed to a complex order that executes against another complex order).\7\ Proposed Rule 6.25.07(a) provides: --------------------------------------------------------------------------- \7\ The leg market consists of quotes and/or orders in single options series. A complex order may be received by the Exchange electronically, and the legs of the complex order may have different counterparties. If a complex order executes against individual legs and at least one of the legs qualifies as an Obvious or Catastrophic Error under this Rule 6.25, then the leg(s) that is an Obvious or Catastrophic Error will be adjusted in accordance with paragraphs (c)(4)(A) or (d)(3), respectively, regardless of whether one of the parties is a Customer. However, any Customer order subject to this paragraph (a) will be nullified if the adjustment would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer's limit price on the complex order or individual leg(s). If any leg of a complex order is nullified, the entire --------------------------------------------------------------------------- transaction is nullified. At least one of the legs of the complex order must qualify as an obvious or catastrophic error under the initial harmonized rule in order for the complex order to receive obvious or catastrophic error relief. Thus, when the Exchange is notified (within the timeframes set forth in paragraph (c)(2) or (d)(2)) of a complex order that is a possible obvious error or catastrophic error, the Exchange will first review the individual legs of the complex order to determine if one or more legs qualify as an obvious or catastrophic error.\8\ If no leg qualifies as an obvious or catastrophic error, the transaction stands-- no adjustment and no nullification. --------------------------------------------------------------------------- \8\ Because a complex order can execute against the leg market, the Exchange may also be notified of a possible obvious or catastrophic error by a counterparty that received an execution in an individual options series. If upon review of a potential obvious error the Exchange determines an individual options series was executed against the leg of a complex order or stock-option order, proposed Rule 6.25.07 will govern. --------------------------------------------------------------------------- Reviewing the legs to determine whether one or more legs qualify as an obvious or catastrophic error requires the Exchange to follow the initial harmonized rule. In accordance with paragraphs (c)(1) and (d)(1) of the initial harmonized rule, the Exchange compares the execution price of each individual leg to the Theoretical Price \9\ of each leg (as determined by paragraph (b) of the initial harmonized rule). Under the proposed rule, if the execution price of an individual leg is higher or lower than the Theoretical Price for the series by an amount equal to at least the amount shown in the obvious error table in paragraph (c)(1) of the initial harmonized rule or the catastrophic error table in paragraph (d)(1) of the initial harmonized rule, the individual leg qualifies as an obvious or catastrophic error, and the Exchange will take steps to adjust or nullify the transaction.\10\ --------------------------------------------------------------------------- \9\ See Rule 6.25(b) (defining the manner in which Theoretical Price is determined). \10\ Only the execution price on the leg (or legs) that qualifies as an obvious or catastrophic error pursuant to any portion of proposed Rule 6.25.07 will be adjusted. The execution price of a leg (or legs) that does not qualify as an obvious or catastrophic error will not be adjusted. --------------------------------------------------------------------------- Paragraph (c)(4)(A) of the initial harmonized rule mandates that if it is determined that an obvious error has occurred, the execution price of the transaction will be adjusted pursuant to the table set forth in (c)(4)(A).\11\ Although for simple orders paragraph (c)(4)(A) is only applicable when no party to the transaction is a Customer,\12\ for the purposes of complex orders, paragraph (a) of proposed Interpretation and Policy .07 will supersede that limitation; therefore, if it is determined that a leg (or legs) of a complex order is an obvious error, the leg (or legs) will be adjusted pursuant to paragraph (c)(4)(A), regardless of whether a party to the transaction is a Customer. The Size Adjustment Modifier defined in subparagraph (a)(4) will similarly apply (regardless of whether a Customer is on the transaction) by virtue of the application of paragraph (c)(4)(A).\13\ --------------------------------------------------------------------------- \11\ In contrast, paragraph (d)(3) of the initial harmonized rule mandates that if it is determined that a catastrophic error has occurred, the execution price of the transaction will be adjusted pursuant to the table set forth in paragraph (d)(3). However, if a Customer is a party to the transaction and the adjustment would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer's limit price, the Customer order will be nullified. \12\ See Rule 6.25(a)(1) (defining Customer for purposes of Rule 6.25 as not including a broker-dealer, Professional Customer, or Voluntary Professional Customer). \13\ See Rule 6.25(c)(4)(A) (stating that any non-Customer Obvious Error exceeding 50 contracts will be subject to the Size Adjustment Modifier defined in sub-paragraph (a)(4)). The Size Adjustment Modifier may also apply to the option leg of a stock- option order that is adjusted pursuant to proposed Rule 6.25.07(c). --------------------------------------------------------------------------- Pursuant to proposed Rule 6.25.07(a), if a complex order executes against individual legs and at least one of the leg(s) qualifies as an Obvious Error or a Catastrophic Error, then the leg(s) that is an Obvious or Catastrophic error will be adjusted in accordance with paragraphs (c)(4)(A) or (d)(3) of the initial harmonized rule, respectively, regardless of whether one of the parties is a Customer. However, because incoming complex orders may execute against resting simple orders in the leg market and adjusting the execution price of the leg may violate the limit price of the resting order, proposed Rule 6.25.07(a) also provides protection for Customer orders, stating that where at least one party to a complex order transaction is a Customer, the transaction will be nullified if adjustment would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer's limit price on the complex order or individual leg(s). If any leg of a complex order is nullified, the entire transaction will be nullified. 2. Complex Orders Executed Against Complex Orders Proposed Interpretation and Policy .07(b) governs the review of complex orders that are executed against other complex orders. Proposed Rule 6.25.07(b) provides: If a complex order executes against another complex order and at least one of the legs qualifies as an Obvious Error under paragraph (c)(1) or a Catastrophic Error under paragraph (d)(1), then the leg(s) that is an Obvious or Catastrophic Error will be adjusted or busted in accordance with paragraph (c)(4) or (d)(3), respectively, so long as either: (i) The width of the National Spread Market for the complex order strategy just prior to the erroneous transaction was equal to or greater than the amount set forth in the wide quote table of paragraph (b)(3) or (ii) the net execution price of the complex order is higher (lower) than the offer (bid) of the National Spread Market for the complex order strategy just prior to the erroneous transaction by an amount equal to at least the amount shown in the table in paragraph (c)(1). If any leg of a complex order is nullified, the entire transaction is nullified. For purposes of Rule 6.25, the National Spread Market for a complex order strategy is determined by the National Best Bid/Offer of the individual legs of the strategy. As described above in relation to proposed Rule 6.25.07(a), the first step is for the Exchange to review (upon receipt of a timely notification in accordance with paragraph (c)(2) or (d)(2) of the initial harmonized rule) the individual legs to determine whether a leg or legs qualifies as an obvious or catastrophic error. If no leg qualifies as an obvious or catastrophic error, the transaction stands-- no adjustment and no nullification. Unlike proposed Rule 6.25.07(a), the Exchange also proposes to compare the [[Page 11250]] net execution price of the entire complex order package to the National Spread Market for the complex order strategy.\14\ Complex orders are exempt from the order protection rules of the options exchanges.\15\ Thus, depending on the manner in which the systems of an options exchange are calibrated, a complex order can execute without regard to the prices offered in the complex order books or the leg markets of other options exchanges. Accordingly, the Exchange proposes to consider the National Spread Market. Specifically, proposed Rule 6.25.07(b) provides that if the Exchange determines that a leg or legs does qualify as an obvious or catastrophic error, the leg or legs will be adjusted or busted in accordance with paragraph (c)(4) or (d)(3) of the initial harmonized rule, so long as either: (i) The width of the National Spread Market for the complex order strategy just prior to the erroneous transaction was equal to or greater than the amount set forth in the wide quote table of paragraph (b)(3) of the initial harmonized rule or (ii) the net execution price of the complex order is higher (lower) than the offer (bid) of the National Spread Market for the complex order strategy just prior to the erroneous transaction by an amount equal to at least the amount shown in the table in paragraph (c)(1) of the initial harmonized rule. --------------------------------------------------------------------------- \14\ National Spread Market is the derived net market for a complex order package. See, e.g., Rule 6.53C.04 (utilizing the term derived net market in the context of complex order strategies). \15\ See Rule 6.81(b)(7). All options exchanges have the same order protection rule. --------------------------------------------------------------------------- For purposes of complex orders that meet the requirements of proposed Rule 6.25.07(b), the Exchange proposes to apply the initial harmonized rule and adjust or bust obvious errors in accordance with paragraph (c)(4) (as opposed to applying only paragraph (c)(4)(A) as is the case under proposed Rule 6.25.07(a)) and catastrophic errors in accordance with paragraph (d)(3). Therefore, for purposes of complex orders under proposed Rule 6.25.07(b), if one of the legs is determined to be an obvious error under paragraph (c)(1), all Customer transactions will be nullified, unless a Trading Permit Holder (``TPH'') submits 200 or more Customer transactions for review in accordance with paragraph (c)(4)(C).\16\ For purposes of complex orders under proposed Rule 6.25.07(b), if one of the legs is determined to be a catastrophic error under paragraph (d)(3) and all of the other requirements of proposed Rule 6.25.07(b) are met, all market participants will be adjusted in accordance with the table set forth in paragraph (d)(3). Again, however, pursuant to paragraph (d)(3) where at least one party to a complex order transaction is a Customer, the transaction will be nullified if adjustment would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer's limit price on the complex order or individual leg(s). Also, if any leg of a complex order is nullified, the entire transaction is nullified. --------------------------------------------------------------------------- \16\ Rule 6.25(c)(4)(C) also requires the orders resulting in 200 or more Customer transactions to have been submitted during the course of 2 minutes or less. --------------------------------------------------------------------------- 3. Stock-Option Orders Proposed Interpretation and Policy .07(c) governs stock-option orders. Proposed Rule 6.25.07(c) provides: If the option leg of a stock-option order qualifies as an Obvious Error under paragraph (c)(1) or a Catastrophic Error under paragraph (d)(1), then the option leg that is an Obvious or Catastrophic Error will be adjusted in accordance with paragraph (c)(4)(A) or (d)(3), respectively, regardless of whether one of the parties is a Customer. However, the option leg of any Customer order subject to this paragraph (c) will be nullified if the adjustment would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer's limit price on the stock-option order, and the Exchange will attempt to nullify the stock leg. Whenever a stock trading venue nullifies the stock leg of a stock-option order or whenever the stock leg cannot be executed, the Exchange will nullify the option leg upon request of one of the parties to the transaction or in accordance with paragraph (c)(3). Similar to proposed Interpretation and Policy .07(a), an option leg (or legs) of a stock-option order must qualify as an obvious or catastrophic error under the initial harmonized rule in order for the stock-option order to qualify as an obvious or catastrophic error. Also, similar to proposed Rule 6.25.07(a), if an option leg (or legs) does qualify as an obvious or catastrophic error, the option leg (or legs) will be adjusted in accordance with paragraph (c)(4)(A) or (d)(3), respectively, regardless of whether one of the parties is a Customer. Again, as with proposed Rule 6.25.07(a), where at least one party to a complex order transaction is a Customer, the Exchange will nullify the option leg and attempt to nullify the stock leg if adjustment would result in an execution price higher (for buy transactions) or lower (for sell transactions) than the Customer's limit price on the complex order or individual leg(s). Finally, the Exchange proposes to provide guidance that whenever the stock trading venue nullifies the stock leg of a stock-option order, the option will be nullified upon request of one of the parties to the transaction or by an Official acting on their own motion in accordance with paragraph (c)(3). The Exchange states that there are situations in which buyer and seller agree to trade a stock-option order, but the stock leg cannot be executed. Thus, the Exchange proposes to provide that whenever the stock portion of a stock-option order cannot be executed, the Exchange will nullify the option leg upon request of one of the parties to the transaction or on an Official's own motion. In order to ensure that other options exchanges are able to adopt rules consistent with this proposal and to coordinate the effectiveness of such harmonized rules, the Exchange proposes to delay the effectiveness of this proposal to April 17, 2017.\17\ --------------------------------------------------------------------------- \17\ See Amendment No. 1. --------------------------------------------------------------------------- III. Discussion and Commission Findings The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\18\ In particular, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of Section 6(b) of the Act \19\ and with Section 6(b)(5) of the Act,\20\ which requires, among other things, that the Exchange's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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. --------------------------------------------------------------------------- \18\ In approving this proposed rule change, as amended, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \19\ 15 U.S.C. 78f(b). \20\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission believes that the proposal to amend Rule 6.25 will help assure greater objectivity, transparency, and clarity with respect to the adjustment and nullification of erroneous options transactions and, in particular, those involving complex order or stock-option order transactions. The Commission notes that the proposal is designed to achieve more consistent results for participants across U.S. options exchanges than under the initial harmonized rules, while maintaining a fair and orderly market, protecting investors, and protecting the public [[Page 11251]] interest. In particular, the proposal is designed to increase the consistency and transparency in the handling of erroneous options transactions among those options exchanges that allow complex order or stock-option order transactions. In its order approving the initial harmonized rule of BATS Exchange, Inc., the Commission noted that the options exchanges intended to work together to further develop additional objectivity with respect to their processes for the adjustment and nullification of erroneous options transactions.\21\ The Commission believes that the proposed rule change to specifically delineate the treatment of erroneous complex order or stock-option order transactions constitutes an additional step towards this goal. Based on the foregoing, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act \22\ in that proposed Rule 6.25 will foster cooperation and coordination with persons engaged in regulating and facilitating transactions. --------------------------------------------------------------------------- \21\ See BATS Order, supra note 5, at 16039. \22\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission notes that the proposed rule change will become operative on April 17, 2017. This delayed implementation is to ensure that other options exchanges that permit transactions in complex orders or stock-option orders will have sufficient time to put in place similar rules consistent with this proposed rule change and to coordinate the date of implementation of such harmonized rules.\23\ --------------------------------------------------------------------------- \23\ See Amendment No. 1. --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\24\ that the proposed rule change, as modified by Amendment No. 1 (SR-CBOE-2016-088) be, and hereby is, approved. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\25\ --------------------------------------------------------------------------- \25\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-03295 Filed 2-17-17; 8:45 am] BILLING CODE 8011-01-P
![11248 Federal Register / Vol. 82, No. 33 / Tuesday, February 21, 2017 / Notices
SUPPLEMENTARY INFORMATION: The SECURITIES AND EXCHANGE A. Background
United States Postal Service® hereby COMMISSION The Exchange and other options
gives notice that, pursuant to 39 U.S.C. [Release No. 34–80040; File No. SR–CBOE– exchanges previously adopted new,
3642 and 3632(b)(3), on February 14, 2016–088] harmonized rules related to the
2017, it filed with the Postal Regulatory adjustment and nullification of
Commission a Request of the United Self-Regulatory Organizations; erroneous options transactions.5 The
States Postal Service to Add Priority Chicago Board Options Exchange, Exchange believes that the changes the
Mail Contract 294 to Competitive Incorporated; Order Granting Approval options exchanges implemented with
Product List. Documents are available at of a Proposed Rule Change, as the new, harmonized rule have led to
www.prc.gov, Docket Nos. MC2017–91, Modified by Amendment No. 1, Related increased transparency and finality with
CP2017–125. to the Nullification and Adjustment of respect to the adjustment and
Options Transactions nullification of erroneous options
Stanley F. Mires, transactions. However, as part of the
February 14, 2017.
Attorney, Federal Compliance. initial initiative, the Exchange and other
[FR Doc. 2017–03286 Filed 2–17–17; 8:45 am] I. Introduction options exchanges deferred a few
BILLING CODE 7710–12–P On December 14, 2016, Chicago Board specific matters for further discussion,
Options Exchange, Incorporated (the including how erroneous complex
‘‘Exchange’’ or ‘‘CBOE’’) filed with the orders and stock-option orders should
POSTAL SERVICE Securities and Exchange Commission be handled.
(‘‘Commission’’), pursuant to Section Since the adopting of the initial
Product Change—Priority Mail Express 19(b)(1) of the Securities Exchange Act harmonized rule, the exchanges that
Negotiated Service Agreement of 1934 (the ‘‘Act’’),1 and Rule 19b–4 offer complex orders and/or stock-
thereunder,2 a proposed rule change to option orders discussed the adoption of
AGENCY: Postal ServiceTM. amend Exchange Rule 6.25, relating to a rule—described below—that they
ACTION: Notice. the adjustment and nullification of collectively believe will improve the
erroneous complex order and stock- handling of erroneous options
option order transactions. The proposed transactions that result from the
SUMMARY: The Postal Service gives
rule change was published for comment execution of complex orders and stock-
notice of filing a request with the Postal option orders.6
in the Federal Register on January 3,
Regulatory Commission to add a 2017.3 On February 13, 2017, the
domestic shipping services contract to B. Proposed Rule
Exchange submitted Amendment No. 1
the list of Negotiated Service to the proposed rule change.4 The The proposed rule applies much of
Agreements in the Mail Classification Commission received no comments the initial harmonized rule to complex
Schedule’s Competitive Products List. regarding the proposal. This order orders and stock-option orders. The
approves the proposed rule change, as proposed rule, however, deviates from
DATES: Effective date: February 21, 2017.
modified by Amendment No. 1. the initial harmonized rule to account
FOR FURTHER INFORMATION CONTACT: for unique qualities of complex orders
Elizabeth A. Reed, 202–268–3179. II. Description of the Proposed Rule and stock-option orders. Specifically,
Change the proposed rule reflects the fact that
SUPPLEMENTARY INFORMATION: The The Exchange proposes to amend complex orders can execute against
United States Postal Service® hereby Rule 6.25, entitled ‘‘Nullification and other complex orders or can execute
gives notice that, pursuant to 39 U.S.C. Adjustment of Options Transactions’’ by against individual simple orders in the
3642 and 3632(b)(3), on February 14, adding Interpretation and Policy .07 (a)– leg markets. When a complex order
2017, it filed with the Postal Regulatory (c) related to the adjustment and executes against the leg markets, there
Commission a Request of the United nullification of erroneous complex order may be different counterparties on each
States Postal Service to Add Priority and stock-option order transactions. leg of the complex order, and not every
Mail Express Contract 45 to Competitive leg will necessarily be executed at an
Product List. Documents are available at 1 15 U.S.C. 78s(b)(1). erroneous price. With regards to stock-
2 17 CFR 240.19b–4.
www.prc.gov, Docket Nos. MC2017–92, option orders, the proposed rule reflects
3 See Securities Exchange Act Release No. 79697
CP2017–126. the fact that stock-option orders contain
(December 27, 2016), 82 FR 167 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange proposed an a stock component that is executed on
Stanley F. Mires,
implementation date of April 17, 2017, to allow all a stock trading venue, and the Exchange
Attorney, Federal Compliance. the other options exchanges that permit complex may not be able to ensure that the stock
[FR Doc. 2017–03287 Filed 2–17–17; 8:45 am] order or stock-option order transactions the time trading venue will adjust or nullify the
necessary to harmonize their obvious error rules
BILLING CODE 7710–12–P with the proposed rule change. Because stock execution in the event of an
Amendment No. 1 does not materially alter the obvious or catastrophic error. In order to
substance of the proposed rule change or raise account for the unique characteristics of
unique or novel regulatory issues, Amendment No.
1 is not subject to notice and comment. To promote
complex orders and stock-option orders,
transparency of its proposed amendment, when
5 See, e.g., Securities Exchange Act Release Nos.
CBOE filed Amendment No. 1 with the
Commission, it also submitted Amendment No. 1 as 74898 (May 7, 2015), 80 FR 27354 (May 13, 2015)
sradovich on DSK3GMQ082PROD with NOTICES
a comment letter to the file, which the Commission (SR–CBOE–2015–039); and 74556 (March 20, 2015),
posted on its Web site and placed in the public 80 FR 16031 (March 26, 2015) (SR–BATS–2014–
comment file for SR–CBOE–2016–088 (available at 067) (‘‘BATS Order’’).
https://www.sec.gov/comments/sr-cboe-2016-088/ 6 See Notice, supra note 3, at 167. An exchange
cboe2016088-1581994-131907.pdf). The Exchange that does not offer complex orders and/or stock-
also posted a copy of its Amendment No. 1 on its option orders will not adopt these new provisions
Web site (http://www.cboe.com/aboutcboe/legal/ until such time as the exchange offers complex
submittedsecfilings.aspx), when it filed it with the orders and/or stock-option orders. See id. at 167
Commission. n.5.
VerDate Sep<11>2014 17:15 Feb 17, 2017 Jkt 241001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 E:\FR\FM\21FEN1.SGM 21FEN1](https://thefederalregister.org/doc/82_FR_11281/page/1.svg)
![Federal Register / Vol. 82, No. 33 / Tuesday, February 21, 2017 / Notices 11251
interest. In particular, the proposal is SECURITIES AND EXCHANGE ADDRESSES: Secretary, U.S. Securities
designed to increase the consistency COMMISSION and Exchange Commission, 100 F Street
and transparency in the handling of NE., Washington, DC 20549–1090.
erroneous options transactions among [Investment Company Act Release No. Applicants: Jason B. Moore, Brinker
those options exchanges that allow 32478; File No. 812–14724] Capital Destinations Trust, 1055
complex order or stock-option order Westlakes Drive, Berwyn, PA 19312;
transactions. Brinker Capital Destinations Trust, et and John J. O’Brien, Esq., Morgan, Lewis
al.; Notice of Application & Bockius LLP, 1701 Market Street,
In its order approving the initial Philadelphia, PA 19103.
harmonized rule of BATS Exchange, February 14, 2017.
FOR FURTHER INFORMATION CONTACT:
Inc., the Commission noted that the AGENCY: Securities and Exchange
Jennifer O. Palmer, Senior Counsel, at
options exchanges intended to work Commission (‘‘Commission’’).
(202) 551–5786, or Nadya Roytblat,
together to further develop additional ACTION: Notice of an application for an Assistant Chief Counsel, at (202) 551–
objectivity with respect to their order under section 12(d)(1)(J) of the 6821 (Division of Investment
processes for the adjustment and Investment Company Act of 1940 (the Management, Chief Counsel’s Office).
nullification of erroneous options ‘‘Act’’) for an exemption from sections
SUPPLEMENTARY INFORMATION: The
transactions.21 The Commission 12(d)(1)(A), (B), and (C) of the Act and
following is a summary of the
believes that the proposed rule change under sections 6(c) and 17(b) of the Act
application. The complete application
to specifically delineate the treatment of for an exemption from sections 17(a)(1)
may be obtained via the Commission’s
erroneous complex order or stock- and (2) of the Act. The requested order
Web site by searching for the file
option order transactions constitutes an would permit certain registered open-
number, or for an applicant using the
additional step towards this goal. Based end investment companies to acquire
Company name box, at http://
on the foregoing, the Commission shares of certain registered open-end
www.sec.gov/search/search.htm, or by
believes that the proposed rule change investment companies, registered
calling (202) 551–8090.
is consistent with Section 6(b)(5) of the closed-end investment companies,
Act 22 in that proposed Rule 6.25 will business development companies, as Summary of the Application
foster cooperation and coordination defined in section 2(a)(48) of the Act, 1. Applicants request an order to
and unit investment trusts (collectively, permit (a) a Fund 1 (each a ‘‘Fund of
with persons engaged in regulating and
‘‘Underlying Funds’’) that are within Funds’’) to acquire shares of Underlying
facilitating transactions.
and outside the same group of Funds 2 in excess of the limits in
The Commission notes that the investment companies as the acquiring
proposed rule change will become sections 12(d)(1)(A) and (C) of the Act
investment companies, in excess of the and (b) the Underlying Funds that are
operative on April 17, 2017. This limits in section 12(d)(1) of the Act. registered open-end investment
delayed implementation is to ensure
companies or series thereof, their
that other options exchanges that permit APPLICANTS: Brinker Capital
principal underwriters and any broker
transactions in complex orders or stock- Destinations Trust, a Delaware statutory
or dealer registered under the Securities
option orders will have sufficient time trust that is registered under the Act as
Exchange Act of 1934 to sell shares of
to put in place similar rules consistent an open-end management investment
the Underlying Fund to the Fund of
with this proposed rule change and to company with multiple series, and
Funds in excess of the limits in section
coordinate the date of implementation Brinker Capital, Inc., a Delaware
12(d)(1)(B) of the Act.3 Applicants also
of such harmonized rules.23 Corporation registered as an investment
request an order of exemption under
adviser under the Investment Advisers
IV. Conclusion Act of 1940. 1 Applicants request that the order apply to each
DATES: Filing Dates: The application was existing and future series of Brinker Capital
It is therefore ordered, pursuant to Destinations Trust and to each existing and future
Section 19(b)(2) of the Act,24 that the filed on December 8, 2016 and amended
registered open-end investment company or series
on February 1, 2017.
proposed rule change, as modified by thereof that is advised by Brinker Capital, Inc. or
Amendment No. 1 (SR–CBOE–2016– HEARING OR NOTIFICATION OF HEARING: An its successor or by any other investment adviser
order granting the requested relief will controlling, controlled by or under common control
088) be, and hereby is, approved. with Brinker Capital, Inc. or its successor and is
be issued unless the Commission orders part of the same ‘‘group of investment companies’’
For the Commission, by the Division of a hearing. Interested persons may as Brinker Capital Destinations Trust (each, a
Trading and Markets, pursuant to delegated request a hearing by writing to the ‘‘Fund’’). For purposes of the requested order,
authority.25 Commission’s Secretary and serving ‘‘successor’’ is limited to an entity that results from
Eduardo A. Aleman, a reorganization into another jurisdiction or a
applicants with a copy of the request, change in the type of business organization. For
Assistant Secretary. personally or by mail. Hearing requests purposes of the request for relief, the term ‘‘group
[FR Doc. 2017–03295 Filed 2–17–17; 8:45 am] should be received by the Commission of investment companies’’ means any two or more
by 5:30 p.m. on March 14, 2017 and registered investment companies, including closed-
BILLING CODE 8011–01–P end investment companies and business
should be accompanied by proof of development companies, that hold themselves out
service on the applicants, in the form of to investors as related companies for purposes of
an affidavit, or, for lawyers, a certificate investment and investor services.
of service. Pursuant to Rule 0–5 under 2 Certain of the Underlying Funds have obtained
the Act, hearing requests should state exemptions from the Commission necessary to
sradovich on DSK3GMQ082PROD with NOTICES
permit their shares to be listed and traded on a
the nature of the writer’s interest, any national securities exchange at negotiated prices
facts bearing upon the desirability of a and, accordingly, to operate as an exchange-traded
21 See BATS Order, supra note 5, at 16039. hearing on the matter, the reason for the fund (‘‘ETF’’).
3 Applicants do not request relief for Funds of
22 15 U.S.C. 78f(b)(5). request, and the issues contested.
Funds to invest in reliance on the order in business
23 See Amendment No. 1. Persons who wish to be notified of a development companies and registered closed-end
24 15 U.S.C. 78s(b)(2). hearing may request notification by investment companies that are not listed and traded
25 17 CFR 200.30–3(a)(12). writing to the Commission’s Secretary. on a national securities exchange.
VerDate Sep<11>2014 17:15 Feb 17, 2017 Jkt 241001 PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 E:\FR\FM\21FEN1.SGM 21FEN1](https://thefederalregister.org/doc/82_FR_11281/page/4.svg)
Document Created: 2018-02-01 15:04:33
Document Modified: 2018-02-01 15:04:33
| 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 | 82 FR 11248 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR