82 FR 26825 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Disaster Recovery
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 110 (June 9, 2017)
Federal Register Volume 82, Issue 110 (June 9, 2017)
| Page Range | 26825-26830 | |
| FR Document | 2017-11962 |
[Federal Register Volume 82, Number 110 (Friday, June 9, 2017)] [Notices] [Pages 26825-26830] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-11962] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80857; File No. SR-CBOE-2017-044] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Disaster Recovery June 5, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on May 24, 2017, Chicago Board Options Exchange, Incorporated (``CBOE'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.18 relating to disaster recovery. The text of the proposed rule change is 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 [[Page 26826]] statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange adopted Rule 6.18 in 2006 for the limited purpose of providing alternative means of operation in the event of a physical disaster. In particular, Rule 6.18, as originally adopted, was intended to deal with trading floor closures, providing for the operation of a ``Disaster Recovery Facility'' (``DRF'') in the event that a disaster or other unusual circumstance rendered the trading floor inoperable.\3\ Under original Rule 6.18, if the Exchange were forced to halt trading due to a disaster or other physical impairment of its trading floor, the Exchange and its members \4\ could operate remotely in a screen- based only environment from the DRF while the trading floor was unavailable. While operating from the DRF, open outcry trading would be suspended. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 54171 (July 19, 2006), 71 FR 42427 (July 26, 2006) (Order Approving Proposed Rule Change and Amendment No. 1 Thereto Regarding a Disaster Recovery Facility) (SR-CBOE-2006-001). \4\ Prior to its demutualization in 2010, the Exchange was a member-owned organization. See Securities Exchange Act Release No. 62382 (June 25, 2010), 75 FR 38164 (July 1, 2010) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Conforming Changes in Connection With Demutualization) (SR-CBOE- 2010-058). Individuals and organizations that may trade on CBOE are now referred to as Trading Permit Holders (``TPHs''). --------------------------------------------------------------------------- In 2012, Rule 6.18 was amended in connection with the Exchange's relocation of its primary data center to the East Coast and the consequent conversion of its former primary data center to a back-up data center in Chicago.\5\ Specifically, Rule 6.18 was amended to address other situations in which the primary data center could continue to operate despite the trading floor being rendered inoperable or in which the back-up data center might be used despite the trading floor being operational. Specifically, as amended, Rule 6.18 provided that in the event that the Exchange were forced to switch operations to the back-up data center, the Exchange's trading floor could still be used and that in the event that the trading floor were inoperable, the Exchange could still operate using a floorless configuration or screen- based only environment on the Exchange's primary data center. References to the DRF and other irrelevant portions of the original rule were eliminated or replaced with references to Exchange's primary and back-up data centers as appropriate. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 68301 (November 27, 2012), 77 FR 71650 (December 3, 2012) (Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Amend CBOE Rule 6.18 Concerning the Exchange's Disaster Recovery Facility) (SR- CBOE-2012-111). --------------------------------------------------------------------------- In 2015, Rule 6.18 was again amended to add greater detail to the Exchange's disaster recovery rules and harmonize the disaster recovery rules with newly implemented disaster recovery-related regulatory imperatives of Regulation Systems Compliance and Integrity (``Regulation SCI''), which superseded and replaced the SEC's voluntary Automation Review Policy.\6\ In doing so, the Exchange made certain changes to Rule 6.18 to provide additional details regarding the Exchange's back-up trading systems, business continuity and disaster recovery plans, and testing and update its disaster recovery rules to ensure consistency with Regulation SCI. --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 76203 (October 20, 2015), 80 FR 65258 (October 26, 2015) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Disaster Recovery) (SR-CBOE-2015-088); see also Securities Exchange Act Release No. 73639 (November 19, 2014), 79 FR at 72252 (December 5, 2014) (Regulation Systems Compliance and Integrity) (File No. S7- 01-13); Securities Exchange Act Release No. 27445 (November 16, 1989), 54 FR 48703 (November 24, 1989) (Automated Systems of Self- Regulatory Organizations) (File No. S7-29-89); Securities Exchange Act Release No. 29185 (May 9, 1991), 56 FR 22490 (May 15, 1991) (Automated Systems of Self-Regulatory Organizations) (File No. S7- 12-91). --------------------------------------------------------------------------- The Exchange now proposes to make additional changes to its disaster recovery rules to provide the Exchange authority to take additional steps necessary to preserve the Exchange's ability to conduct business in the event that the Exchange's primary and/or back- up data center(s) become inoperable or otherwise unavailable for use due to a significant systems failure, disaster or other unusual circumstances and make clear in the Rules the intermediary steps that the Exchange may take to disable certain systems and users' connectivity while continuing to operate its primary data center. The Exchange believes this authority serves the interests of all investors and the general public, because it helps the Exchange ensure its continuous operation and ability to maintain fair and orderly markets in the event of a significant systems failure or other unusual circumstance. Proposal The Exchange proposes to amend Rule 6.18 relating to disaster recovery. Specifically, the Exchange proposes to make changes to Rule 6.18 to: (1) Allow the Exchange to establish certain additional temporary requirements applicable to particular Designated BCP/DR Participants \7\ during use of the back-up data center; (2) provide that the Exchange may determine to temporarily allow trading in proprietary classes of options and classes of options exclusively- licensed \8\ by the Exchange \9\ in an exclusively floor-based environment via open outcry in order to preserve the Exchange's ability to provide fair and orderly markets in those classes in the event that the Exchange's primary and back-up data centers become inoperable or otherwise unavailable for use due to a significant systems failure, disaster, or other unusual circumstances; (3) permit the Exchange to deactivate certain nonessential systems and systems functionalities in response to limited systems disruptions or malfunctions, security intrusions, systems compliance issues, or other unusual circumstances; and (4) permit the Exchange to restrict access of a TPH or associated person to [[Page 26827]] the Hybrid Trading System \10\ and other Exchange systems if such access poses a significant threat to the Exchange's ability to operate systems essential to maintain a fair and orderly market. --------------------------------------------------------------------------- \7\ Under Rule 6.18(b)(iv), the Exchange shall designate those Trading Permit Holders that the Exchange determines are, as a whole, necessary for the maintenance of fair and orderly markets in the event of the activation of the Exchange's business continuity and disaster recovery plans (``Designated BCP/DR Participants''). Designated BCP/DR Participants will be identified based on criteria determined by the Exchange and announced via Regulatory Circular, which may include whether the TPH is an appointed DPM, LMM, or Market-Maker in a class and the quality of markets provided by the DPM, LMM, or Market-Maker, the amount of volume transacted by the market participant in a class or on the Exchange in general, operational capacity, trading experience, and historical contribution to fair and orderly markets on the Exchange. Designated BCP/DR Participants shall include, at a minimum, all Market-Makers in option classes exclusively listed on the Exchange that stream quotes in such classes and all DPMs in multiply listed option classes. \8\ The Exchange's current suite of proprietary and exclusively- licensed option products includes options on CBOE Volatility Index (VIX) futures, the S&P 500 (SPX and XSP) Index, S&P Dow Jones Indexes (OEX, XEO, and DJX), Russell 2000 (RUT) Index, FTSE Emerging Index (FTEM/EMS), MSCI Emerging Markets Index (MXEF), and the MSCI EAFE Index (MXEA), among others. The Exchange will maintain a current list of all proprietary and exclusively-licensed options products on the Exchange's Web site, including for purposes of this rule. \9\ Options exclusively-listed on the Exchange may include products listed on the Exchange and certain other CBOE Holdings Inc. affiliated exchanges, including C2 Options Exchange, Incorporated (``C2''), Bats BZX Exchange, Inc. (``BZX''), Bats BYX Exchange Inc. (``BYX''), Bats EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''). Currently, RUT is listed on both CBOE and C2. All other exclusively-listed products are currently listed on CBOE only. \10\ Under Rule 1.1(aaa), the ``Hybrid Trading System'' refers to (i) the Exchange's trading platform that allows Market-Makers to submit electronic quotes in their appointed classes and (ii) any connectivity to the foregoing trading platform that is administered by or on behalf of the Exchange, such as a communications hub. --------------------------------------------------------------------------- The Exchange proposes to add new Rule 6.18(b)(iv)(B) (Alternative BCP/DR Participant Obligations), which would provide that during the use of the back-up data center, the Exchange may, if necessary for the maintenance of fair and orderly markets, establish heightened quoting obligations for Designated BCP/DR Participants in a class in which the Designated BCP/DR Participant is already an appointed Lead Market-Maker or Market-Maker up to the standards specified for Designated Primary Market-Makers (``DPMs'') specified in Rule 8.85(a) \11\ and/or disallow the ability to deselect an appointment intraday in a class in which the Designated BCP/DR Participant is already an appointed Market-Maker.\12\ Proposed Rule 6.18(b)(iv)(B) would also provide that the Exchange would notify market participants of any such additional temporary requirements prior to implementation in a reasonable manner as determined by the Exchange.\13\ The Exchange believes this extended authority would afford the Exchange with necessary flexibility to address unexpected contingencies that may arise if a disaster or other unusual circumstances occur, causing the Exchange to use the back-up data center and help ensure that the Exchange operate a fair and orderly market in the event of a market emergency. The Exchange also proposes non-substantive changes to the lettering in paragraph (b)(iv) to accommodate the addition of new Rule 6.18(b)(iv)(B). Accordingly, current Rule 6.18(b)(iv)(B) would become Rule 6.18(b)(iv)(C), and current Rule 6.18(b)(iv)(C) would become Rule 6.18(b)(iv)(D). --------------------------------------------------------------------------- \11\ Currently, under Rule 8.85(a)(i), for example, DPMs must provide continuous electronic quotes (as defined in Rule 1.1(ccc)) in at least the lesser of 99% of the non-adjusted option series or 100% of the non-adjusted option series minus one call-put pair, with the term ``call-put pair'' referring to one call and one put that cover the same underlying instrument and have the same expiration date and exercise price, and assure that its disseminated market quotations are accurate. Compliance with this quoting obligation applies to all of a DPM's allocated classes collectively. The Exchange will determine compliance by a DPM with this quoting obligation on a monthly basis. However, determining compliance with this obligation on a monthly basis does not relieve a DPM from meeting this obligation on a daily basis, nor does it prohibit the Exchange from taking disciplinary action against DPM for failing to meet this obligation each trading day. See Rule 8.85(a)(i). Accordingly, under proposed Rule 6.18(b)(iv)(B), during use of the back-up data center, the Exchange could require that Market-Makers in SPXW provide continuous electronic quotes in up to 99% of the non-adjusted option series or 100% of the non-adjusted option series minus one call-put pair. \12\ In accordance with Rule 1001(a)(2)(v) of Regulation SCI, the Exchange maintains written policies and procedures reasonably designed to ensure that its trading systems (including with respect to both the Exchange's primary and back-up data center trading systems), have levels of capacity, integrity, resiliency, availability, and security adequate to maintain the Exchange's operational capability and promote the maintenance of fair and orderly markets, including, but not limited to business continuity and disaster recovery plans that are reasonably designed to achieve next two-hour resumption of its critical SCI systems, as defined in Rule 1000 of Regulation SCI. See Securities Exchange Act Release No. 73639 (November 19, 2014), 79 FR 72252 (December 5, 2014) (Regulation Systems Compliance and Integrity) (File No. S7-01-13). Notably, the Exchange employs business continuity and disaster recovery standards reasonably designed to achieve two-hour resumption of all trading systems that are essential to conducting business on the Exchange and which the Exchange believes are reasonably designed to support resumption in a significantly shorter amount of time, including, but not limited to with respect to those systems that are essential to the trading of proprietary products and products exclusively licensed for trading on the Exchange. \13\ The Exchange would make these notifications on the Systems Notification page on the Exchange's Web site, via the Exchange's Order Management Terminals (``OMTs''), via an Exchange-used messaging service, and/or other reasonable notification mechanisms. --------------------------------------------------------------------------- The Exchange proposes to add Rule 6.18(c) (Operation via Open Outcry), which would provide that if the Exchange's primary and back-up data centers become inoperable or otherwise unavailable for use due to a significant systems failure, disaster, or other unusual circumstances, in the interests of maintaining fair and orderly markets or for the protection of investors, the Exchange may determine, on a class-by-class basis, to temporarily allow trading in its exclusively- licensed and/or proprietary products \14\ in an exclusively floor-based environment via open outcry in order to preserve the Exchange's ability to conduct business in those option classes.\15\ Similar to the Exchange's authority in current Rule 6.18(c) (proposed Rule 6.18(d)), which permits the Exchange to operate in a screen-based only environment if the trading floor facility is inoperable, proposed Rule 6.18(c) would afford the Exchange necessary flexibility to temporarily operate in open outcry in order to trade certain classes of options that are either proprietary or exclusively-licensed in the event that the Exchange's primary and back-up data centers are inoperable due to a significant systems failure, disaster, or other unusual circumstances. The Exchange believes that the providing authority for it to temporarily operate in an exclusively floor-based environment in such a situation would help ensure the Exchange's ability to continue to conduct business and help preserve the Exchange's ability to continuously provide fair and orderly markets in classes of options that are only traded on CBOE or exclusively-licensed to CBOE. The Exchange also proposes non-substantive changes to the lettering in Rule 6.18 to accommodate the addition of new Rule 6.18(c). Accordingly, current Rule 6.18(c) would become Rule 6.18(d). --------------------------------------------------------------------------- \14\ See supra at note 8. \15\ See supra at note 12. --------------------------------------------------------------------------- The Exchange also proposes to add Rule 6.18(e) (Deactivation of Certain Systems), which would provide that in the event of a systems disruption or malfunction, security intrusion, systems compliance issue, or other unusual circumstances, the Exchange may, in accordance with the Rules or if necessary to maintain fair and orderly markets or to protect investors, temporarily deactivate certain systems or systems functionalities that are not essential to conducting business on the Exchange. Many of the systems and systems functionalities described in the Rules are provided optionally by the Exchange to enhance participants' trading experience, but are not required to be active under the Rules and are not necessary for the Exchange to conduct business.\16\ As is described in the Rules, many of the Exchange's systems functionalities may be made available (or unavailable) by the Exchange on a class-by-class basis. Such systems and systems functionalities that are non-essential to conducting business on the Exchange include, but are not limited to, Public Automated Routing (``PAR'') \17\ workstations, the Automated Improvement Mechanism (``AIM''),\18\ and the Solicitation Auction Mechanism (``SAM'').\19\ --------------------------------------------------------------------------- \16\ See, e.g., Rules 6.2, 6.2A, 6.2B, 6.12, 6.13, 6.13A, 6.13B, 6.14A, 6.53, 6.53C, 6.74A, and 6.74B. \17\ See generally Rule 6.12, Rule 6.12A. \18\ See generally Rule 6.74A. \19\ See generally Rule 6.74B. --------------------------------------------------------------------------- In addition, the activation of other functionalities may not be described by rule, but could be suspended temporarily (e.g., until the earlier of the end of a trading session or until systems disruptions could be remedied) if disruption or malfunction of that functionality were to interfere with the Exchange's ability to conduct business in a fair and orderly manner. For example, if a certain order type were to [[Page 26828]] cause a wider system malfunction or a certain complex order product could not be created without triggering widespread systems issues \20\ the Exchange might announce, via its systems status page or otherwise, the suspension of the availability of that order type or complex product. If such an event impacts a non-essential system or system functionality, the Exchange may deem it necessary to maintain fair and orderly markets to deactivate that system or functionality until any issues are resolved to prevent any potential harm to investors. Proposed Rule 6.18(e) would also provide that the Exchange would notify market participants of any such deactivation, and subsequent reactivation, promptly and in a reasonable manner determined by the Exchange. The Exchange may make these notifications on the Systems Notification page on the Exchange's Web site, via the OMT, via an Exchange-used messaging service such as SendWordNow \21\ Regulatory Circular, and/or other reasonable notification mechanisms. --------------------------------------------------------------------------- \20\ For example, if the creation of a certain complex order product (e.g. the October/November calendar spread in class XYZ) were to cause significant trading disruptions in an entire class (e.g., trading in all of XYZ), the Exchange might determine to turn off calendar spreads or complex orders in general in the class in order to help ensure that regular trading (i.e. trading of simple orders) in the class remained available. Notably, Rule 6.53C permits the Exchange to determine which classes and which complex order origin types (i.e., non-broker-dealer public customer, broker- dealers that are not Market-Makers or specialists on an options exchange, and/or Market-Makers or specialists on an options exchange) are eligible for entry into the COB and whether such complex orders can route directly to the COB and/or from PAR to the COB. Note also, in this case, if the Exchange were to suspend such complex order types, complex products could still be ``created'' by legging. \21\ See CBOE Regulatory Circular RG14-030 (Send Word Now Smart Notification Services). --------------------------------------------------------------------------- Finally, the Exchange proposes Rule 6.18(f) (Connectivity Restriction), which would permit the Exchange to temporarily restrict a TPH's or associated person's access to the Hybrid Trading System or other electronic trading systems if it is determined by the President (or senior-level designee) of the Exchange, that because of a systems issue, such access threatens the Exchange's ability to operate systems essential to the maintenance of fair and orderly markets.\22\ Such access would remain restricted until the end of the trading session or an earlier time if the President (or senior-level designee) of the Exchange, in consultation with the affected TPH(s), determines that lifting the restriction no longer poses a threat to the Exchange's ability to operate systems essential to conducting business or continuing to maintain a fair and orderly market on the Exchange or to investors.\23\ In the current electronic trading environment, if a TPH's systems malfunctions or is compromised, it could disrupt the Exchange's systems or market or harm other investors. For example, software malfunctions may pose a risk to the Exchange's systems, investors, and the general public without proper risk controls. Proposed Rule 6.18(f) would simply give the Exchange the authority to activate additional risk controls to stem the access of a TPH that has experienced a systems disruption or malfunction, which poses undue risk to the Exchange. --------------------------------------------------------------------------- \22\ In such cases, the Exchange would make efforts to contact the affected TPH immediately before or contemporaneously with the restriction of access to the Hybrid Trading System to the extent possible while protecting the Exchange's ability to operate systems essential to the maintenance of fair and orderly markets. \23\ In determining whether to a TPH's access threatens the Exchange's ability to operate systems essential to the maintenance of fair and orderly markets and/or determining that lifting the restriction no longer poses a threat to the Exchange's ability to operate systems essential to conducting business or continuing to maintain a fair and orderly market on the Exchange or to investors, a designee of the President of the Exchange would only be charged with making such determinations in the President of the Exchange's absence. In such cases, the designee would be a senior executive (i.e. Vice President or above) of the Exchange. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.\24\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \25\ 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) \26\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78f(b). \25\ 15 U.S.C. 78f(b)(5). \26\ Id. --------------------------------------------------------------------------- The proposed rule change is designed to promote the Exchange's ability to ensure the continued operation of a fair and orderly market in the event of a systems failure, disaster, or other unusual circumstances that might threaten the ability to conduct business on the Exchange. The Exchange recognizes that switching operations to the back-up data center may occur in times of uncertainty or great volatility in the markets. It is at these times that the investors may have the greatest need for viable, trustworthy marketplaces. The proposed rule change seeks to ensure that such a marketplace will exist when most needed and thus, the Exchange believes that the proposed rule protects investors in the most fundamental sense. In particular, the Exchange believes that proposed Rule 6.18(b)(iv)(B) allowing the Exchange, during the use of the back-up data center to (1) establish heightened quoting obligations for Designated BCP/DR Participants in a class in which the Designated BCP/ DR Participant is already an appointed Lead Market-Maker or Market- Maker up to the standards specified for Designated Primary Market- Makers specified in Rule 8.85(a) and/or (2) disallow the ability to deselect an appointment intraday in a class in which the Designated BCP/DR Participant is already an appointed Market-Maker would help ensure the maintenance of a fair and orderly market in the event of a disaster, which is in the interests of all market participants, investors, and the general public. The Exchange believes that adopting rules that help ensure that markets are open and available during times of turmoil and emergency is an important goal consistent with the Act. In the same vein, the Exchange believes that proposed Rule 6.18(c), which would permit the Exchange, in the interests of maintaining fair and orderly markets or for the protection of investors, to temporarily allow trading in certain proprietary and exclusively-licensed options classes, which only trade on the Exchange or the Exchange and the Exchange's affiliated exchanges, in an exclusively floor-based environment via open outcry to preserve the Exchange's ability conduct business on the Exchange in those option classes. The Exchange believes that this proposed provision would help the Exchange maintain fair and orderly markets in these classes during a disaster situation and would serve the interests of market participants, investors, and the general public by helping to ensure that the Exchange's proprietary and exclusively-licensed [[Page 26829]] products remain available for trading in the event of a significant systems failure, disaster, or other unusual circumstances. The Exchange also believes that deactivation of certain systems in proposed Rule 6.18(e), whether by rule or otherwise, in order to ensure that the Exchange is able to provide a fair and orderly market in the face of systems disruptions and malfunction is in the best interests of market participants, investors, and the general public. Similarly, the Exchange believes that the proposed connectivity restriction in proposed Rule 6.18(f) would help ensure that the Exchange remains open and available to all market participants. The Exchange notes that other connectivity restrictions are already in place on the Exchange.\27\ Furthermore, the Exchange believes that proposed Rule 6.18(f) is consistent with Section 6(b)(7) \28\ of the Act, which requires the Exchange to adopt rules that provide a fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof. The Exchange notes that proposed Rule 6.18(f) is not aimed at denying access to a particular TPH, but rather making sure that the Exchange remains accessible to all other TPHs that do not threaten the Exchange's ability to conduct normal business operations. The Exchange notes that as soon as the President of the Exchange (or designee), working with the TPH organization that poses a threat to the Exchange, were able to confirm that the TPH organization no longer posed such a threat, access to the Exchange would be restored to that TPH. The Exchange believes that this is a fair result and is in the best interests of all market participants, investors, and the general public. --------------------------------------------------------------------------- \27\ See, e.g., Rules 6.23A (Trading Permit Holder Connectivity) and 6.23C (Technical Disconnect). Under Rule 6.23A(b), the Exchange may limit the number of messages sent by Trading Permit Holders accessing the Exchange electronically in order to protect the integrity of the Hybrid trading system. In addition, the Exchange may impose restrictions on the use of a computer connected through an application programming interface (``API'') if it believes such restrictions are necessary to ensure the proper performance of the system. Any such restrictions shall be objectively determined and submitted to the Commission for approval pursuant to a rule change filing under Section 19(b) of the Exchange Act. Under Rule 6.23C(a), when a CBOE Application Server (``CAS'') loses communication with a Client Application such that a CAS does not receive an appropriate response to a Heartbeat Request within ``x'' period of time, the Technical Disconnect Mechanism will automatically logoff the Trading Permit Holder's affected Client Application and automatically cancel all the Trading Permit Holder's Market-Maker quotes, if applicable, and open orders with a time-in-force of ``day'' resting in the Book (which excludes orders resting on a PAR workstation or order management terminal) (``day orders''), if the Trading Permit Holder enables that optional service, posted through the affected Client Application. \28\ 15 U.S.C. 78f(b)(7). --------------------------------------------------------------------------- The Exchange also believes that the proposed rule change promotes just and equitable principles of trade by adding detail and clarity to the Rules. The proposed rule change seeks to provide additional clarity to the Exchange's disaster recovery rules, putting all market participants on notice as to how the Exchange will function in case of significant systems disruption or other disaster situation. The Exchange is continuously updating the Rules to provide additional detail, clarity, and transparency regarding its operations and trading systems and regulatory authority. The Exchange believes that the adoption of detailed, clear, and transparent rules reduces burdens on competition and promotes just and equitable principles of trade. The Exchange also believes that adding greater detail to the Rules regarding the Exchange's ability to ensure the continuous operation of the market and preserve the ability to conduct business on the Exchange will increase confidence in the markets and encourage wider participation in the markets and greater investment. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the proposed rule change will help ensure that competitive markets remain operative in the event of a systems failure or other disaster event. The Exchange notes that the proposed rule change is designed to provide the Exchange with authority to require market participants to participate in, and provide necessary liquidity to, the market to ensure that the Exchange functions in a fair and orderly manner in the event of a significant systems failure, disaster, or other unusual circumstances. Accordingly, the Exchange believes that the proposed rule change is designed to ensure fair and competitive markets at time when they may be most needed. 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 written 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 rule-comments@sec.gov. Please include File Number SR-CBOE-2017-044 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2017-044. 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 [[Page 26830]] 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-2017-044, and should be submitted on or before June 30, 2017. --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ Robert W. Errett, Deputy Secretary. [FR Doc. 2017-11962 Filed 6-8-17; 8:45 am] BILLING CODE 8011-01-P
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price discovery process. The proposed establish, implement, maintain, and 003), as amended by Amendment No. 1,
rule changes would eliminate the use of enforce written policies and procedures be, and hereby is, approved.14
the intermediary in the price reasonably designed to identify sources For the Commission by the Division of
submission process and instead require of operational risk and minimize them Trading and Markets, pursuant to delegated
CPs to submit required price through the development of appropriate authority.15
information directly to ICC. In order to systems, controls, and procedures; Robert W. Errett,
implement the direct price submission implement systems that are reliable, Deputy Secretary.
process, ICC proposed to amend its resilient and secure, and have adequate, [FR Doc. 2017–11963 Filed 6–8–17; 8:45 am]
Pricing Policy to (1) require CPs scalable capacity.12 BILLING CODE 8011–01–P
establish direct connectivity with ICC The Commission finds that the
and use a FIX API to provide ICC with proposed rule change, which modifies
the required price information, (2) add ICC’s Pricing Policy to implement a SECURITIES AND EXCHANGE
references to FIX API terminology, and direct price submission process for CPs, COMMISSION
(3) make revisions reflecting the is consistent with Section 17A of the
replacement of existing trade date files [Release No. 34–80857; File No. SR–CBOE–
Act and Rule 17Ad–22 thereunder. The 2017–044]
with FIX API firm trade messages.6 proposed rule change is consistent with
Moreover, ICC proposed amending the the requirements of Section 17A(b)(3)(F) Self-Regulatory Organizations;
Pricing Policy to note that ICC will send that the rules of a registered clearing Chicago Board Options Exchange,
FIX API messages directly to CPs, and agency be designed to promote the Incorporated; Notice of Filing of a
removed references to the intermediary prompt and accurate clearance and Proposed Rule Change Relating to
and its ‘‘Valuation Service API’’ settlement of securities transactions Disaster Recovery
previously used.7 Although ICC and, to the extent applicable, derivative
proposed additional minor changes to agreements, contracts, and transactions. June 5, 2017.
the timing of various steps in the pricing By reducing operational risk the Pursuant to Section 19(b)(1) of the
process, these proposed changes would proposed rule changes reduce the Securities Exchange Act of 1934
not affect the actual settlement likelihood that ICC will be unable to (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
submission windows.8 complete its end-of-day price discovery notice is hereby given that on May 24,
In addition to the changes described process. Completion of the end-of-day 2017, Chicago Board Options Exchange,
above, ICC also proposed changes with price discovery process is a necessary Incorporated (‘‘CBOE’’ or the
respect to the format of information and essential element in ICC’s clearance ‘‘Exchange’’) filed with the Securities
required to be submitted by CPs for the and settlement processes. The and Exchange Commission
iTraxx Australia and iTraxx Asia Ex- Commission believes that the proposed (‘‘Commission’’) the proposed rule
Japan Indices, as well as the changes should enhance ICC’s ability to change as described in Items I, II, and
CDX.NA.HY and CDS.EM indices. ICC complete the necessary pricing process III below, which Items have been
also proposed modifications to the effectively and thereby promote the prepared by the Exchange. The
process for distributing end-of-day prompt and accurate clearance and Commission is publishing this notice to
prices, which will result in ICC settlement of derivative agreements, solicit comments on the proposed rule
publishing to CPs separate messages contracts and transactions consistent change from interested persons.
setting forth end-of-day price with Section 17A(b)(3)(F). I. Self-Regulatory Organization’s
information for single name and index For similar reasons, the proposed rule Statement of the Terms of Substance of
CDS.9 changes are also consistent with Rule the Proposed Rule Change
III. Discussion and Commission 17Ad–22(d)(4) in that they are designed The Exchange proposes to amend
Findings to reduce operational risk outside of Rule 6.18 relating to disaster recovery.
ICC’s control.13 The proposed rule The text of the proposed rule change is
Section 19(b)(2)(C) of the Act directs changes are intended to reduce ICC’s
the Commission to approve a propose available on the Exchange’s Web site
external operational risk by allowing (http://www.cboe.com/AboutCBOE/
rule change of a self-regulatory ICC to control the price submission
organization if it finds that such CBOELegalRegulatoryHome.aspx), at
process through the implementation of the Exchange’s Office of the Secretary,
proposed rule change is consistent with systems designed to provide for direct
the requirements of the Act and the and at the Commission’s Public
connection and communication with Reference Room.
rules and regulations thereunder CPs instead of relying on an
applicable to such organization.10 intermediary to collect price II. Self-Regulatory Organization’s
Section 17A(b)(3)(F) of the Act requires, information needed for ICC’s price Statement of the Purpose of, and
among other things, that the rules of a discovery process. As a result, because Statutory Basis for, the Proposed Rule
registered clearing agency be designed ICC will be able to reduce its reliance Change
to promote the prompt and accurate on intermediaries and thereby reduce In its filing with the Commission, the
clearance and settlement of securities operational risk that is outside of its Exchange included statements
transactions and, to the extent control, the proposed rule changes are concerning the purpose of and basis for
applicable, derivative agreements, consistent with the requirements of Rule the proposed rule change and discussed
contracts, and transactions.11 Rule 17Ad–22(d)(4). any comments it received on the
17Ad–22(d)(4) requires, in relevant part, proposed rule change. The text of these
mstockstill on DSK30JT082PROD with NOTICES
that a registered clearing agency shall IV. Conclusion
6 Notice,
It is therefore ordered, pursuant to 14 In approving the proposed rule change, the
82 FR at 13173–74. Commission considered the proposal’s impact on
7 Notice, 82 FR at 13173. Section 19(b)(2) of the Act that the
efficiency, competition, and capital formation. 15
8 Notice, 82 FR at 13174. proposed rule change (SR–ICC–2017– U.S.C. 78c(f).
9 Id. 15 17 CFR 200.30–3(a)(12).
10 15 U.S.C. 78s(b)(2)(C). 12 17 CFR 240.17Ad–22(d)(4). 1 15 U.S.C. 78s(b)(1).
11 15 U.S.C. 78q–1(b)(3)(F). 13 Id. 2 17 CFR 240.19b–4.
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![26830 Federal Register / Vol. 82, No. 110 / Friday, June 9, 2017 / Notices
provisions of 5 U.S.C. 552, will be President’s major disaster declaration on Physical Loan Application Deadline
available for Web site viewing and 06/02/2017, Private Non-Profit Date: 08/01/2017.
printing in the Commission’s Public organizations that provide essential Economic Injury (EIDL) Loan
Reference Room, 100 F Street NE., services of governmental nature may file Application Deadline Date: 03/02/2018.
Washington, DC 20549 on official disaster loan applications at the address ADDRESS: Submit completed loan
business days between the hours of listed above or other locally announced applications to: U.S. Small Business
10:00 a.m. and 3:00 p.m. Copies of such locations. Administration, Processing and
filing also will be available for The following areas have been Disbursement Center, 14925 Kingsport
inspection and copying at the principal determined to be adversely affected by Road, Fort Worth, TX 76155.
office of the Exchange. All comments the disaster: FOR FURTHER INFORMATION CONTACT: A.
received will be posted without change; Primary Counties: Barry, Barton, Escobar, Office of Disaster Assistance,
the Commission does not edit personal Bollinger, Butler, Camden, Carter, U.S. Small Business Administration,
identifying information from Cedar, Christian, Cole, Crawford, 409 3rd Street SW., Suite 6050,
submissions. You should submit only Dade, Dallas, Dent, Douglas, Dunklin, Washington, DC 20416, (202) 205–6734.
information that you wish to make Franklin, Gasconade, Howell, Iron, SUPPLEMENTARY INFORMATION: Notice is
available publicly. All submissions Jefferson, Lawrence, Madison, Maries, hereby given that as a result of the
should refer to File Number SR–CBOE– McDonald, Miller, Morgan, Newton, President’s major disaster declaration on
2017–044, and should be submitted on Oregon, Osage, Ozark, Perry, Phelps, 06/02/2017, applications for disaster
or before June 30, 2017. Pike, Pulaski, Ralls, Reynolds, Ripley, loans may be filed at the address listed
For the Commission, by the Division of Saint Louis, Shannon, Stone, Taney, above or other locally announced
Trading and Markets, pursuant to delegated Texas, Washington, Wayne, Webster, locations.
authority.29 Wright. The following areas have been
Robert W. Errett, The Interest Rates are: determined to be adversely affected by
Deputy Secretary. the disaster:
Percent Primary Counties (Physical Damage and
[FR Doc. 2017–11962 Filed 6–8–17; 8:45 am]
BILLING CODE 8011–01–P For Physical Damage: Economic Injury Loans): Bollinger,
Non-Profit Organizations with Butler, Carter, Douglas, Dunklin,
Credit Available Elsewhere ... 2.500 Franklin, Gasconade, Howell, Jasper,
SMALL BUSINESS ADMINISTRATION Non-Profit Organizations with- Jefferson, Madison, Maries,
out Credit Available Else- McDonald, Newton, Oregon, Osage,
[Disaster Declaration #15153 and #15154; where ..................................... 2.500 Ozark, Pemiscot, Phelps, Pulaski,
Missouri Disaster #MO–00082] For Economic Injury: Reynolds, Ripley, Saint Louis,
Non-Profit Organizations with- Shannon, Stone, Taney, Texas.
Presidential Declaration of a Major out Credit Available Else- Contiguous Counties (Economic Injury
Disaster for Public Assistance Only for where ..................................... 2.500
Loans Only):
the State of Missouri Missouri: Barry, Barton, Callaway,
The number assigned to this disaster Camden, Cape Girardeau, Christian,
AGENCY: U.S. Small Business
for physical damage is 151536 and for Cole, Crawford, Dade, Dent, Iron,
Administration.
economic injury is 151546. Laclede, Lawrence, Miller,
ACTION: Notice.
(Catalog of Federal Domestic Assistance Montgomery, New Madrid, Perry,
SUMMARY: This is a Notice of the Number 59008) Saint Charles, Saint Francois, Saint
Presidential declaration of a major James E. Rivera, Louis City, Sainte Genevieve,
disaster for Public Assistance Only for Stoddard, Warren, Washington,
Associate Administrator for Disaster
the State of Missouri (FEMA–4317–DR), Assistance. Wayne, Webster, Wright.
dated 06/02/2017. Arkansas: Baxter, Benton, Boone,
[FR Doc. 2017–11971 Filed 6–8–17; 8:45 am]
Incident: Severe Storms, Tornadoes, Carroll, Clay, Craighead, Fulton,
Straight-line Winds, and Flooding. BILLING CODE 8025–01–P
Greene, Marion, Mississippi,
Incident Period: 04/28/2017 through Randolph, Sharp.
05/11/2017. Illinois: Madison, Monroe, Saint Clair.
SMALL BUSINESS ADMINISTRATION Kansas: Cherokee, Crawford.
DATES: Effective 06/02/2017.
Physical Loan Application Deadline [Disaster Declaration #15151 and #15152; Oklahoma: Delaware, Ottawa.
Date: 08/01/2017. Missouri Disaster #MO–00081] Tennessee: Dyer, Lake.
Economic Injury (EIDL) Loan The Interest Rates are:
Application Deadline Date: 03/02/2018. Presidential Declaration of a Major
ADDRESSES: Submit completed loan
Disaster for the State of Missouri Percent
applications to: U.S. Small Business AGENCY: U.S. Small Business For Physical Damage:
Administration, Processing and Administration. Homeowners with Credit Avail-
Disbursement Center, 14925 Kingsport ACTION: Notice. able Elsewhere ...................... 3.875
Road, Fort Worth, TX 76155. Homeowners without Credit
FOR FURTHER INFORMATION CONTACT: A. SUMMARY: This is a Notice of the Available Elsewhere .............. 1.938
Escobar, Office of Disaster Assistance, Presidential declaration of a major Businesses with Credit Avail-
mstockstill on DSK30JT082PROD with NOTICES
U.S. Small Business Administration, disaster for the State of MISSOURI able Elsewhere ...................... 6.430
409 3rd Street SW., Suite 6050, (FEMA–4317–DR), dated 06/02/2017. Businesses without Credit
Incident: Severe Storms, Tornadoes, Available Elsewhere .............. 3.215
Washington, DC 20416, (202) 205–6734. Non-Profit Organizations with
SUPPLEMENTARY INFORMATION: Notice is Straight-line Winds, and Flooding. Credit Available Elsewhere ... 2.500
hereby given that as a result of the Incident Period: 04/28/2017 through Non-Profit Organizations with-
05/11/2017. out Credit Available Else-
29 17 CFR 200.30–3(a)(12). DATES: Effective 06/02/2017. where ..................................... 2.500
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Document Created: 2017-06-09 01:11:48
Document Modified: 2017-06-09 01:11:48
| 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 26825 |
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