82 FR 34717 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change Relating to Disaster Recovery
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 142 (July 26, 2017)
Federal Register Volume 82, Issue 142 (July 26, 2017)
| Page Range | 34717-34719 | |
| FR Document | 2017-15630 |
[Federal Register Volume 82, Number 142 (Wednesday, July 26, 2017)] [Notices] [Pages 34717-34719] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-15630] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81175; File No. SR-CBOE-2017-044] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change Relating to Disaster Recovery July 20, 2017. I. Introduction On May 24, 2017, the Chicago Board Options Exchange, Incorporated (``CBOE'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend CBOE Rule 6.18 relating to disaster recovery. The proposed rule change was published for comment in the Federal Register on June 9, 2017.\3\ The Commission received no comments on the proposed rule change. This order grants approval of the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 80857 (June 5, 2017), 82 FR 26825 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposed Rule Change CBOE Rule 6.18 contains the Exchange's rules relating to disaster recovery, including provisions intended to comply with Regulation Systems Compliance and Integrity (``Regulation SCI'') concerning business continuity and disaster recovery plans.\4\ The Exchange has proposed to amend Rule 6.18 to provide the Exchange authority to take additional steps that it deems necessary to preserve the Exchange's ability to conduct business and maintain fair and orderly markets in the event of a significant systems failure, disaster, or other unusual circumstances. Specifically, the Exchange has proposed to amend Rule 6.18 to allow the Exchange to: (1) Establish specified additional temporary requirements for Designated BCP/DR Participants \5\ during use of the back-up data center; (2) temporarily allow trading in its exclusively-licensed and/or proprietary products, on a class-by-class basis, in an exclusively floor-based environment via open outcry if the Exchange's primary and back-up data centers both are inoperable or otherwise unavailable; (3) temporarily deactivate certain systems or systems functionalities that are not essential to conducting business on the Exchange if there is a systems disruption or malfunction, security intrusion, systems compliance issue, or other unusual circumstances; and (4) temporarily restrict a Trade Permit Holder's or associated person's access to the Exchange's electronic trading systems if the President of the Exchange determines that, because of a systems issue, such access threatens the Exchange's ability to operate systems essential to maintenance of a fair and orderly market. --------------------------------------------------------------------------- \4\ See Notice, supra note 3, at 26826; see also 17 CFR 242.1000-07. \5\ ``Designated BCP/DR Participants'' are Trading Permit Holders that the Exchange has determined 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. See Rule 6.18(b)(iv)(A). ``Trading Permit Holder'' has the meaning set forth in Section 1.1(f) of CBOE's Bylaws. Designated BCP/DR Participants include, at a minimum, all Market- Makers in option classes exclusively listed on the Exchange that stream quotes in such classes and all Designated Primary Market- Makers (``DPMs'') in multiply listed option classes. See Rule 6.18(b)(iv)(A)(2). --------------------------------------------------------------------------- First, the Exchange has proposed to adopt new Rule 6.18(b)(iv)(B), which would provide that, during the use of the back-up data center, if necessary for the maintenance of fair and orderly markets, the Exchange may: (1) Establish heightened quoting obligations for Designated BCP/DR Participants in a class in which the Designated BCP/DR Participant is already an appointed Market-Maker \6\ or Lead Market-Maker \7\ up to the standards specified for Designated Primary Market-Makers \8\ in Rule 8.85(a); \9\ and/or (2) disallow BCP/DR Participants the ability to deselect an appointment intraday in a class in which the BCP/DR Participant is already an appointed Market-Maker. The Exchange would be required to notify market participants of any of these additional temporary requirements prior to implementing them.\10\ --------------------------------------------------------------------------- \6\ A Market-Maker is an individual Trading Permit Holder or TPH organization that is registered with the Exchange for the purpose of making transactions as a dealer-specialist on the Exchange in accordance with the provisions of Chapter VIII of the Rules. See Rule 8.1. A ``TPH organization'' is an organization that meets the requirements set forth in Rule 3.3. \7\ The Exchange may appoint one or more Market-Makers in a class to serve as Lead Market-Makers (``LMMs''). See Rule 8.15(a). \8\ A DPM is a TPH organization that is approved by the Exchange to function in allocated securities as a Market-Maker and is subject to the obligations under Rule 8.85. See Rule 8.80. \9\ With respect to their allocated series, DPMs must, among other things, provide continuous electronic quotes in the lesser of 99 percent of the non-adjusted option series or 100 percent of the non-adjusted option series minus one call-put pair, with the term ``call-put pair'' referring to one call and one put the cover the same underlying instrument and have the same expiration date and exercise price, and assure that its disseminated market quotations are accurate. See Rule 8.85(a)(i). \10\ See proposed Rule 6.18(b)(iv)(B). The proposal would also renumber existing subparagraphs (B) and (C) of Rule 6.18(b)(iv) as subparagraphs (C) and (D), respectively. See proposed Rule 6.18(b)(iv)(C) and (D). --------------------------------------------------------------------------- Next, the Exchange has proposed to adopt new Rule 6.18(c), 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 would be able to operate in an exclusively floor-based environment on a limited basis for certain classes. Specifically, the Exchange could [[Page 34718]] determine, on a class-by-class basis, to temporarily allow trading in its exclusively-licensed and/or proprietary products \11\ in an exclusively floor-based environment via open outcry to preserve the Exchange's ability to conduct business in those option classes.\12\ --------------------------------------------------------------------------- \11\ According to the Exchange, its current proprietary and exclusively-licensed products include 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). The Exchange will maintain a current list of all proprietary and exclusively-licensed options products on its Web site. See Notice, supra note 3, at 26826 n. 8. The Exchange explained that options exclusively-listed on the Exchange may include options also listed on other CBOE Holdings Inc. affiliated exchanges, including C2 Options Exchange, Incorporated (``C2''), and that currently RUT is listed on CBOE and C2. See Notice, supra note 3, at 26826 n. 9. \12\ See proposed Rule 6.18(c). The proposal also would renumber existing subparagraph (c) of Rule 6.18 as subparagraph (d). See proposed Rule 6.18(d). --------------------------------------------------------------------------- The Exchange has also proposed to adopt new Rule 6.18(e), which would provide that, if there is a systems disruption or malfunction, security intrusion, systems compliance issue, or other unusual circumstances, the Exchange could temporarily deactivate certain systems or systems functionalities that are not essential to conducting business on the Exchange in accordance with the Rules or, if necessary, to maintain fair and orderly markets or to protect investors.\13\ The Exchange would notify market participants of any such deactivation and subsequent reactivation promptly and in a reasonable manner determined by the Exchange.\14\ --------------------------------------------------------------------------- \13\ See proposed Rule 6.18(e). The Exchange stated that 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'') workstations, the Automated Improvement Mechanism (``AIM''), and the Solicitation Auction Mechanism (``SAM''). See Notice, supra note 3, at 26827-28. \14\ See proposed Rule 6.18(e). --------------------------------------------------------------------------- Finally, the Exchange has proposed to adopt new Rule 6.18(f), which would allow the Exchange to temporarily restrict a Trading Permit Holder's or associated person's access to the Hybrid Trading System or other electronic trading systems if the President (or senior-level designee) \15\ of the Exchange determines 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.\16\ The Exchange would continue to restrict such access until: (1) The end of the trading session; or (2) an earlier time if the President (or senior-level designee) of the Exchange, in consultation with the affected Trading Permit Holder, 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 poses a threat to investors.\17\ In the Notice, the Exchange also represented that it would make efforts to contact the affected Trading Permit Holder immediately before or contemporaneously with the restriction of access to the extent possible while protecting the Exchange's ability to operate systems essential to the maintenance of fair and orderly markets.\18\ --------------------------------------------------------------------------- \15\ According to the Exchange, a designee would make determinations under this subsection only in the President of the Exchange's absence and the designee would be a senior executive (i.e., Vice President or above) of the Exchange. See Notice, supra note 3, at 26828 n. 23. \16\ See proposed Rule 6.18(f). \17\ See id. \18\ See Notice, supra note 3, at 26828 n. 22. --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review, 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.\19\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\20\ which requires, among other things, that the rules of a national securities 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. The Commission also finds that the proposed rule change is consistent with Section 6(b)(7) of the Act,\21\ which requires, among other things, that the rules of a national securities exchange provide a fair procedure for the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof. --------------------------------------------------------------------------- \19\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \20\ 15 U.S.C. 78f(b)(5). \21\ 15 U.S.C. 78f(b)(7). --------------------------------------------------------------------------- The Commission believes that the proposed rule change will provide the Exchange with additional tools to help ensure continuous operation of the Exchange and its core systems in the event of a significant systems failure or other unusual circumstances that threaten the Exchange's ability to operate its systems, maintain fair and orderly markets, and protect investors. The Commission notes that the authority provided by the proposed provisions is limited to circumstances where the Exchange is experiencing a disruption to its primary, or primary and back-up, electronic systems, or where the Exchange believes it is in imminent danger of experiencing such disruption. Further, the Commission notes that, according to the Exchange, 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 its primary and back-up data centers, 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.\22\ Further, the Exchange represents that its business continuity and disaster recovery standards are reasonably designed to achieve two-hour resumption of all trading systems that are essential to conducting business on the Exchange, and that the Exchange believes that its standards are reasonably designed to support resumption in a significantly shorter amount of time.\23\ As such, the Commission expects that the Exchange would invoke the disaster recovery provisions in this proposed rule change only in rare and unusual circumstances and only for very limited periods of time. --------------------------------------------------------------------------- \22\ See Notice, supra note 3, at 26827 n. 12. \23\ See id. --------------------------------------------------------------------------- The Commission believes that the Exchange's ability, during use of the back-up system, to invoke pre-determined heighted quoting obligations for Designated BCP/DR Participants that are Market-Makers (or Lead Market-Makers) in their appointed classes, or prevent them from dropping their appointments intraday, may help to ensure that such Designated BCP/DR Participants contribute to, and continue to help ensure, the maintenance of fair and orderly markets in the event of a disaster or other serious circumstances causing the Exchange to operate out of [[Page 34719]] its back-up data center. Moreover, the Commission notes that such additional requirements will be imposed only on Designated BCP/DR Participants, which are market participants that the Exchange has determined that, taken as a whole, are 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 pursuant to Regulation SCI.\24\ The Commission believes that, through the adoption of this rule, Designated BCP/DR Participants will be on notice that they might be called upon to meet heightened quoting obligations up to the levels currently required for Designated Primary Market-Makers in CBOE Rule 8.85(a) \25\ during unusual circumstances when the back-up data center is in use and notes that the Exchange would provide specific notice prior to invoking this new authority. The Commission further notes that, as described above, Regulation SCI requires the Exchange to have business continuity and disaster recovery plans reasonably designed to achieve two-hour resumption of critical SCI systems and next business day resumption of trading,\26\ and the Exchange represented that its procedures are reasonably designed to achieve two-hour resumption of all trading systems that are essential to conducting business on the exchange and that they are designed to support resumption in a significantly shorter amount of time.\27\ As such, the additional requirements imposed by this provision should be in effect for relatively short periods of time if they are ever invoked. In addition, to the extent the Exchange invokes this authority when necessary to support fair and orderly markets when its systems are in back-up mode, then the additional requirements may help support quote activity during a disruption and thereby may help protect investors and the public interest. --------------------------------------------------------------------------- \24\ See Notice, supra note 3, at 26826 n. 7. \25\ These heighted quoting obligations could include providing continuous electronic quotes in up to the lesser of 99 percent of the non-adjusted option series or 100 percent of the non-adjusted option series minus one call-put pair in classes in which the Designated BCP/DR Participant is already an appointed LMM or Market- Maker. See supra note 9. \26\ 17 CFR 242.1001(a)(v). \27\ See supra notes 22-23 and accompanying text. --------------------------------------------------------------------------- The Commission believes that the Exchange's ability to temporarily operate in an exclusively floor-based environment via open outcry in certain proprietary and exclusively-licensed products if the Exchange's primary and back-up data centers become inoperable or otherwise unavailable could help ensure that the market for these securities would continue to be available and functioning, which should protect investors by providing the ability to continue to trade these products until such time as the Exchange can resume normal trading. The Commission notes that this provision would be invoked only if the Exchange's primary and back-up data centers were both inoperable or otherwise unavailable due to a significant systems failure, disaster, or other unusual circumstances, and will only apply to the Exchange's exclusively-licensed and proprietary products, which only trade on CBOE and, in some instances, its affiliated exchanges. The Commission notes that the period of operation for this exclusively floor-based environment should be minimal based on Regulation SCI's requirements and the Exchange's two-hour resumption standard for its trading systems.\28\ --------------------------------------------------------------------------- \28\ See supra notes 26 and 27 and accompanying text. --------------------------------------------------------------------------- The Commission believes that the Exchange's ability to temporarily deactivate certain non-core systems or systems functionalities in the event of a systems disruption or malfunction, security intrusion, systems compliance issue, or other unusual circumstances could help prevent systems issues from spreading and potentially causing harm to investors or impeding the Exchange's ability to maintain fair and orderly markets. The Commission notes that this authority will only extend to those systems not essential to conducting business on the Exchange. The Commission further notes that the new rule provides that the Exchange will notify market participants of any such deactivation and any subsequent reactivation promptly. The Commission believes that the Exchange's ability to temporarily restrict a Trading Permit Holder's or associated person's access to the Hybrid Trading System or other electronic trading system as provided in the rule is designed to allow the Exchange to prevent a Trading Permit Holder's systems issues from spreading across the Exchange's systems and potentially causing a more widespread problem implicating the Exchange's ability to maintain fair and orderly markets and thus potentially impacting other market participants. The Commission believes that this connectivity restriction is consistent with Section 6(b)(7) of the Act,\29\ as the proposed limitation on access is exceptionally limited in duration and the rule provides a fair procedure for imposing such restrictions. Specifically, the Commission notes that the Exchange's authority under this provision is limited to when, due to a systems issue, a Trading Permit Holder's activity poses a present threat to the Exchange's ability to operate systems essential to maintaining a fair and orderly market. The Commission also notes that the decision to restrict access would be made by the highest levels of Exchange management, namely the President (or his or her senior-level designee), and this restriction would be temporary, lasting only until the end of the trading session or such earlier time that it is determined by the President, in consultation with the affected Trading Permit Holder, that the access no longer poses a threat. Consistent with the Exchange's representations, the Commission expects that the Exchange would make reasonable efforts to contact the affected Trading Permit Holder immediately before, or, if that is not possible, contemporaneously with, any restriction of access.\30\ --------------------------------------------------------------------------- \29\ 15 U.S.C. 78f(b)(7). \30\ See supra note 18 and accompanying text. --------------------------------------------------------------------------- Accordingly, for the reasons discussed above, the Commission believes that the Exchange's proposal is consistent with the Act. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\31\ that the proposed rule change (SR-CBOE-2017-044) be, and hereby is, approved. --------------------------------------------------------------------------- \31\ 15 U.S.C. 78s(b)(2). \32\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-15630 Filed 7-25-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 142 / Wednesday, July 26, 2017 / Notices 34717
no comments on the proposed rule Exchange Act of 1934 (‘‘Act’’) 1 and Rule Exchange’s electronic trading systems if
change. 19b–4 thereunder,2 a proposed rule the President of the Exchange
Section 19(b)(2) of the Act 10 provides change to amend CBOE Rule 6.18 determines that, because of a systems
that, after initiating disapproval relating to disaster recovery. The issue, such access threatens the
proceedings, the Commission shall issue proposed rule change was published for Exchange’s ability to operate systems
an order approving or disapproving the comment in the Federal Register on essential to maintenance of a fair and
proposed rule change not later than 180 June 9, 2017.3 The Commission received orderly market.
days after the date of publication of no comments on the proposed rule First, the Exchange has proposed to
notice of filing of the proposed rule change. This order grants approval of adopt new Rule 6.18(b)(iv)(B), which
change. The Commission may extend the proposed rule change. would provide that, during the use of
the period for issuing an order the back-up data center, if necessary for
II. Description of the Proposed Rule the maintenance of fair and orderly
approving or disapproving the proposed
Change markets, the Exchange may: (1)
rule change, however, by not more than
60 days if the Commission determines CBOE Rule 6.18 contains the Establish heightened quoting obligations
that a longer period is appropriate and Exchange’s rules relating to disaster for Designated BCP/DR Participants in a
publishes the reasons for such recovery, including provisions intended class in which the Designated BCP/DR
determination. The proposed rule to comply with Regulation Systems Participant is already an appointed
change was published for notice and Compliance and Integrity (‘‘Regulation Market-Maker 6 or Lead Market-Maker 7
comment in the Federal Register on SCI’’) concerning business continuity up to the standards specified for
January 23, 2017. July 22, 2017 is 180 and disaster recovery plans.4 The Designated Primary Market-Makers 8 in
days from that date, and September 20, Exchange has proposed to amend Rule Rule 8.85(a); 9 and/or (2) disallow BCP/
2017 is 240 days from that date. 6.18 to provide the Exchange authority DR Participants the ability to deselect an
The Commission finds it appropriate to take additional steps that it deems appointment intraday in a class in
to designate a longer period within necessary to preserve the Exchange’s which the BCP/DR Participant is already
which to issue an order approving or ability to conduct business and an appointed Market-Maker. The
disapproving the proposed rule change maintain fair and orderly markets in the Exchange would be required to notify
so that it has sufficient time to consider event of a significant systems failure, market participants of any of these
this proposed rule change. Accordingly, disaster, or other unusual additional temporary requirements prior
the Commission, pursuant to Section circumstances. Specifically, the to implementing them.10
19(b)(2) of the Act,11 designates Exchange has proposed to amend Rule Next, the Exchange has proposed to
September 20, 2017 as the date by 6.18 to allow the Exchange to: (1) adopt new Rule 6.18(c), which would
which the Commission shall either Establish specified additional temporary provide that, if the Exchange’s primary
approve or disapprove the proposed requirements for Designated BCP/DR and back-up data centers become
rule change (File No. SR–NYSEArca– Participants 5 during use of the back-up inoperable or otherwise unavailable for
2016–177), as modified by Amendment data center; (2) temporarily allow use due to a significant systems failure,
No. 3. trading in its exclusively-licensed and/ disaster, or other unusual
For the Commission, by the Division of
or proprietary products, on a class-by- circumstances, in the interests of
Trading and Markets, pursuant to delegated class basis, in an exclusively floor-based maintaining fair and orderly markets or
authority.12 environment via open outcry if the for the protection of investors, the
Eduardo A. Aleman, Exchange’s primary and back-up data Exchange would be able to operate in an
Assistant Secretary. centers both are inoperable or otherwise exclusively floor-based environment on
[FR Doc. 2017–15632 Filed 7–25–17; 8:45 am]
unavailable; (3) temporarily deactivate a limited basis for certain classes.
certain systems or systems Specifically, the Exchange could
BILLING CODE 8011–01–P
functionalities that are not essential to
conducting business on the Exchange if 6 A Market-Maker is an individual Trading Permit
there is a systems disruption or Holder or TPH organization that is registered with
SECURITIES AND EXCHANGE the Exchange for the purpose of making
COMMISSION malfunction, security intrusion, systems transactions as a dealer-specialist on the Exchange
compliance issue, or other unusual in accordance with the provisions of Chapter VIII
[Release No. 34–81175; File No. SR–CBOE– circumstances; and (4) temporarily of the Rules. See Rule 8.1. A ‘‘TPH organization’’
2017–044] restrict a Trade Permit Holder’s or is an organization that meets the requirements set
forth in Rule 3.3.
Self-Regulatory Organizations; associated person’s access to the 7 The Exchange may appoint one or more Market-
Chicago Board Options Exchange, Makers in a class to serve as Lead Market-Makers
1 15
U.S.C. 78s(b)(1). (‘‘LMMs’’). See Rule 8.15(a).
Incorporated; Order Granting Approval 2 17
CFR 240.19b–4. 8 A DPM is a TPH organization that is approved
of Proposed Rule Change Relating to 3 See Securities Exchange Act Release No. 80857 by the Exchange to function in allocated securities
Disaster Recovery (June 5, 2017), 82 FR 26825 (‘‘Notice’’). as a Market-Maker and is subject to the obligations
4 See Notice, supra note 3, at 26826; see also 17 under Rule 8.85. See Rule 8.80.
July 20, 2017. CFR 242.1000–07. 9 With respect to their allocated series, DPMs
5 ‘‘Designated BCP/DR Participants’’ are Trading must, among other things, provide continuous
I. Introduction electronic quotes in the lesser of 99 percent of the
Permit Holders that the Exchange has determined
On May 24, 2017, the Chicago Board are, as a whole, necessary for the maintenance of non-adjusted option series or 100 percent of the
fair and orderly markets in the event of the non-adjusted option series minus one call-put pair,
Options Exchange, Incorporated with the term ‘‘call-put pair’’ referring to one call
activation of the Exchange’s business continuity
mstockstill on DSK30JT082PROD with NOTICES
(‘‘CBOE’’ or the ‘‘Exchange’’) filed with and disaster recovery plans. See Rule 6.18(b)(iv)(A). and one put the cover the same underlying
the Securities and Exchange ‘‘Trading Permit Holder’’ has the meaning set forth instrument and have the same expiration date and
Commission (‘‘Commission’’), pursuant in Section 1.1(f) of CBOE’s Bylaws. Designated exercise price, and assure that its disseminated
BCP/DR Participants include, at a minimum, all market quotations are accurate. See Rule 8.85(a)(i).
to Section 19(b)(1) of the Securities
Market-Makers in option classes exclusively listed 10 See proposed Rule 6.18(b)(iv)(B). The proposal
on the Exchange that stream quotes in such classes would also renumber existing subparagraphs (B)
10 15 U.S.C. 78s(b)(2). and all Designated Primary Market-Makers and (C) of Rule 6.18(b)(iv) as subparagraphs (C) and
11 Id.
(‘‘DPMs’’) in multiply listed option classes. See (D), respectively. See proposed Rule 6.18(b)(iv)(C)
12 17 CFR 200.30–3(a)(57). Rule 6.18(b)(iv)(A)(2). and (D).
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![Federal Register / Vol. 82, No. 142 / Wednesday, July 26, 2017 / Notices 34719
its back-up data center. Moreover, the or otherwise unavailable could help duration and the rule provides a fair
Commission notes that such additional ensure that the market for these procedure for imposing such
requirements will be imposed only on securities would continue to be restrictions. Specifically, the
Designated BCP/DR Participants, which available and functioning, which should Commission notes that the Exchange’s
are market participants that the protect investors by providing the authority under this provision is limited
Exchange has determined that, taken as ability to continue to trade these to when, due to a systems issue, a
a whole, are necessary for the products until such time as the Trading Permit Holder’s activity poses a
maintenance of fair and orderly markets Exchange can resume normal trading. present threat to the Exchange’s ability
in the event of the activation of the The Commission notes that this to operate systems essential to
Exchange’s business continuity and provision would be invoked only if the maintaining a fair and orderly market.
disaster recovery plans pursuant to Exchange’s primary and back-up data The Commission also notes that the
Regulation SCI.24 The Commission centers were both inoperable or decision to restrict access would be
believes that, through the adoption of otherwise unavailable due to a made by the highest levels of Exchange
this rule, Designated BCP/DR significant systems failure, disaster, or management, namely the President (or
Participants will be on notice that they other unusual circumstances, and will his or her senior-level designee), and
might be called upon to meet only apply to the Exchange’s this restriction would be temporary,
heightened quoting obligations up to the exclusively-licensed and proprietary lasting only until the end of the trading
levels currently required for Designated products, which only trade on CBOE session or such earlier time that it is
Primary Market-Makers in CBOE Rule and, in some instances, its affiliated determined by the President, in
8.85(a) 25 during unusual circumstances exchanges. The Commission notes that consultation with the affected Trading
when the back-up data center is in use the period of operation for this Permit Holder, that the access no longer
and notes that the Exchange would exclusively floor-based environment poses a threat. Consistent with the
provide specific notice prior to invoking should be minimal based on Regulation Exchange’s representations, the
this new authority. The Commission SCI’s requirements and the Exchange’s Commission expects that the Exchange
further notes that, as described above, two-hour resumption standard for its would make reasonable efforts to
Regulation SCI requires the Exchange to trading systems.28 contact the affected Trading Permit
have business continuity and disaster The Commission believes that the Holder immediately before, or, if that is
recovery plans reasonably designed to Exchange’s ability to temporarily not possible, contemporaneously with,
achieve two-hour resumption of critical deactivate certain non-core systems or any restriction of access.30
SCI systems and next business day systems functionalities in the event of a Accordingly, for the reasons
resumption of trading,26 and the systems disruption or malfunction, discussed above, the Commission
Exchange represented that its security intrusion, systems compliance believes that the Exchange’s proposal is
procedures are reasonably designed to issue, or other unusual circumstances consistent with the Act.
achieve two-hour resumption of all could help prevent systems issues from
spreading and potentially causing harm IV. Conclusion
trading systems that are essential to
conducting business on the exchange to investors or impeding the Exchange’s It is therefore ordered, pursuant to
and that they are designed to support ability to maintain fair and orderly Section 19(b)(2) of the Act,31 that the
resumption in a significantly shorter markets. The Commission notes that proposed rule change (SR–CBOE–2017–
amount of time.27 As such, the this authority will only extend to those 044) be, and hereby is, approved.
additional requirements imposed by this systems not essential to conducting For the Commission, by the Division of
provision should be in effect for business on the Exchange. The Trading and Markets, pursuant to delegated
relatively short periods of time if they Commission further notes that the new authority.32
are ever invoked. In addition, to the rule provides that the Exchange will Eduardo A. Aleman,
extent the Exchange invokes this notify market participants of any such Assistant Secretary.
authority when necessary to support fair deactivation and any subsequent [FR Doc. 2017–15630 Filed 7–25–17; 8:45 am]
and orderly markets when its systems reactivation promptly.
BILLING CODE 8011–01–P
The Commission believes that the
are in back-up mode, then the
Exchange’s ability to temporarily restrict
additional requirements may help
a Trading Permit Holder’s or associated SECURITIES AND EXCHANGE
support quote activity during a
person’s access to the Hybrid Trading COMMISSION
disruption and thereby may help protect
System or other electronic trading
investors and the public interest. [Investment Company Act Release No.
system as provided in the rule is
The Commission believes that the 32738; 812–14763]
designed to allow the Exchange to
Exchange’s ability to temporarily
prevent a Trading Permit Holder’s
operate in an exclusively floor-based Point Bridge Capital, LLC, et al.
systems issues from spreading across
environment via open outcry in certain
the Exchange’s systems and potentially July 21, 2017.
proprietary and exclusively-licensed
causing a more widespread problem AGENCY: Securities and Exchange
products if the Exchange’s primary and
implicating the Exchange’s ability to Commission (‘‘Commission’’).
back-up data centers become inoperable
maintain fair and orderly markets and ACTION: Notice.
24 See Notice, supra note 3, at 26826 n. 7. thus potentially impacting other market
25 These heighted quoting obligations could participants. The Commission believes Notice of an application for an order
mstockstill on DSK30JT082PROD with NOTICES
include providing continuous electronic quotes in that this connectivity restriction is under section 6(c) of the Investment
up to the lesser of 99 percent of the non-adjusted consistent with Section 6(b)(7) of the Company Act of 1940 (the ‘‘Act’’) for an
option series or 100 percent of the non-adjusted exemption from sections 2(a)(32),
option series minus one call-put pair in classes in
Act,29 as the proposed limitation on
which the Designated BCP/DR Participant is already access is exceptionally limited in 5(a)(1), 22(d), and 22(e) of the Act and
an appointed LMM or Market-Maker. See supra
note 9. 28 See supra notes 26 and 27 and accompanying 30 See supra note 18 and accompanying text.
26 17 CFR 242.1001(a)(v). text. 31 15 U.S.C. 78s(b)(2).
27 See supra notes 22–23 and accompanying text. 29 15 U.S.C. 78f(b)(7). 32 17 CFR 200.30–3(a)(12).
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Document Created: 2017-07-26 01:30:23
Document Modified: 2017-07-26 01:30:23
| 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 34717 |
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