82 FR 43629 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the On-Floor Lead Market-Maker Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 179 (September 18, 2017)
Federal Register Volume 82, Issue 179 (September 18, 2017)
| Page Range | 43629-43633 | |
| FR Document | 2017-19712 |
[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)] [Notices] [Pages 43629-43633] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-19712] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81586; File No. SR-CBOE-2017-059] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the On-Floor Lead Market-Maker Program September 12, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on August 31, 2017, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I and II 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 the On-Floor Lead Market-Maker (``LMM'') program. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 8.15. Lead Market-Makers (a) No change. (b) LMM Obligations: Each LMM must fulfill all the obligations of a Market-Maker under the Rules and satisfy each of the following requirements: (i) 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. This obligation does not apply to intra-day add-on series on the day during which such series are added for trading. Compliance with this quoting obligation applies to all of an LMM's appointed classes on each platform collectively. The Exchange will determine compliance by an LMM with this quoting obligation on a monthly basis. However, determining compliance with this obligation on a monthly basis does not relieve an LMM from meeting this obligation on a daily basis, nor does it prohibit the Exchange from taking disciplinary action against an LMM for failing to meet this obligation each trading day. In option classes in which both an On-Floor LMM and an Off-Floor DPM or Off-Floor LMM have been appointed, the On-Floor LMM will not be obligated to comply with this paragraph (b)(i) and instead will be obligated to comply with the obligations of Market-Makers in Rule 8.7(d). In an option class in which the Exchange appointed an On- Floor LMM that has open-outcry obligations only, that On-Floor LMM will not be obligated to comply with this paragraph (b)(i) and instead will be obligated to comply with the obligations of Market-Makers in Rule 8.7(d) and have a designee in the class's crowd on the trading floor for the entire trading day (except for a de minimis amount of time); (ii)-(iv) No change. (v) enter opening quotes within one minute of the initiation of an opening rotation in any series that is not open due to the lack of a quote (see Rule 6.2B(d)(i)(A) or (ii)(A)) and participate in other rotations described in Rule 6.2B (including the modified opening rotation set forth in Interpretation and Policy .01) or 24.13, as applicable. In option classes in which both an On-Floor LMM and an Off- Floor DPM or [[Page 43630]] Off-Floor LMM have been appointed, the obligation set forth in this paragraph (b)(v) will be that of the Off-Floor DPM or Off-Floor LMM and not the On-Floor LMM. In an option class in which the Exchange appointed an On-Floor LMM that has open-outcry obligations only, that On-Floor LMM will not be obligated to comply with this paragraph (b)(v); (vi)-(viii) No change. (c)-(d) No change. . . . Interpretations and Policies: .01 An LMM generally will operate on CBOE's trading floor (``On- Floor LMM''). However, as provided below, an LMM can request that the Exchange authorize the LMM to function remotely away from CBOE's trading floor (``Off-Floor LMM'') on a class-by-class basis. (a)-(b) No change. (c) Notwithstanding Rule 8.15(a)[,]: (i) in an option class in which an Off-Floor LMM or Off-Floor DPM has been appointed in accordance with this Rule 8.15 or Rule 8.83, as applicable, the Exchange in its discretion may also appoint an On-Floor LMM, which will be eligible to receive a participation entitlement under this Rule 8.15 with respect to orders represented in open outcry; and (ii) in a class in which the Exchange does not grant an electronic participation entitlement pursuant to Rule 6.45(a)(ii) and in which the Exchange did not appoint an Off-Floor LMM or Off-Floor DPM, the Exchange may appoint an On-Floor LMM that has open-outcry obligations only. If the Exchange in its discretion determines to reallocate a class in which an Off- Floor LMM or Off-Floor DPM has been appointed, the On-Floor LMM appointment will automatically terminate. .02-.04 No change. * * * * * The text of the proposed rule change is also available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the On-Floor LMM program. Currently, Rule 8.15, Interpretation and Policy .01 permits an LMM that is approved to operate as an Off-Floor LMM in one or more classes can request the Exchange authorize it to operate as an On-Floor LMM in those classes. Additionally, in an option class in which an Off-Floor LMM or Off-Floor Designated Primary Market-Maker (``DPM'') has been appointed in accordance with Rule 8.15 or Rule 8.83, respectively, the Exchange in its discretion may appoint an On-Floor LMM (which may be the same firm or different firm serving as the Off-Floor LMM or Off- Floor DPM), which will be eligible to receive a participation entitlement under Rule 8.15 with respect to orders represented in open outcry. Pursuant to Rule 8.15(b), in an option class in which both an On-Floor LMM and an Off-Floor DPM or Off-Floor LMM have been appointed, the On-Floor LMM will not be obligated to comply with the continuous electronic quoting obligation in subparagraph (i) or opening quoting obligation in subparagraph (v) (the Off-Floor LMM or Off-Floor DPM would be required to comply with those quoting obligations). Pursuant to Rule 6.45(a)(ii), which permits the exchange to determine, on a class-by-class basis, certain priority overlays, including participation entitlements to LMMs (as well as DPMs and Preferred Market-Makers). The Exchange may grant an LMM a participation entitlement only if it has applied the priority customer overlay. LMMs operating on the trading floor may also receive a participation entitlement.\3\ In exchange for eligibility to receive a participation entitlement, LMMs must, among other things, satisfy a heightened quoting obligation.\4\ If the Exchange does not grant an electronic participation entitlement to a class, currently an LMM that operates off the floor is required to continue to satisfy the heightened electronic quoting obligation under the rules, even though it does not receive the benefit of an electronic participation entitlement (although it would continue to receive an open outcry participation entitlement if it also operates on the floor). --------------------------------------------------------------------------- \3\ See Rule 8.15(d). \4\ Generally, LMMs and DPMs must provide continuous electronic quotes (for 90% of the time) in at least the lesser of 99% of the non-adjusted series or 100% of the non-adjusted series minus one call-put pair, while Market-Makers must provide continuous electronic quotes (for 90% of the time) in at least 60% of the series in their appointed classes. --------------------------------------------------------------------------- Therefore, under current Rules, the Exchange may appoint an On- Floor LMM in a class if there is also an Off-Floor LMM or Off-Floor DPM in that class (which, as noted above, the same firm or different firms may be operating as the On-Floor LMM and Off-Floor LMM or Off-Floor DPM). Additionally, the Rules provide an On-Floor LMM does not have to satisfy heightened electronic quoting standards if there is also an Off-Floor LMM or Off-Floor DPM in that class, who must satisfy those standards. However, the Rules do not expressly contemplate the Exchange appointing an On-Floor LMM in a class if it has not appointed an Off- Floor DPM or Off-Floor LMM in that class. Additionally, current Rules do not explicitly permit the Exchange to not impose a heightened electronic quoting obligation on an On-Floor LMM if there is no Off- Floor LMM or Off-Floor DPM (in other words, if the Exchange were to appoint an On-Floor LMM who operates only on the floor, and no Off- Floor LMM or Off-Floor DPM, the On-Floor LMM would still be required to satisfy heightened quoting standards). The proposed rule change explicitly states the Exchange may appoint an On-Floor LMM in a class, under specific circumstances (as further discussed below), even if there is no Off-Floor LMM or Off-Floor DPM in that class, which On- Floor LMM must satisfy certain floor-based obligations and is eligible for an open outcry participation entitlement, but will not have to satisfy heightened electronic quoting obligations and will not be eligible for an electronic participation entitlement. The proposed rule change merely expands the Exchange's flexibility with respect to appointing On-Floor LMMs in a circumstance not currently contemplated in the Rules--in classes in which it has not appointed an Off-Floor DPM or Off-Floor LMM--and specifies the obligations and entitlement in such a circumstance. Specifically, the Exchange proposes to amend Rule 8.15, Interpretation and Policy .01 to permit the Exchange to appoint an On- Floor LMM to operate only on the trading floor with open-outcry obligations only in a class in which the Exchange appointed no Off- Floor LMM or Off-Floor DPM and does not grant an electronic participation entitlement pursuant to Rule 6.45(a)(ii) (in addition to classes in which the Exchange has appointed an Off-Floor [[Page 43631]] DPM or LMM).\5\ The proposed rule change also amends Rule 8.15(b)(i) and (v) to provide an On-Floor LMM with open-outcry obligations only will not be obligated to comply with the continuous electronic quoting obligation in subparagraph (i) or opening quoting obligation in subparagraph (v), but must comply with the obligations of Market-Makers in Rule 8.7(d) and have a designee in the class's crowd on the trading floor for the entire trading day (except for a de minimis amount of time).\6\ --------------------------------------------------------------------------- \5\ The Exchange may remove an On-Floor LMM in accordance with Rule 8.15 in the same manner as it may remove any other LMM appointed pursuant to Rule 8.15, including current On-Floor LMMs. \6\ For example, a de minimis time period may be the brief time during which a designee leaves the trading floor to purchase a beverage. --------------------------------------------------------------------------- The Exchange believes it is reasonable for an On-Floor LMM with open-outcry obligations only to be eligible for an open outcry entitlement, because priority customer orders in the book always receive priority over in-crowd market participants, including LMMs who may be eligible for an open outcry entitlement. Additionally, as proposed, the On-Floor LMM must satisfy the proposed heightened standard to be in the crowd for the entire trading day to be eligible for the open outcry entitlement.\7\ The Exchange believes this standard is reasonable, as it understands On-Floor LMMs currently have designees present on the floor during the entire trading, because a designee must be present to participate in open outcry trades and receive open outcry participation entitlements on trades.\8\ --------------------------------------------------------------------------- \7\ See Rule 6.45(b)(i). \8\ If an On-Floor LMM has no designee on the trading floor at any time during the trading day, it could not receive an entitlement, as there is no one present to participate on any trade during that time. On-Floor LMMs may have multiple designees in the trading crowd. --------------------------------------------------------------------------- If the Exchange eliminates an electronic participation entitlement from a class, the Exchange believes there is no incentive for a Market- Maker to satisfy a heightened electronic quoting standard in that class due to the allocation algorithm determined by the Exchange. The Exchange does not believe the open outcry participation entitlement is a sufficient benefit to balance the requirement to satisfy the heightened electronic quoting obligation (due to the significant electronic trading volume) if an LMM or DPM is not also receiving an electronic participation entitlement. However, the Exchange believes it will benefit price discovery in the trading crowd for an LMM to be present in that class if it is eligible to receive a participation entitlement, even though there may be no LMM streaming quotes remotely. The proposed rule change will permit the Exchange to appoint an LMM to a trading crowd in this circumstance with an appropriate balance of floor-based benefits and obligations, consistent with the LMM's on- floor role. The proposed rule change permits the Exchange to appoint an On- Floor LMM as it already can do pursuant to current Rules, which is appoint an On-Floor LMM that must satisfy regular market-maker quoting obligations rather than heightened LMM quoting obligations and only receive an open outcry participation entitlement (with the expectation a designee of the LMM will have a presence on the trading floor for the entire trading day). The proposed rule change merely provides the Exchange with discretion to make such an appointment in a different circumstance not currently contemplated in the Rules--in a class with no Off-Floor DPM or Off-Floor LMM. The Exchange may make such an appointment in the limited circumstance of classes in which it does not grant an electronic participation entitlement, and it will consider, among other factors, electronic liquidity in the class prior to making such an appointment. An On-Floor LMM in such a class will be subject to the same obligations and receive the same benefits as current On-Floor LMMs in other classes, subject to a different heightened quoting standard of maintaining a floor presence all day (subject to a de minimis exception) (which is expected of current On-Floor LMMs). Any violation of the proposed heightened quoting standard will be subject to potential discipline under Chapter XVII.\9\ --------------------------------------------------------------------------- \9\ Exchange regulatory staff are present on the trading floor and may detect violations of this obligation. Additionally, pursuant to Rule 17.2(a), Trading Permit Holders (including those in a trading crowd) may submit complaints to the Regulatory Division alleging violations of this obligation. --------------------------------------------------------------------------- The Exchange notes current On-Floor LMMs in classes in which there is a different Off-Floor DPM or Off-Floor LMM, as well as On-Floor LMMs in classes with no Off-Floor DPM or Off-Floor LMM pursuant to the proposed rule change, are not subject to the heightened electronic quoting obligation or opening quoting obligation in Rule 8.15(b), but receive the participation entitlement in Rule 8.15(d). While there is no current obligation in the rules requiring an On-Floor LMM to have a designee on the floor during the entire trading day, the Exchange expects current On-Floor LMMs to do so and may consider trading floor presence when determining whether to renew an On-Floor LMM's term.\10\ --------------------------------------------------------------------------- \10\ See Rule 8.15(a)(i) (a factor to be considered by the Exchange when selecting LMMs includes presence in the trading crowd). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ``Act'') and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.\11\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \12\ 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) \13\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b). \12\ 15 U.S.C. 78f(b)(5). \13\ Id. --------------------------------------------------------------------------- In particular, the proposed rule change promotes just and equitable principles of trade by creating a balance between the obligations imposed on and benefits provided to On-Floor LMMs that only operate on the trading floor and only have open-outcry obligations. The Exchange believes if an On-Floor LMM was obligated to satisfy a heightened continuous electronic quoting standard in a class in which there was no electronic participation entitlement, the obligations would outweigh the benefit of an open outcry entitlement. The proposed rule change imposes a more reasonable heightened open outcry obligation that balances the eligibility of the open outcry benefit, as the proposed rule change imposes an on-floor requirement to be eligible for the on- floor entitlement rather than an electronic quoting obligation unrelated to the corresponding potential entitlement. The proposed rule change permits the Exchange to appoint an On- Floor LMM as it does pursuant to current Rules; it merely provides the Exchange with discretion to appoint an On-Floor LMM [[Page 43632]] in a different circumstance--in a class with no Off-Floor DPM or Off- Floor LMM. Current rules do not contemplate an On-Floor LMM in a class with no Off-Floor DPM or Off-Floor LMM. An On-Floor LMM in such a class will be subject to the same obligations and receive the same benefits as current On-Floor LMMs in other classes, subject to a different heightened quoting standard of maintaining a floor presence for the entire trading day (subject to a de minimis exception), although current On-Floor LMMs are similarly expected have a designee present on the trading floor for the entire trading day. The proposed rule change removes impediments to and perfects the mechanism of a free and open market by providing flexibility to have an LMM in the trading crowd, which enhances price discovery and provides potential price improvement, in a class in which there is no incentive for a Market- Maker to satisfy a heightened electronic quoting standard due to the allocation algorithm determined by the Exchange in that class. B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes it is appropriate to limit its ability to appoint an On-Floor LMM with open- outcry obligations only in classes in which it determines to have no electronic participation entitlement, as it wants to incentivize firms to remain LMMs (and provide liquidity) in the trading crowd when there is no incentive for firms to satisfy heightened electronic quoting standards. The Exchange will, among other factors, consider electronic liquidity in the class prior to making such an appointment. The Exchange believes the continued presence of an LMM in the trading crowd enhances price discovery and provides potential price improvement, and such requirement creates a balance with eligibility for an open outcry participation entitlement. The Exchange believes requiring an On-Floor LMM that operates only on the trading floor to satisfy heightened electronic quoting standards would outweigh the benefit of an open outcry only entitlement. The proposed rule change has no impact on intermarket competition, as it relates solely to the presence of an LMM on CBOE's trading floor. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) \14\ of the Act and Rule 19b- 4(f)(6) thereunder.\15\ --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A). \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \16\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that waiver of the 30-day operative delay would permit the Exchange to appoint an On-Floor LMM as of September 1, 2017, which in turn would permit the market to benefit sooner from enhanced price discovery and the potential for price improvement. Based on the foregoing, the Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.\18\ --------------------------------------------------------------------------- \16\ 17 CFR 240.19b-4(f)(6). \17\ 17 CFR 240.19b-4(f)(6)(iii). \18\ For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-CBOE-2017-059 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2017-059. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE- [[Page 43633]] 2017-059, and should be submitted on or before October 10, 2017. --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-19712 Filed 9-15-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices 43629
III. Date of Effectiveness of the printing in the Commission’s Public Chicago Board Options Exchange,
Proposed Rule Change and Timing for Reference Room, 100 F Street NE., Incorporated
Commission Action Washington, DC 20549, on official Rules
The foregoing rule change has become business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the * * * * *
effective pursuant to Section
19(b)(3)(A)(ii) 18 of the Act. filing also will be available for Rule 8.15. Lead Market-Makers
At any time within 60 days of the inspection and copying at the principal
office of the Exchange. All comments (a) No change.
filing of the proposed rule change, the (b) LMM Obligations: Each LMM must
Commission summarily may received will be posted without change;
the Commission does not edit personal fulfill all the obligations of a Market-
temporarily suspend such rule change if Maker under the Rules and satisfy each
it appears to the Commission that such identifying information from
submissions. You should submit only of the following requirements:
action is necessary or appropriate in the (i) Provide continuous electronic
public interest, for the protection of information that you wish to make
quotes (as defined in Rule 1.1 (ccc)) in
investors, or otherwise in furtherance of available publicly. All submissions
at least the lesser of 99% of the non-
the purposes of the Act. If the should refer to File Number SR–IEX–
adjusted option series or 100% of the
Commission takes such action, the 2017–29, and should be submitted on or
non-adjusted option series minus one
Commission shall institute proceedings before October 10, 2017.
call-put pair, with the term ‘‘call-put
under Section 19(b)(2)(B) 19 of the Act to For the Commission, by the Division of pair’’ referring to one call and one put
determine whether the proposed rule Trading and Markets, pursuant to delegated that cover the same underlying
change should be approved or authority.20
instrument and have the same
disapproved. Eduardo A. Aleman, expiration date and exercise price. This
Assistant Secretary. obligation does not apply to intra-day
IV. Solicitation of Comments
[FR Doc. 2017–19811 Filed 9–15–17; 8:45 am] add-on series on the day during which
Interested persons are invited to BILLING CODE 8011–01–P such series are added for trading.
submit written data, views, and
Compliance with this quoting obligation
arguments concerning the foregoing,
applies to all of an LMM’s appointed
including whether the proposed rule SECURITIES AND EXCHANGE classes on each platform collectively.
change is consistent with the Act. COMMISSION The Exchange will determine
Comments may be submitted by any of
the following methods: [Release No. 34–81586; File No. SR–CBOE– compliance by an LMM with this
2017–059] quoting obligation on a monthly basis.
Electronic Comments However, determining compliance with
Self-Regulatory Organizations; this obligation on a monthly basis does
• Use the Commission’s Internet
Chicago Board Options Exchange, not relieve an LMM from meeting this
comment form (http://www.sec.gov/
Incorporated; Notice of Filing and obligation on a daily basis, nor does it
rules/sro.shtml); or
• Send an email to rule-comments@ Immediate Effectiveness of a Proposed prohibit the Exchange from taking
sec.gov. Please include File Number SR– Rule Change Relating to the On-Floor disciplinary action against an LMM for
IEX–2017–29 on the subject line. Lead Market-Maker Program failing to meet this obligation each
September 12, 2017. trading day. In option classes in which
Paper Comments both an On-Floor LMM and an Off-Floor
Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934 (the DPM or Off-Floor LMM have been
to Secretary, Securities and Exchange ‘‘Act’’),1 and Rule 19b–4 thereunder,2 appointed, the On-Floor LMM will not
Commission, 100 F Street NE., notice is hereby given that on August be obligated to comply with this
Washington, DC 20549–1090. 31, 2017, Chicago Board Options paragraph (b)(i) and instead will be
All submissions should refer to File Exchange, Incorporated (the ‘‘Exchange’’ obligated to comply with the obligations
Number SR–IEX–2017–29. This file or ‘‘CBOE’’) filed with the Securities of Market-Makers in Rule 8.7(d). In an
number should be included on the and Exchange Commission (the option class in which the Exchange
subject line if email is used. To help the ‘‘Commission’’) the proposed rule appointed an On-Floor LMM that has
Commission process and review your change as described in Items I and II open-outcry obligations only, that On-
comments more efficiently, please use below, which Items have been prepared Floor LMM will not be obligated to
only one method. The Commission will by the Exchange. The Commission is comply with this paragraph (b)(i) and
post all comments on the Commission’s publishing this notice to solicit instead will be obligated to comply with
Internet Web site (http://www.sec.gov/ comments on the proposed rule change the obligations of Market-Makers in Rule
rules/sro.shtml). Copies of the from interested persons. 8.7(d) and have a designee in the class’s
submission, all subsequent crowd on the trading floor for the entire
amendments, all written statements I. Self-Regulatory Organization’s trading day (except for a de minimis
with respect to the proposed rule Statement of the Terms of Substance of amount of time);
change that are filed with the the Proposed Rule Change (ii)–(iv) No change.
Commission, and all written The Exchange proposes to amend the (v) enter opening quotes within one
communications relating to the On-Floor Lead Market-Maker (‘‘LMM’’) minute of the initiation of an opening
proposed rule change between the program. The text of the proposed rule rotation in any series that is not open
change is provided below. due to the lack of a quote (see Rule
sradovich on DSKBBY8HB2PROD with NOTICES
Commission and any person, other than
those that may be withheld from the (additions are italicized; deletions are 6.2B(d)(i)(A) or (ii)(A)) and participate
public in accordance with the [bracketed]) in other rotations described in Rule 6.2B
provisions of 5 U.S.C. 552, will be * * * * * (including the modified opening
available for Web site viewing and rotation set forth in Interpretation and
20 17 CFR 200.30–3(a)(12). Policy .01) or 24.13, as applicable. In
18 15 U.S.C. 78s(b)(3)(A)(ii). 1 15 U.S.C. 78s(b)(1). option classes in which both an On-
19 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4. Floor LMM and an Off-Floor DPM or
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![43630 Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices
Off-Floor LMM have been appointed, the most significant aspects of such it does not receive the benefit of an
the obligation set forth in this paragraph statements. electronic participation entitlement
(b)(v) will be that of the Off-Floor DPM (although it would continue to receive
A. Self-Regulatory Organization’s
or Off-Floor LMM and not the On-Floor an open outcry participation entitlement
Statement of the Purpose of, and the
LMM. In an option class in which the if it also operates on the floor).
Statutory Basis for, the Proposed Rule
Exchange appointed an On-Floor LMM Therefore, under current Rules, the
Change
that has open-outcry obligations only, Exchange may appoint an On-Floor
that On-Floor LMM will not be obligated 1. Purpose LMM in a class if there is also an Off-
to comply with this paragraph (b)(v); The Exchange proposes to amend the Floor LMM or Off-Floor DPM in that
(vi)–(viii) No change. On-Floor LMM program. Currently, Rule class (which, as noted above, the same
(c)–(d) No change. firm or different firms may be operating
8.15, Interpretation and Policy .01
. . . Interpretations and Policies: permits an LMM that is approved to as the On-Floor LMM and Off-Floor
operate as an Off-Floor LMM in one or LMM or Off-Floor DPM). Additionally,
.01 An LMM generally will operate the Rules provide an On-Floor LMM
on CBOE’s trading floor (‘‘On-Floor more classes can request the Exchange
authorize it to operate as an On-Floor does not have to satisfy heightened
LMM’’). However, as provided below,
LMM in those classes. Additionally, in electronic quoting standards if there is
an LMM can request that the Exchange
an option class in which an Off-Floor also an Off-Floor LMM or Off-Floor
authorize the LMM to function remotely
LMM or Off-Floor Designated Primary DPM in that class, who must satisfy
away from CBOE’s trading floor (‘‘Off-
Market-Maker (‘‘DPM’’) has been those standards. However, the Rules do
Floor LMM’’) on a class-by-class basis.
appointed in accordance with Rule 8.15 not expressly contemplate the Exchange
(a)–(b) No change.
(c) Notwithstanding Rule 8.15(a)[,]: (i) or Rule 8.83, respectively, the Exchange appointing an On-Floor LMM in a class
in an option class in which an Off-Floor in its discretion may appoint an On- if it has not appointed an Off-Floor DPM
LMM or Off-Floor DPM has been Floor LMM (which may be the same or Off-Floor LMM in that class.
appointed in accordance with this Rule firm or different firm serving as the Off- Additionally, current Rules do not
8.15 or Rule 8.83, as applicable, the Floor LMM or Off-Floor DPM), which explicitly permit the Exchange to not
Exchange in its discretion may also will be eligible to receive a participation impose a heightened electronic quoting
appoint an On-Floor LMM, which will entitlement under Rule 8.15 with obligation on an On-Floor LMM if there
be eligible to receive a participation respect to orders represented in open is no Off-Floor LMM or Off-Floor DPM
entitlement under this Rule 8.15 with outcry. Pursuant to Rule 8.15(b), in an (in other words, if the Exchange were to
respect to orders represented in open option class in which both an On-Floor appoint an On-Floor LMM who operates
outcry; and (ii) in a class in which the LMM and an Off-Floor DPM or Off-Floor only on the floor, and no Off-Floor LMM
Exchange does not grant an electronic LMM have been appointed, the On- or Off-Floor DPM, the On-Floor LMM
participation entitlement pursuant to Floor LMM will not be obligated to would still be required to satisfy
Rule 6.45(a)(ii) and in which the comply with the continuous electronic heightened quoting standards). The
Exchange did not appoint an Off-Floor quoting obligation in subparagraph (i) or proposed rule change explicitly states
LMM or Off-Floor DPM, the Exchange opening quoting obligation in the Exchange may appoint an On-Floor
may appoint an On-Floor LMM that has subparagraph (v) (the Off-Floor LMM or LMM in a class, under specific
open-outcry obligations only. If the Off-Floor DPM would be required to circumstances (as further discussed
Exchange in its discretion determines to comply with those quoting obligations). below), even if there is no Off-Floor
Pursuant to Rule 6.45(a)(ii), which LMM or Off-Floor DPM in that class,
reallocate a class in which an Off-Floor
permits the exchange to determine, on which On-Floor LMM must satisfy
LMM or Off-Floor DPM has been
a class-by-class basis, certain priority certain floor-based obligations and is
appointed, the On-Floor LMM overlays, including participation
appointment will automatically eligible for an open outcry participation
entitlements to LMMs (as well as DPMs entitlement, but will not have to satisfy
terminate. and Preferred Market-Makers). The
.02–.04 No change. heightened electronic quoting
Exchange may grant an LMM a obligations and will not be eligible for
* * * * * participation entitlement only if it has
The text of the proposed rule change an electronic participation entitlement.
applied the priority customer overlay. The proposed rule change merely
is also available on the Exchange’s Web LMMs operating on the trading floor
site (http://www.cboe.com/AboutCBOE/ expands the Exchange’s flexibility with
may also receive a participation respect to appointing On-Floor LMMs in
CBOELegalRegulatoryHome.aspx), at entitlement.3 In exchange for eligibility
the Exchange’s Office of the Secretary, a circumstance not currently
to receive a participation entitlement, contemplated in the Rules—in classes in
and at the Commission’s Public LMMs must, among other things, satisfy
Reference Room. which it has not appointed an Off-Floor
a heightened quoting obligation.4 If the DPM or Off-Floor LMM—and specifies
II. Self-Regulatory Organization’s Exchange does not grant an electronic the obligations and entitlement in such
Statement of the Purpose of, and participation entitlement to a class, a circumstance.
Statutory Basis for, the Proposed Rule currently an LMM that operates off the Specifically, the Exchange proposes to
Change floor is required to continue to satisfy amend Rule 8.15, Interpretation and
In its filing with the Commission, the the heightened electronic quoting Policy .01 to permit the Exchange to
Exchange included statements obligation under the rules, even though appoint an On-Floor LMM to operate
concerning the purpose of and basis for only on the trading floor with open-
sradovich on DSKBBY8HB2PROD with NOTICES
3 See Rule 8.15(d). outcry obligations only in a class in
the proposed rule change and discussed 4 Generally, LMMs and DPMs must provide
any comments it received on the continuous electronic quotes (for 90% of the time)
which the Exchange appointed no Off-
proposed rule change. The text of these in at least the lesser of 99% of the non-adjusted Floor LMM or Off-Floor DPM and does
statements may be examined at the series or 100% of the non-adjusted series minus one not grant an electronic participation
call-put pair, while Market-Makers must provide entitlement pursuant to Rule 6.45(a)(ii)
places specified in Item IV below. The continuous electronic quotes (for 90% of the time)
Exchange has prepared summaries, set in at least 60% of the series in their appointed
(in addition to classes in which the
forth in sections A, B, and C below, of classes. Exchange has appointed an Off-Floor
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![Federal Register / Vol. 82, No. 179 / Monday, September 18, 2017 / Notices 43633
2017–059, and should be submitted on the Commission’s Public Reference incremental credits and volume
or before October 10, 2017. Room. thresholds are as follows:
For the Commission, by the Division of • An additional credit of $0.0004 per
II. Self-Regulatory Organization’s share if an LMM is registered as the
Trading and Markets, pursuant to delegated Statement of the Purpose of, and
authority.19 LMM in at least 300 Less Active ETP
Statutory Basis for, the Proposed Rule Securities
Eduardo A. Aleman, Change • An additional credit of $0.0003 per
Assistant Secretary.
In its filing with the Commission, the share if an LMM is registered as the
[FR Doc. 2017–19712 Filed 9–15–17; 8:45 am]
self-regulatory organization included LMM in at least 200 but less than 300
BILLING CODE 8011–01–P Less Active ETP Securities
statements concerning the purpose of,
and basis for, the proposed rule change • An additional credit of $0.0002 per
and discussed any comments it received share if an LMM is registered as the
SECURITIES AND EXCHANGE LMM in at least 100 but less than 200
COMMISSION on the proposed rule change. The text
of those statements may be examined at Less Active ETP Securities
the places specified in Item IV below. The number of Less Active ETP
[Release No. 34–81601; File No. SR–
The Exchange has prepared summaries, Securities for the billing month is based
NYSEARCA–2017–104] on the number of Less Active ETP
set forth in sections A, B, and C below,
of the most significant parts of such Securities in which an LMM is
Self-Regulatory Organizations; NYSE registered as the LMM on the last
Arca, Inc.; Notice of Filing and statements.
business day of the previous month. The
Immediate Effectiveness of Proposed A. Self-Regulatory Organization’s incremental credits also apply to ETP
Rule Change To Amend the NYSE Arca Statement of the Purpose of, and the Holders and Market Makers affiliated
Equities Fees and Charges Statutory Basis for, the Proposed Rule with the LMM whose orders in Tape B
September 13, 2017. Change Securities provide displayed liquidity to
1. Purpose the NYSE Arca Book.
Pursuant to Section 19(b)(1) 1 of the
The Exchange proposes to adopt an
Securities Exchange Act of 1934 (the
The Exchange proposes to amend the additional tier pursuant to which LMMs
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
Fee Schedule to adopt an additional and ETP Holders and Market Makers
notice is hereby given that, on
tiered credit applicable to LMMs and to affiliated with the LMM that provide
September 1, 2017, NYSE Arca, Inc. (the
ETP Holders and Market Makers displayed liquidity to the NYSE Arca
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
affiliated with the LMM that provide Book in Tape B Securities would receive
the Securities and Exchange
displayed liquidity to the NYSE Arca an additional credit of $0.0001 per share
Commission (the ‘‘Commission’’) the
Book in Tape B Securities; and (ii) add if the LMM is registered as the LMM in
proposed rule change as described in
a second way by which an ETP Holder at least 75 but less than 100 Less Active
Items I, II, and III below, which Items
or Market Maker could qualify for the ETP Securities.
have been prepared by the self- For example, currently, a LMM that
Step Up Tier. The Exchange proposes to
regulatory organization. The provides liquidity to the NYSE Arca
implement the proposed fee changes on
Commission is publishing this notice to Book in a security for which the LMM
September 1, 2017.
solicit comments on the proposed rule is registered as the LMM which has a
change from interested persons. LMM Transaction Fees and Credits CADV in the previous month of at least
I. Self-Regulatory Organization’s The Exchange proposes to amend the 5,000,000 shares would receive a credit
Statement of the Terms of Substance of Fee Schedule to adopt an additional of $0.0033 per share. If that LMM is also
the Proposed Rule Change tiered credit applicable to LMMs and to registered as an LMM in 80 Less Active
ETP Holders and Market Makers ETP Securities, the LMM would receive
The Exchange proposes to amend the an incremental credit of $0.0001 per
NYSE Arca Equities Fees and Charges affiliated with the LMM that provide
displayed liquidity to the NYSE Arca share under the proposed new rebate
(the ‘‘Fee Schedule’’) to (i) adopt an structure, for a total credit of $0.0034
additional tiered credit applicable to Book in Tape B Securities. The
Exchange currently provides tier-based per share. Additionally, if the affiliated
Lead Market Makers (‘‘LMMs’’) 4 and to ETP Holders and Market Makers of such
ETP Holders and Market Makers incremental credits for orders that
provide displayed liquidity to the NYSE LMM that provide displayed liquidity in
affiliated with the LMM that provide Tape B Securities are a Tier 1 firm, they
displayed liquidity to the NYSE Arca Arca Book in Tape B Securities.
Specifically, LMMs that are registered as would receive a total credit of $0.0024
Book in Tape B Securities; and (ii) add per share, i.e., $0.0023 per share Tier 1
a second way by which an ETP Holder the LMM in Tape B Securities that have
a consolidated average daily volume credit for orders that provide liquidity
or Market Maker could qualify for the to the NYSE Arca Book plus $0.0001 per
Step Up Tier. The Exchange proposes to (‘‘CADV’’) in the previous month of less
than 100,000 shares, or 0.0070% of share for being registered as a LMM in
implement the proposed fee change on 80 Less Active ETP Securities.
September 1, 2017.The proposed rule Consolidated Tape B ADV, whichever is
greater (‘‘Less Active ETP Securities’’), With the proposed additional tier, the
change is available on the Exchange’s Exchange hopes to provide incentives
Web site at www.nyse.com, at the and the ETP Holders and Market Makers
affiliated with such LMMs, currently for increased trading in Less Active ETP
principal office of the Exchange, and at Securities for the benefit of all market
receive an additional credit for orders
sradovich on DSKBBY8HB2PROD with NOTICES
that provide displayed liquidity to the participants.
19 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
Book in any Tape B Securities that trade Step-Up Tier
2 15 U.S.C. 78a. on the Exchange.5 The current
The Exchange proposes to add a
3 17 CFR 240.19b–4.
4 The term ‘‘Lead Market Maker’’ is defined in 5 The Exchange defines ‘‘affiliate’’ to ‘‘mean any
second way by which an ETP Holder or
Rule 1.1(w) to mean a registered Market Maker that ETP Holder under 75% common ownership or
Market Maker could qualify for the
is the exclusive Designated Market Maker in listings control of that ETP Holder.’’ See Fee Schedule, existing Step Up Tier. Currently, to
for which the Exchange is the primary market. NYSE Arca Marketplace: General. qualify for the Step Up Tier, ETP
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Document Created: 2017-09-16 00:52:50
Document Modified: 2017-09-16 00:52:50
| 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 43629 |
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