82 FR 61637 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Approving a Proposed Rule Change To Amend Rule 6.56 To Include Procedures for Multi-Leg Positions

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 248 (December 28, 2017)

[Federal Register Volume 82, Number 248 (Thursday, December 28, 2017)]
[Notices]
[Pages 61637-61638]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-28082]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82398; File No. SR-CBOE-2017-070]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Order 
Approving a Proposed Rule Change To Amend Rule 6.56 To Include 
Procedures for Multi-Leg Positions

December 22, 2017.

I. Introduction

    On November 3, 2017, the Cboe Exchange, Inc. (``Exchange'' or 
``Cboe Options'') 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 to amend Rule 6.56 (Compression Forums) to include 
procedures for multi-leg positions. The proposed rule change was 
published for comment in the Federal Register on November 22, 2017.\3\ 
The Commission did not receive any comment letters on the proposed rule 
change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82102 (Nov. 16, 
2017), 82 FR 55667 (Nov. 22, 2017) (``Notice'').
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II. Description of the Proposed Rule Change

    As described in more detail in the Notice,\4\ the Exchange proposes 
to amend its SPX Compression Forum procedures set forth in Cboe Rule 
6.56, primarily to authorize the Exchange to include information on 
hypothetical multi-leg positions constructed from the single series 
voluntarily submitted by Trading Permit Holders (``TPHs''). 
Specifically, in addition to the information Cboe Options currently 
provides on single series interest, the Exchange now also will generate 
a list, using the individual series of SPX options submitted by TPHs, 
of all possible multi-leg positions based on the three option 
strategies specified in Rule 6.56--vertical call spreads, vertical put 
spreads, and box spreads.\5\
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    \4\ Id.
    \5\ Id. at 55667. The Exchange represents that its ``provision 
of the list does not constitute advice, guidance, a commitment to 
trade, an execution, or a recommendation to trade.'' See id. 
Furthermore, the Exchange notes that TPHs determine whether to 
submit compression-list positions, whether to participate in the 
compression forum, and whether to represent orders on the trading 
floor.
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    In addition to listing hypothetical multi-leg positions with 
offsetting interest in the compression-list position file, the Exchange 
also will provide to each TPH that submitted compression-list 
positions, a new individualized multi-leg position file that includes: 
(a) A complete list of all possible combinations of offsetting multi-
leg positions that are composed of series the individual TPH submitted 
as part of a compression-list position; (b) a unique identification 
number for each multi-leg position (``PID'') that would enable the TPH 
to identify particular multi-leg positions; (c) the series that make up 
the multi-leg position; and (d) the offsetting size of the multi-leg 
position against other TPHs on an individualized and anonymous 
basis.\6\ TPHs would be able to give the Exchange permission to share 
their identity with the contra-party for a particular multi-leg 
position, and vice-versa, provided that both parties have agreed to 
reveal their identities.\7\
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    \6\ Id. at 55671.
    \7\ Id. at 55673. The disclosure of the TPH's identity would be 
done on a multi-leg position by multi-leg position basis, as 
referenced by the PID.
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    Finally, Exchange will extend the hours for submitting compression-
list positions from 3:15pm to 4:30pm Chicago time.\8\
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    \8\ Id. at 55674.

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[[Page 61638]]

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act \9\ and the rules 
and regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
exchange be designed 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 and that the 
rules are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f.
    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change is designed 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system by providing TPHs with information 
that may encourage them to close positions in series of SPX options at 
the end of the month, which the Exchange has stated is intended to 
``foster liquidity in the SPX options market in light of the bank 
regulatory capital requirements.'' \12\ The Commission notes the 
Exchange has represented that the proposed multi-leg compression-list 
position file provided by the Exchange is for informational purposes 
only and does not constitute advice, guidance, a commitment to trade, 
an execution, or a recommendation to trade, and that participation in 
the process by TPHs is entirely voluntary.\13\ TPHs who receive the 
individualized multi-leg positions and wish to enter into a trade may 
only do so by finding a counterparty on the trading floor and executing 
a trade thereon, and all transactions must be effected in accordance 
with applicable rules.\14\ Furthermore, all TPHs on the trading floor, 
whether or not they submitted compression-list positions, have the 
opportunity to respond to orders on the trading floor, including orders 
represented in compression forums. For the reasons noted above, the 
Commission believes that the proposal to amend Rule 6.56 to include the 
proposed procedures for multi-leg compression-list positions is 
consistent with the Act.
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    \12\ See Notice, supra note 3, at 55674. The Exchange stated its 
belief that those capital requirements ``could potentially limit the 
amount of capital clearing TPHs can allocate to their clients' 
transactions, which in turn, may impact liquidity, particularly in 
the SPX market.'' Id.
    \13\ See Notice, supra note 3, at 55667. The list is not ranked 
or weighted and contains all potential multi-leg positions with 
offsetting interest. Accordingly, not all the multi-leg positions on 
the list would be possible to trade since one series may be used to 
construct multiple potential multi-leg positions.
    \14\ See Notice, supra note 3, at 55675.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-CBOE-2017-070) be, and 
hereby is, approved.
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    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-28082 Filed 12-27-17; 8:45 am]
 BILLING CODE 8011-01-P