82 FR 8459 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rules Related to the Automated Improvement Mechanism
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 15 (January 25, 2017)
Federal Register Volume 82, Issue 15 (January 25, 2017)
| Page Range | 8459-8462 | |
| FR Document | 2017-01614 |
[Federal Register Volume 82, Number 15 (Wednesday, January 25, 2017)] [Notices] [Pages 8459-8462] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-01614] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79836; File No. SR-CBOE-2016-084] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rules Related to the Automated Improvement Mechanism January 18, 2017. I. Introduction On November 29, 2016, Chicago Board Options Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange Commission (``Commission''), pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to make permanent make permanent those aspects of its Automated Improvement Mechanism (``AIM'' or ``Auction'') that are currently operating on a pilot basis. The proposed rule change was published for comment in the Federal Register on December 13, 2016.\3\ The Commission received no comments regarding the proposal. On January 6, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.\4\ The Commission is publishing this notice to solicit comments on Amendment No. 1 from interested persons, and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 79499 (December 7, 2016), 81 FR 90012 (``Notice''). \4\ In Amendment No. 1, the Exchange described additional data relating to complex orders submitted through AIM and provided additional support for its proposal to approve the aspects of AIM currently operating on a pilot basis as applicable to complex orders. To promote transparency of its proposed amendment, when CBOE filed Amendment No. 1 with the Commission, it also submitted Amendment No. 1 as a comment letter to the file, which the Commission posted on its Web site and placed in the public comment file for SR-CBOE-2016-084 (available at https://www.sec.gov/comments/sr-cboe-2016-084/cboe2016084-1475098-130456.pdf). The Exchange also posted a copy of its Amendment No. 1 on its Web site (http://www.cboe.com/aboutcboe/legal/submittedsecfilings.aspx), when it filed it with the Commission. --------------------------------------------------------------------------- II. Description of the Proposal AIM exposes certain orders electronically to an auction process to provide these orders with the opportunity to receive an execution at an improved price.\5\ In addition, the AIM auction process for FLEX Options (``FLEX AIM'') exposes certain FLEX Options orders electronically to an auction process to provide these orders with the opportunity to receive an execution at an improved price.\6\ The AIM and FLEX AIM auctions are available only for orders that a Trading Permit Holder represents as agent (``Agency Order'') and for which a second order of the same size as the Agency Order (and on the opposite side of the market) is also submitted (effectively stopping the Agency Order at a given price). --------------------------------------------------------------------------- \5\ See CBOE Rule 6.74A. See also Securities Exchange Release No. 53222 (February 3, 2006), 71 FR 7089 (February 10, 2006) (SR- CBOE-2005-60) (``AIM Approval Order''). \6\ See Securities Exchange Release No. 66702 (March 30, 2012), 77 FR 20675 (April 5, 2012) (SR-CBOE-2011-123) (``FLEX AIM Approval Order''). --------------------------------------------------------------------------- Three components of AIM were approved by the Commission on a pilot basis (the ``Pilot''): (1) That there is no minimum size requirement for orders to be eligible for the AIM; (2) that the AIM will conclude prematurely anytime there is a quote lock on the Exchange pursuant to Rule 6.45A(d); \7\ and (3) that there is no minimum size requirement for orders to be eligible for the FLEX AIM.\8\ In connection with the Pilot, the Exchange has provided certain data to the Commission to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the AIM.\9\ The Pilot is currently set to expire on January 18, 2017.\10\ The Exchange proposes to make the Pilot permanent. --------------------------------------------------------------------------- \7\ A quote lock occurs when a CBOE Market-Maker's quote interacts with the quote of another CBOE Market-Maker (i.e., when internal quotes lock). \8\ The pilot for the FLEX AIM auction process was modeled after the pilot for non-FLEX Options. See FLEX AIM Approval Order, supra note 6. \9\ See Interpretation and Policy .03 to CBOE Rule 6.74A and Interpretation and Policy .03 to CBOE Rule 24B.5A. \10\ See Securities Exchange Act Release No. 78316 (July 13, 2016) 81 FR 46975 (July 19, 2016) (SR-CBOE-2016-056). --------------------------------------------------------------------------- A. No Minimum Size Requirement Pilot In support of its proposal, and in addition to data submitted to the Commission on a monthly and confidential basis since the Pilot's inception, the Exchange has provided the Commission with data for AIM executions from January through June 2015 (the ``Report'').\11\ The Exchange believes the data provides evidence that AIM offers meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of AIM.\12\ The Exchange further notes that the data provided in the Report demonstrates the price improvement benefits of AIM.\13\ According to the Exchange, approving the no minimum size pilot on a permanent basis will allow AIM to continue to offer meaningful price improvement and will not have an adverse effect on the market functioning on the Exchange outside of AIM.\14\ --------------------------------------------------------------------------- \11\ See Exhibit 3 to SR-CBOE-2016-084. \12\ See Notice, supra note 3, at 90013-14. \13\ See id. The Commission notes that AIM currently requires price improvement for Agency Orders of fewer than 50 contracts. See CBOE Rule 6.74A(a)(3). \14\ See Notice, supra note 3, at 90014. --------------------------------------------------------------------------- Specifically, the Report contains eight categories of non-customer and customer auction data, as well as three categories of summary auction data, during the period from January through [[Page 8460]] June 2015.\15\ Each of the eight categories is divided into subcategories based on the spread of the National Best Bid or Offer (``NBBO'') at the time an Auction was initiated. The data is further divided into the number of orders that were auctioned within each particular subcategory. Finally, for each subcategory, the Exchange identified the per contract price improvement that occurred at each NBBO spread, the average number of participants responding to the Auctions plus the initiator, the total volume the initiator received, the average percentage of orders the initiator received, and the percentage of contracts received by the Auction initiator. --------------------------------------------------------------------------- \15\ See Exhibit 3 to SR-CBOE-2016-084. The various categories contained in the Report include: (1) Non-Customer Auction/Under 50 Contracts/CBOE not at NBBO; (2) Non-Customer Auction/Under 50 Contracts/CBOE at NBBO; (3) Non-Customer Auction/50 Contracts and over/CBOE not at NBBO; (4) Non-Customer Auction/50 Contracts and over/CBOE at NBBO; (5) Customer Auction/Under 50 Contracts/CBOE not at NBBO; (6) Customer Auction/Under 50 Contracts/CBOE at NBBO; (7) Customer Auction/50 Contracts and over/CBOE not at NBBO; (8) Customer Auction/50 Contracts and over/CBOE at NBBO; (9) Summary of all Non-Customer Auctions for the Period; (10) Summary of all Customer Auctions for the Period; and (11) Summary of all Auctions for the Period. --------------------------------------------------------------------------- The summary of all Auctions demonstrates that AIM offers competition and price improvement because the vast majority of contracts traded via AIM received price improvement beyond the NBBO. Specifically, with regards to Customer AIM auctions, of the 54,243,091 contracts traded via AIM during the Report period, 41,278,408 contracts received price improvement beyond the NBBO.\16\ In addition, of the 54,504,717 total contracts traded via AIM during the Report period, 41,514,731 contracts received price improvement beyond the NBBO.\17\ --------------------------------------------------------------------------- \16\ See Exhibit 3 to SR-CBOE-2016-084. \17\ See id. --------------------------------------------------------------------------- For complex orders that are otherwise eligible for AIM,\18\ the AIM eligibility requirements of CBOE Rule 6.74A(a) apply in the same manner as they apply for simple orders. Thus, a complex order may be executed via AIM at a net debit or net credit price provided, for example, that an Agency Order that is a complex order of 50 contracts or more (as determined by the size of the smallest leg) is stopped at the better of the NBBO or the Agency Order's limit price (if the order is a limit order).\19\ Similarly, a complex order of fewer than 50 contracts (as determined by the size of the smallest leg) may be executed via AIM at a net debit or net credit price provided that the Agency Order is stopped at the better of (A) the NBBO price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or (B) the Agency Order's limit price (if the order is a limit order).\20\ --------------------------------------------------------------------------- \18\ A ``complex order'' is any order involving the execution of two or more different options series in the same underlying security occurring at or near the same time in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to- one (3.00) (or such lower ratio as may be determined by the Exchange on a class-by-class basis) and for the purpose of executing a particular investment strategy. For the purpose of applying the aforementioned ratios to complex orders comprised of both mini- option contracts and standard option contracts, ten (10) mini-option contracts will represent one (1) standard option contract. Only those complex orders with no more than the applicable number of legs, as determined by the Exchange on a class-by-class basis, are eligible for processing. See CBOE Rule 6.53C(a)(1). \19\ See CBOE Rule 6.74A(a)(2). \20\ See CBOE Rule 6.74A(a)(3). The Commission notes that, as with simple orders, AIM currently requires price improvement for complex Agency Orders where the smallest leg is fewer than 50 contracts. --------------------------------------------------------------------------- In September 2016, there were 5,982 complex orders processed via AIM with an order size of 50 contracts or more (as determined by the size of the smallest leg), and there were 214,986 complex orders processed via AIM with an order size of fewer than 50 contracts (as determined by the size of the smallest leg).\21\ With regards to having no minimum size requirement for orders to be eligible for the Auction, the Exchange believes small complex orders benefit from the price improvement offered by AIM in the same manner that small simple orders benefit from the price improvement offered by AIM, and that it is therefore appropriate to approve the no minimum size pilot on a permanent basis.\22\ The Exchange believes that, in addition to the simple order market, the complex order market both within and outside of AIM is robust, and therefore it is appropriate to approve the no minimum size pilot on a permanent basis. --------------------------------------------------------------------------- \21\ See Amendment No. 1. \22\ See id. --------------------------------------------------------------------------- B. Early Conclusion of the AIM CBOE Rule 6.74A(b)(2)(E) provides that the AIM will conclude prematurely anytime there is a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d). This condition is operating as part of the current Pilot.\23\ --------------------------------------------------------------------------- \23\ See Interpretation and Policy .06 to CBOE Rule 6.74A. --------------------------------------------------------------------------- As with the no minimum size requirement, the Exchange has gathered data on the number of times an AIM auction was terminated early because of a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d). From January through June 2015, for example, there were less than two Auctions ended early per month because of a quote lock. Thus, for both simple and complex orders, due to the infrequency with which a quote lock terminates an AIM auction, the Exchange believes permanent approval of the pilot program to end AIM auctions early when there is a quote lock on the Exchange will have a de minimis impact on the marketplace.\24\ --------------------------------------------------------------------------- \24\ See Notice, supra note 3, at 90014. See also Amendment No. 1. The Exchange further notes that modifying the ``Quote Lock'' timer, which allows quotes from two or more CBOE Market-Makers to remain locked for a given time interval prior to trading with one another, will not impact AIM. See CBOE Rule 6.45A(d)(i)(B) and RG16- 158. --------------------------------------------------------------------------- C. FLEX AIM Pilot Currently, in order to initiate a FLEX AIM auction, the initiating Trading Permit Holder must stop the entire Agency Order as principal or with a solicited order at the better of the BBO or the Agency Order's limit price. For purposes of CBOE Chapter XXIVB, the term ``BBO'' means the best bid or offer, or both, as applicable, entered in response to a Request for Quotes (``RFQ'') or resting in the electronic book.\25\ According to the Exchange, generally speaking, there is no existing BBO prior to a FLEX AIM because there either has not been an RFQ or a FLEX Order with the same terms as the order to be auctioned in FLEX AIM.\26\ Therefore, the Exchange notes, the data does not show observable price improvement beyond the BBO because, generally speaking, no BBO exists prior to a FLEX AIM.\27\ The Exchange has proposed to modify its FLEX AIM rules to require the Agency Order to be stopped at the better of the BBO price improved by one minimum price increment or the Agency Order's limit price, although the Exchange does not believe there will be any difference in the way FLEX AIM functions. The Exchange notes that there likely will continue to be no BBO prior to a FLEX AIM; however, the Exchange believes FLEX AIM will continue to offer the possibility for price improvement beyond the initiator's stop price.\28\ --------------------------------------------------------------------------- \25\ See CBOE Rule 24B.1(a). RFQ is defined as the initial request supplied by a Submitting Trading Permit Holder to initiate FLEX bidding and offering. See CBOE Rule 24B.1(r). \26\ FLEX Order is defined as (i) FLEX bids and offers entered by FLEX Market-Makers and (ii) orders to purchase and orders to sell FLEX Options entered by FLEX Traders, in each case into the electronic book. See CBOE Rule 24B.1(j). \27\ See Notice, supra note 3, at 90014. \28\ See id. --------------------------------------------------------------------------- [[Page 8461]] 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 and, in particular, with Section 6(b) of the Act.\29\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\30\ 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 customers, issuers, brokers and dealers. --------------------------------------------------------------------------- \29\ 15 U.S.C. 78f(b). 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). \30\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- As part of its proposal, the Exchange provided summary data on Exhibit 3 of its filing for the period January through June 2015, which the Exchange and Commission both publicly posted on their respective Web sites. Among other things, this data is useful in assessing the level of price improvement in the Auction, in particular for orders of fewer than 50 contracts; the degree of competition for order flow in such Auctions; and a comparison of liquidity in the Auctions with liquidity on the Exchange generally.\31\ Based on the data provided by the Exchange, the Commission believes that the Exchange's price improvement auction generally delivers a meaningful opportunity for price improvement to orders, including orders for fewer than 50 contracts. In addition, the Commission notes that AIM currently requires price improvement for Agency Orders of fewer than 50 contracts.\32\ The Commission further believes that the Exchange's proposed modification to the FLEX AIM to require the Agency Order to be stopped at the better of the BBO price improved by one minimum price increment or the Agency Order's limit price will better align the FLEX AIM auction rules with those applicable to standard AIM auctions and will provide price improvement for additional FLEX AIM orders. --------------------------------------------------------------------------- \31\ See Exhibit 3 to SR-CBOE-2016-084. \32\ See CBOE Rule 6.74A(a)(3). --------------------------------------------------------------------------- The Commission believes that the data provided by the Exchange support its proposal to make the Pilot permanent. The data demonstrate that the Auction generally provides price improvement opportunities to orders, including orders of retail customers; that there is meaningful competition for orders on the Exchange; and that there exists an active and liquid market functioning on the Exchange outside of the Auction.\33\ Thus, the Commission has determined to approve the Exchange's proposed revisions to Interpretations and Policies .03 and .06 to Rule 6.74A, Rule 24B.5A(a)(2), and Interpretations and Policies .03 to Rule 24B.5A, and to approve the Pilot, as proposed to be modified, on a permanent basis. --------------------------------------------------------------------------- \33\ See Exhibit 3 to SR-CBOE-2016-084. --------------------------------------------------------------------------- IV. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 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-2016-084 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-2016-084. 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-2016-084 and should be submitted on or before February 15, 2017. V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the 30th day after the date of publication of the notice of Amendment No. 1 in the Federal Register. As noted above, in Amendment No. 1, the Exchange described additional data relating to complex orders submitted through AIM and provided further support for its proposal to approve the aspects of AIM currently operating on a pilot basis as applicable to complex orders. Because Amendment No. 1 provides additional support for the Exchange's original proposal and does not make any substantive changes to the proposal, the Commission believes that good cause exists for accelerated approval of the proposed rule change, as modified by Amendment No. 1. The Commission further notes that the original proposal was subject to a 21 day comment period and no comments were received on the proposal. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,\34\ to approve the proposed rule change prior to the 30th day after the date of publication of the notice of Amendment No. 1 in the Federal Register. --------------------------------------------------------------------------- \34\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VI. Conclusion IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Act,\35\ that the proposed rule change (SR-CBOE-2016-084), as modified by Amendment No. 1, be and hereby is approved on an accelerated basis. --------------------------------------------------------------------------- \35\ 15 U.S.C. 78s(b)(2). [[Page 8462]] --------------------------------------------------------------------------- For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\36\ --------------------------------------------------------------------------- \36\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-01614 Filed 1-24-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices 8459
Internet Web site (http://www.sec.gov/ to the provisions of Section 19(b)(1) of Three components of AIM were
rules/sro.shtml). Copies of the the Securities Exchange Act of 1934 approved by the Commission on a pilot
submission, all subsequent (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a basis (the ‘‘Pilot’’): (1) That there is no
amendments, all written statements proposed rule change to make minimum size requirement for orders to
with respect to the proposed rule permanent make permanent those be eligible for the AIM; (2) that the AIM
change that are filed with the aspects of its Automated Improvement will conclude prematurely anytime
Commission, and all written Mechanism (‘‘AIM’’ or ‘‘Auction’’) that there is a quote lock on the Exchange
communications relating to the are currently operating on a pilot basis. pursuant to Rule 6.45A(d); 7 and (3) that
proposed rule change between the The proposed rule change was there is no minimum size requirement
Commission and any person, other than published for comment in the Federal for orders to be eligible for the FLEX
those that may be withheld from the Register on December 13, 2016.3 The AIM.8 In connection with the Pilot, the
public in accordance with the Commission received no comments Exchange has provided certain data to
provisions of 5 U.S.C. 552, will be regarding the proposal. On January 6, the Commission to provide supporting
available for Web site viewing and 2017, the Exchange filed Amendment evidence that, among other things, there
printing in the Commission’s Public No. 1 to the proposed rule change.4 The is meaningful competition for all size
Reference Room, 100 F Street NE., Commission is publishing this notice to orders and that there is an active and
Washington, DC 20549, on official solicit comments on Amendment No. 1 liquid market functioning on the
business days between the hours of from interested persons, and is Exchange outside of the AIM.9 The Pilot
10:00 a.m. and 3:00 p.m. Copies of such approving the proposed rule change, as is currently set to expire on January 18,
filing also will be available for modified by Amendment No. 1, on an 2017.10 The Exchange proposes to make
inspection and copying at the principal accelerated basis. the Pilot permanent.
office of OCC and on OCC’s Web site at
II. Description of the Proposal A. No Minimum Size Requirement Pilot
http://www.theocc.com/components/
docs/legal/rules_and_bylaws/sr_occ_17_ In support of its proposal, and in
AIM exposes certain orders addition to data submitted to the
001.pdf. electronically to an auction process to
All comments received will be posted Commission on a monthly and
provide these orders with the confidential basis since the Pilot’s
without change; the Commission does
opportunity to receive an execution at inception, the Exchange has provided
not edit personal identifying
an improved price.5 In addition, the the Commission with data for AIM
information from submissions. You
AIM auction process for FLEX Options executions from January through June
should submit only information that
(‘‘FLEX AIM’’) exposes certain FLEX 2015 (the ‘‘Report’’).11 The Exchange
you wish to make available publicly.
All submissions should refer to File Options orders electronically to an believes the data provides evidence that
Number SR–OCC–2017–001 and should auction process to provide these orders AIM offers meaningful competition for
be submitted on or before February 15, with the opportunity to receive an all size orders and that there is an active
2017. execution at an improved price.6 The and liquid market functioning on the
AIM and FLEX AIM auctions are Exchange outside of AIM.12 The
For the Commission, by the Division of available only for orders that a Trading
Trading and Markets, pursuant to delegated Exchange further notes that the data
Authority.21
Permit Holder represents as agent provided in the Report demonstrates the
(‘‘Agency Order’’) and for which a price improvement benefits of AIM.13
Eduardo A. Aleman,
second order of the same size as the According to the Exchange, approving
Assistant Secretary.
Agency Order (and on the opposite side the no minimum size pilot on a
[FR Doc. 2017–01605 Filed 1–24–17; 8:45 am] of the market) is also submitted permanent basis will allow AIM to
BILLING CODE 8011–01–P (effectively stopping the Agency Order continue to offer meaningful price
at a given price). improvement and will not have an
SECURITIES AND EXCHANGE adverse effect on the market functioning
COMMISSION
1 15 U.S.C. 78s(b)(1). on the Exchange outside of AIM.14
2 17 CFR 240.19b–4. Specifically, the Report contains eight
3 See Securities Exchange Act Release No. 79499
[Release No. 34–79836; File No. SR–CBOE– categories of non-customer and
2016–084] (December 7, 2016), 81 FR 90012 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange described
customer auction data, as well as three
additional data relating to complex orders categories of summary auction data,
Self-Regulatory Organizations;
submitted through AIM and provided additional during the period from January through
Chicago Board Options Exchange, support for its proposal to approve the aspects of
Incorporated; Notice of Filing of AIM currently operating on a pilot basis as 7 A quote lock occurs when a CBOE Market-
Amendment No. 1, and Order Granting applicable to complex orders. To promote Maker’s quote interacts with the quote of another
Accelerated Approval of a Proposed transparency of its proposed amendment, when CBOE Market-Maker (i.e., when internal quotes
CBOE filed Amendment No. 1 with the lock).
Rule Change, as Modified by Commission, it also submitted Amendment No. 1 as 8 The pilot for the FLEX AIM auction process was
Amendment No. 1, To Amend a comment letter to the file, which the Commission
modeled after the pilot for non-FLEX Options. See
Exchange Rules Related to the posted on its Web site and placed in the public
FLEX AIM Approval Order, supra note 6.
Automated Improvement Mechanism comment file for SR–CBOE–2016–084 (available at 9 See Interpretation and Policy .03 to CBOE Rule
https://www.sec.gov/comments/sr-cboe-2016-084/
cboe2016084-1475098-130456.pdf). The Exchange 6.74A and Interpretation and Policy .03 to CBOE
January 18, 2017. Rule 24B.5A.
also posted a copy of its Amendment No. 1 on its
10 See Securities Exchange Act Release No. 78316
I. Introduction Web site (http://www.cboe.com/aboutcboe/legal/
mstockstill on DSK3G9T082PROD with NOTICES
submittedsecfilings.aspx), when it filed it with the (July 13, 2016) 81 FR 46975 (July 19, 2016) (SR–
On November 29, 2016, Chicago Commission. CBOE–2016–056).
11 See Exhibit 3 to SR–CBOE–2016–084.
Board Options Exchange, Incorporated 5 See CBOE Rule 6.74A. See also Securities
12 See Notice, supra note 3, at 90013–14.
(the ‘‘Exchange’’ or ‘‘CBOE’’) filed with Exchange Release No. 53222 (February 3, 2006), 71
FR 7089 (February 10, 2006) (SR–CBOE–2005–60) 13 See id. The Commission notes that AIM
the Securities and Exchange (‘‘AIM Approval Order’’). currently requires price improvement for Agency
Commission (‘‘Commission’’), pursuant 6 See Securities Exchange Release No. 66702 Orders of fewer than 50 contracts. See CBOE Rule
(March 30, 2012), 77 FR 20675 (April 5, 2012) (SR– 6.74A(a)(3).
21 17 CFR 200.30–3(a)(12). CBOE–2011–123) (‘‘FLEX AIM Approval Order’’). 14 See Notice, supra note 3, at 90014.
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![8462 Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices
For the Commission, by the Division of at www.bats.com, at the principal office Order for electronic execution into the
Trading and Markets, pursuant to delegated of the Exchange, and at the BAM Auction pursuant Rule 21.19. All
authority.36 Commission’s Public Reference Room. options traded on EDGX Options are
Eduardo A. Aleman, eligible for BAM.
Assistant Secretary. II. Self-Regulatory Organization’s
Statement of the Purpose of, and Pilot Program
[FR Doc. 2017–01614 Filed 1–24–17; 8:45 am]
Statutory Basis for, the Proposed Rule One component of BAM as approved
BILLING CODE 8011–01–P
Change by the Commission is currently
In its filing with the Commission, the operating as a Pilot, which is set to
SECURITIES AND EXCHANGE Exchange included statements expire on January 18, 2017. The Pilot
COMMISSION concerning the purpose of and basis for concerns that there is no minimum size
the proposed rule change and discussed requirement for orders to be eligible for
[Release No. 34–79838; File No. SR–
BatsEDGX–2017–05]
any comments it received on the a BAM Auction. The Exchange now
proposed rule change. The text of these seeks to remove Interpretation and
Self-Regulatory Organizations; Bats statements may be examined at the Policy .05 from Rule 21.19 so that the
EDGX Exchange, Inc.; Notice of Filing places specified in Item III below. The Pilot may operate on a permanent basis.
and Order Granting Accelerated Exchange has prepared summaries, set Pursuant to the Pilot, there is no
Approval of a Proposed Rule Change forth in sections A, B, and C below, of minimum size requirement for orders to
to EDGX Rule 21.19, Bats Auction the most significant aspects of such be eligible for a BAM Auction. During
Mechanism, as it Applies to the Equity statements. this Pilot, the Exchange agreed to
Options Platform submit certain data, periodically as
A. Self-Regulatory Organization’s required by the Commission, to provide
January 18, 2017. Statement of the Purpose of, and supporting evidence that, among other
Pursuant to Section 19(b)(1) of the Statutory Basis for, the Proposed Rule things, there is meaningful competition
Securities Exchange Act of 1934 (the Change for all size orders and that there is an
‘‘Act’’),1 and Rule 19b–4 thereunder,2 1. Purpose active and liquid market functioning on
notice is hereby given that, on January the Exchange outside of the Auction
The purpose of this filing is to make
13, 2017, Bats EDGX Exchange, Inc. (the mechanism. The Exchange proposed to
‘‘Exchange’’ or ‘‘EDGX’’) filed with the permanent an aspect of BAM that is
adopt this provision on a pilot basis
Securities and Exchange Commission operating as a Pilot by removing
based on the fact that multiple other
(the ‘‘Commission’’) the proposed rule Interpretation and Policy .05 from Rule
options exchanges have a similar
change as described in Items I and II 21.19.
provision with respect to their own
below, which Items have been prepared Background price improvement mechanisms and
by the Exchange. The Commission is The Exchange proposed BAM in such provisions have been operating on
publishing this notice to solicit September of 2016 as a price a pilot basis.9 Although the Exchange
comments on the proposed rule change improvement mechanism on the only recently launched BAM and does
from interested persons and, for the Exchange.5 The Proposal was amended not yet have meaningful data to analyze
reasons discussed below, is approving by the Exchange on December 15, 2016,6 pursuant to the Pilot, the Exchange is
the proposal on an accelerated basis. proposing to make the Pilot permanent
and approved, as amended, on January
I. Self-Regulatory Organization’s 3, 2017.7 BAM Auctions were launched based on the recent filings by multiple
Statement of the Terms of Substance of on the Exchange effective January 4, other options exchanges to make
the Proposed Rule Change 2017. BAM includes functionality in analogous provisions permanent.10 The
The Exchange filed a proposal for the which a Member (an ‘‘Initiating 9 See, e.g., Securities Exchange Act Release Nos.
Exchange’s equity options platform Member’’) may electronically submit for 53222 (February 3, 2006), 71 FR 7089 (February 10,
(‘‘EDGX Options’’) concerning a price execution an order it represents as agent 2006) (SR–CBOE–2005–60) (order approving the
improvement mechanism operated by on behalf of a Priority Customer,8 broker CBOE AIM price improvement mechanism,
dealer, or any other person or entity including that there is no minimum size
EDGX Options, the Bats Auction requirement on a pilot basis); 73590 (November 13,
Mechanism (‘‘BAM’’ or ‘‘BAM (‘‘Agency Order’’) against principal 2014), 79 FR 68919 (November 19, 2014) (SR–
Auction’’), which was recently interest or against any other order it MIAX–2014–56) (order approving the MIAX PRIME
approved by the Commission.3 A represents as agent (an ‘‘Initiating price improvement mechanism, including that there
Order’’) provided it submits the Agency is no minimum size requirement on a pilot basis);
specific aspect of BAM is currently 76301 (October 29, 2015), 80 FR 68347 (November
operating on a pilot basis (‘‘Pilot’’), 4, 2015) (SR–BX–2015–032) (order approving the
5 See Securities Exchange Act Release No. 78988
which is set to expire on January 18, NASDAQ BX PRISM price improvement
(September 29, 2016), 81 FR 69172 (October 5, mechanism, including that there is no minimum
2017.4 The Pilot concerns the fact that 2016) (SR–BatsEDGX–2016–41) (‘‘Proposal’’). size requirement on a pilot basis).
there is no minimum size requirement 6 See supra, note 3; see also SR–BatsEDGX–2016– 10 See, e.g., Securities Exchange Act Release Nos.
for orders to be eligible for a BAM 41 Amendment No. 1, available at: http:// 79499 (December 7 2016), 81 FR 90012 (December
Auction, as described below. The www.bats.com/us/options/regulation/rule_filings/ 13, 2016) (SR–CBOE–2016–084) (proposal to
Exchange seeks to make the Pilot edgx/. modify the CBOE AIM price improvement
7 See supra, note 3.
permanent but does not propose any mechanism including the proposal to make the
8 The term ‘‘Priority Customer’’ means any person process permanent, specifically that there is no
other changes to BAM. or entity that is not: (A) A broker or dealer in minimum size requirement); 79500 (December 7,
The text of the proposed rule change securities; or (B) a Professional. The term ‘‘Priority 2016), 81 FR 90030 (December 13, 2016) (SR–
mstockstill on DSK3G9T082PROD with NOTICES
is available at the Exchange’s Web site Customer Order’’ means an order for the account of MIAX–2016–46) (proposal to modify the MIAX
a Priority Customer. See Rule 16.1(a)(45). A PRIME price improvement mechanism including
36 17 ‘‘Professional’’ is any person or entity that: (A) is the proposal to make the process permanent,
CFR 200.30–3(a)(12).
1 15
not a broker or dealer in securities; and (B) places specifically that there is no minimum size
U.S.C. 78s(b)(1). more than 390 orders in listed options per day on requirement); 79465 (December 5, 2016), 81 FR
2 17 CFR 240.19b–4.
average during a calendar month for its own 79465 [sic] (December 9, 2016) (SR–BX–2016–063)
3 See Securities Exchange Act Release No. 79718
beneficial account(s). All Professional orders shall (proposal to modify certain aspects of the NASDAQ
(January 3, 2017) (SR–BatsEDGX–2016–41). be appropriately marked by Options Members. See BX PRISM price improvement mechanism
4 See id. Rule 16.1(a)(46). including the proposal to make the process
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Document Created: 2017-01-25 00:08:56
Document Modified: 2017-01-25 00:08:56
| 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 8459 |
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