83 FR 23320 - Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 6.11., Regarding the Opening Process for Index Options
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 97 (May 18, 2018)
Federal Register Volume 83, Issue 97 (May 18, 2018)
| Page Range | 23320-23323 | |
| FR Document | 2018-10601 |
[Federal Register Volume 83, Number 97 (Friday, May 18, 2018)] [Notices] [Pages 23320-23323] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-10601] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83225; File No. SR-C2-2018-009] Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 6.11., Regarding the Opening Process for Index Options May 14, 2018. 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 May 9, 2018, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 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 Exchange filed the proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b- 4(f)(6) thereunder.\4\ 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. \3\ 15 U.S.C. 78s(b)(3)(A)(iii). \4\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the opening process with respect to index options. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Cboe C2 Exchange, Inc. Rules * * * * * Rule 6.11. Opening Process (a) Opening Process. (1) No change. (2) Opening Price. (A) Equity Options. The System determines a single price at which a particular equity option series will be opened (the ``Opening Price'') within 30 seconds of the First Listing Market Transaction[ or 9:30 a.m., as applicable]. If there are no contracts in a series that would execute at any price, the System opens the series for trading without determining an Opening Price. The Opening Price, if valid pursuant to subparagraph (3), of a series will be: ([A]i) If there is both an NBB and an NBO, the midpoint of the NBBO (if the midpoint is a half increment, the System rounds down to the nearest minimum increment) (the ``NBBO Midpoint''); ([B]ii) if the NBBO Midpoint is not a valid price, the last disseminated transaction price in the series after 9:30 a.m. (the ``Last Print''); or ([C]iii) if the NBBO Midpoint and the Last Print are not valid prices, the last disseminated transaction in the series from the previous trading day (the ``Previous Close''). If the NBBO Midpoint, Last Print, and Previous Close are not valid, the Exchange in its discretion may extend the Order Entry Period by up to 30 seconds or open the series for trading. [[Page 23321]] (B) Index Options. The System determines the Opening Price within 30 seconds of an away options exchange(s) disseminating a quote in a series. Following an away options exchange's dissemination of a quote in a series, if there are no contracts in a series that would execute at any price, the System opens the series for trading without determining an Opening Price. The Opening Price, if valid pursuant to subparagraph (3), of a series will be the NBBO Midpoint. If the NBBO Midpoint is not valid, the Exchange in its discretion may extend the Order Entry Period by up to 30 seconds or open the series for trading. (3) Validating the Opening Price. For purposes of subparagraph (a)(2): (A) The NBBO Midpoint and, for equity options, the Last Print[,] or the Previous Close, is a valid price if it is not outside the NBBO, and the price is no more than the following Minimum Amount away from the NBB or NBO for the series: ------------------------------------------------------------------------ NBB Minimum amount ------------------------------------------------------------------------ Below $2.00............................................. $0.25 $2.00 to $5.00.......................................... 0.40 Above $5.00 to $10.00................................... 0.50 Above $10.00 to $20.00.................................. 0.80 Above $20.00 to $50.00.................................. 1.00 Above $50.00 to $100.00................................. 1.50 Above $100.00........................................... 2.00 ------------------------------------------------------------------------ and (B) for equity options, the Last Print or Previous Close is a valid price if there is no NBB and no NBO, or there is a NBB (NBO) and no NBO (NBB) and the price is equal to or greater (less) than the NBB (NBO). (4)-(5) No change. (b)-(d) No change. * * * * * The text of the proposed rule change is also available on the Exchange's website (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 proposed rule change amends the opening process with respect to index options. C2 intends to migrate its technology onto the same trading platform as one of its affiliated exchanges, Cboe EDGX Exchange, Inc. (``EDGX''). C2 recently submitted a proposed rule change to, among other things, align certain system functionality with EDGX, including the opening process.\5\ Pursuant to the opening process in C2 Rule 6.11(a)(1), after a time period determined by the Exchange following the first transaction in the securities underlying the options on the primary market that is disseminated after 9:30 a.m. with respect to equity options, or following 9:30 a.m. with respect to index options, the related option series open automatically in a random order, staggered over regular intervals of time pursuant to subparagraphs (a)(2) through (5). Rule 6.11(a)(2) states the System determines a price at which a particular option series will be opened (the ``Opening Price'') within 30 seconds of the applicable triggering event noted above. If there are no contracts in a series that would execute at any price, the System opens the series for trading without determining an Opening Price. The Opening Price, if valid, of a series will be: --------------------------------------------------------------------------- \5\ See SR-C2-2018-005 (April 27, 2018). That proposed rule change as filed for immediate effectiveness and a request for a waiver of the 30-day operative delay to permit effectiveness on May 14, 2018, the date on which the proposed C2 technology migration is currently expected to occur. The rule text and numbers in this filing reference the rule text and numbers in that filing. ---------------------------------------------------------------------------If there is both an NBB and an NBO, the midpoint of the NBBO (if the midpoint is a half increment, the System rounds down to the nearest minimum increment) (the ``NBBO Midpoint''); if the NBBO Midpoint is not a valid price, the last disseminated transaction price in the series after 9:30 a.m. (the ``Last Print''); or if the NBBO Midpoint and the Last Print are not valid prices, the last disseminated transaction in the series from the previous trading day (the ``Previous Close''). If the NBBO Midpoint, Last Print, and Previous Close are not valid, the Exchange in its discretion may extend the order entry period by up to 30 seconds or open the series for trading (a ``contingent opening''). Pursuant to Rule 6.11(a)(3), the NBBO Midpoint, the Last Print, or the Previous Close is a valid price if it is no more than a specified minimum amount away from the national best bid or offer for the series. Additionally, the Last Print or Previous Close is a valid price if there is no NBB and no NBO, or if there is a NBB (NBO) and no NBO (NBB) and the price is equal to or greater (less) than the NBB (NBO). Under this Opening Process, if a series has not opened yet on another exchange on a trading (and thus there is no NBBO and no Last Print), if there is a Previous Close Price, it will be a valid price and will be the Opening Price. Additionally, if there are no crossed contracts in a series, the series opens immediately following the time period referenced above. The Exchange proposes to modify this process with respect to index options. Pursuant to the proposed rule change, for index options, the System will determine the Opening Price within 30 seconds of an away options exchange(s) disseminating a quote in a series. Following an away options exchange's dissemination of a quote in a series, if there are no contracts in a series that would execute at any price, the System opens the series for trading without determining an Opening Price. The Opening Price, if valid, of a series will be the NBBO Midpoint. If the NBBO Midpoint is not valid, the Exchange in its discretion may extend the order entry period by up to 30 seconds or open the series for trading. In other words, the proposed rule change provides that an index option series will not open (with or without a trade) until after the series is open on another exchange. To the extent the Exchange receives a quote from another Exchange within the time period referenced above, and there are contracts that may trade, the Opening Process will essentially be the same, and a series will open with the NBBO Midpoint as an Opening Price (if valid). Additionally, the Exchange will continue to have the ability to use a contingent opening to open a series for trading if there is no valid Opening Price. The proposed rule change delays opening of a series on C2 in an index option series if there are no crossed contracts, and eliminates the possibility to open using the Last Print or Previous Close (as those will generally not be necessary if C2 waits for another exchange to open). Currently, Russell 2000 Index (``RUT'') options is the only index option class trading on C2. RUT options also trade on Cboe Exchange, Inc. (``Cboe Options''), an affiliated exchange of C2. Under current C2 Rule 6.11, if a RUT series was open on Cboe Options, [[Page 23322]] and if there are crossed orders on C2, the RUT series on C2 would open with an Opening Price equal to the NBBO Midpoint (if valid). If a RUT series was not yet open on C2 after 9:30 a.m., and there was a Previous Close for the series, the series would open on C2 with the Previous Close as the Opening Price. If there are no crossing orders on C2, a RUT series would open without an opening price, possibly before the RUT series was open on Cboe Options. RUT options on Cboe Options generally open within 30 seconds after 9:30 a.m., and thus the Exchange expects RUT options on C2 following the technology migration to open for trading within 30 seconds (as set forth in the rule) at an Opening Price equal to the NBBO Midpoint if there are orders that can be crossed. However, it will be possible for a RUT series to open prior to the opening of that series on Cboe Options. The series on C2 would open without an Opening Price (if there are no crossed orders) or with an Opening Price equal to the Previous Close (if there are crossed orders) prior to the settlement value determination being completed on Cboe Options. If this were to occur, trading on C2 may then be occurring at very different prices than what is ultimately the opening trade price on Cboe Options. This is significant because, on certain dates, Cboe Options uses prices of RUT options trading on Cboe Options to determine settlement values for volatility index derivatives.\6\ While trading in these options on volatility index derivative settlement days also generally opens within a few seconds after 9:30, there have been times when series being used to determine the settlement value took longer to open. Trading on another Exchange while Cboe Options is not yet open may impact the volatility settlement value determination and disrupt trading of volatility index derivatives. The proposed rule change eliminates the possibility of RUT options on C2 automatically opening for trading prior to those options being open on Cboe Options and thus interfering with the calculation of volatility index derivative settlement values. --------------------------------------------------------------------------- \6\ See Cboe Options Rule 6.2, Interpretation and Policy .01. --------------------------------------------------------------------------- While options exchanges have varying opening processes, the opening process on Nasdaq BX, LLC (``BX'') is similar to the proposed rule change. Pursuant to BX Rule Section 8(b), if there is a possible trade on BX, a series will open with a valid width NBBO.\7\ This is similar to the proposed rule change, in that a valid NBBO Midpoint must be present for an index option series to open with a trade (which on C2 would only occur if another exchange was open for trading, because on C2, the NBBO that is used to determine the Opening Price is based on disseminated quotes of other exchanges and does not include orders and quotes on C2 prior to the opening of trading).\8\ Additionally, if no trade is possible on BX, then BX will depend on one of the following to open: (1) A valid width NBBO, (2) a certain number of other options exchanges (as determined by BX) having disseminated a firm quote on OPRA, or (3) a certain period of time (as determined by the Exchange) has elapsed. As proposed, if no trade is possible, C2 will open an index option series after another exchange as [sic] disseminated a quote, which is consistent with number (2) above (for example, under BX's rule, it could determine to open if one other options exchange was open). While the proposed rule change does not explicitly provide for additional alternatives in the event no trade is possible, pursuant to Rule 6.11(c), C2 may adjust the timing of the Opening Process in a class if it believes it is necessary in the interests of a fair and orderly market.\9\ Therefore, like BX, C2 could open a series after a certain amount of time has passed if the series does not open on another exchange.\10\ --------------------------------------------------------------------------- \7\ On BX, a valid width NBBO is defined as the combination of all away option market quotes and orders and quotes received on BX, within a specified bid/ask differential. See BX Rule Section 8(a)(6). \8\ See C2 Rule 1.1 (definition of NBBO). \9\ Number (1) above would not apply because, as noted above, the NBBO on C2 prior to the opening of trading does not include orders and quotes on C2. \10\ As stated in Rule 6.11(c), C2 makes and maintains records to document all determinations to deviate from the standard manner of the Opening Process, and periodically reviews these determinations for consistency with the interests of a fair and orderly market. --------------------------------------------------------------------------- 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 eliminates the possibility of RUT options on C2 automatically opening for trading prior to those options being open on Cboe Options and thus interfering with the calculation of volatility index derivative settlement values, which promotes just and equitable principles of trade and perfects the mechanism of a free and open market and national market system. As discussed above, under certain circumstances, the proposed rule change is expected to have a de minimis impact on the opening of index option series on C2 because, to the extent the Exchange receives a quote from another Exchange within the time period following 9:30 a.m., and there are contracts that may trade, the Opening Process will essentially be the same, and a series will open with the NBBO Midpoint as an Opening Price (if valid). Additionally, the Exchange will continue to have the ability to use a contingent opening to open a series for trading if there is no valid Opening Price. Therefore, if an index option series is not yet open on another exchange, C2 will still have the ability to open the series for trading. As discussed above, the proposed rule change is similar to the opening process of another options exchange, which also provides that opening for trading may be dependent on whether another options exchange is open.\14\ --------------------------------------------------------------------------- \14\ See BX Rule Section 8(b). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition C2 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 proposed rule change will apply in the same manner to all market participants that participate in the C2 Opening Process for index options. The Exchange believes it is appropriate to limit the proposed change to index options, [[Page 23323]] because some, such as RUT, are used to determine the settlement value for volatility index derivatives. A similar process does not occur for equity options, and thus, the risk of opening trading in an equity option interfering with a settlement process on another exchange is not present. As discussed above, the proposed rule change is similar to the opening process of another options exchange, which also provides that opening for trading may be dependent on whether another options exchange is open.\15\ --------------------------------------------------------------------------- \15\ See BX Rule Section 8(b). --------------------------------------------------------------------------- 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) \16\ of the Act and Rule 19b- 4(f)(6) thereunder.\17\ --------------------------------------------------------------------------- \16\ 15 U.S.C. 78s(b)(3)(A). \17\ 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 \18\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \19\ 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 is operative on May 14, 2018, which is also the date the C2 technology migration is to occur.\20\ The Exchange states that on May 16, 2018 Cboe Options will determine settlement values for certain volatility index derivatives by using the prices of RUT options trading on Cboe Options. According to the Exchange, waiver of the 30-day operative delay would avoid trading on C2 potentially interfering with the calculation of volatility index derivative settlement values by ensuring that on May 16, trading in RUT options on C2 will not begin before those options are open on Cboe Options. Accordingly, the Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest because it will avoid investor confusion that could result from C2 opening a dually and exclusively listed index option concurrently with, or prior to, Cboe Options, which could lead the two exchanges potentially to open at different prices given the material differences in their opening processes. The possibility for such divergence could be particularly confusing to investors on a volatility index settlement day, which will next occur on May 16. Therefore, the Commission hereby waives the operative delay and designates the proposal operative on May 14, 2018.\21\ --------------------------------------------------------------------------- \18\ 17 CFR 240.19b-4(f)(6). \19\ 17 CFR 240.19b-4(f)(6)(iii). \20\ See supra note 5. \21\ 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 Comments Use 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-C2-2018-009 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-C2-2018-009. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-C2-2018-009, and should be submitted on or before June 8, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\22\ --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-10601 Filed 5-17-18; 8:45 am] BILLING CODE 8011-01-P
![23320 Federal Register / Vol. 83, No. 97 / Friday, May 18, 2018 / Notices
Exchange has requested that the All submissions should refer to File ‘‘Act’’),1 and Rule 19b–4 thereunder,2
Commission waive the 30-day operative Number SR–NASDAQ–2018–037. This notice is hereby given that on May 9,
delay so that the proposal may become file number should be included on the 2018, Cboe C2 Exchange, Inc. (the
operative upon filing. The Exchange subject line if email is used. To help the ‘‘Exchange’’ or ‘‘C2’’) filed with the
states that it believes it is important for Commission process and review your Securities and Exchange Commission
it to be able to manage the comments more efficiently, please use (the ‘‘Commission’’) the proposed rule
administration of its rules on an only one method. The Commission will change as described in Items I and II
immediately effective basis. Further, post all comments on the Commission’s below, which Items have been prepared
with respect to the amendment to the internet website (http://www.sec.gov/ by the Exchange. The Exchange filed the
Market Order Spread Protection and rules/sro.shtml). Copies of the proposal as a ‘‘non-controversial’’
Acceptable Trade Range, the Exchange submission, all subsequent proposed rule change pursuant to
believes that the amendment protects amendments, all written statements Section 19(b)(3)(A)(iii) of the Act 3 and
investors and the public interest by with respect to the proposed rule Rule 19b–4(f)(6) thereunder.4 The
providing more transparency as to the change that are filed with the Commission is publishing this notice to
operation of this protection during the Commission, and all written solicit comments on the proposed rule
Opening Process and during halts for communications relating to the change from interested persons.
the Market Order Spread Protection and proposed rule change between the
also clarifies the Acceptable Trade I. Self-Regulatory Organization’s
Commission and any person, other than
Range rule. For these reasons, the Statement of the Terms of Substance of
those that may be withheld from the
Commission believes that waiver of the the Proposed Rule Change
public in accordance with the
30-day operative delay is consistent provisions of 5 U.S.C. 552, will be The Exchange proposes to amend the
with the protection of investors and the available for website viewing and opening process with respect to index
public interest and, therefore, the printing in the Commission’s Public options. The text of the proposed rule
Commission hereby waives the 30-day Reference Room, 100 F Street NE, change is provided below.
operative delay and designates the Washington, DC 20549, on official
proposed rule change operative upon business days between the hours of (additions are italicized; deletions are
filing.14 10:00 a.m. and 3:00 p.m. Copies of the [bracketed])
At any time within 60 days of the filing also will be available for * * * * *
filing of the proposed rule change, the inspection and copying at the principal
Commission summarily may Cboe C2 Exchange, Inc.
office of the Exchange. All comments
temporarily suspend such rule change if received will be posted without change. Rules
it appears to the Commission that such Persons submitting comments are * * * * *
action is: (i) Necessary or appropriate in cautioned that we do not redact or edit
the public interest; (ii) for the protection Rule 6.11. Opening Process
personal identifying information from
of investors; or (iii) otherwise in comment submissions. You should (a) Opening Process.
furtherance of the purposes of the Act. (1) No change.
submit only information that you wish (2) Opening Price.
If the Commission takes such action, the to make available publicly. All (A) Equity Options. The System determines
Commission shall institute proceedings submissions should refer to File a single price at which a particular equity
to determine whether the proposed rule Number SR–NASDAQ–2018–037 and option series will be opened (the ‘‘Opening
change should be approved or should be submitted on or before June Price’’) within 30 seconds of the First Listing
disapproved. 8, 2018. Market Transaction[ or 9:30 a.m., as
applicable]. If there are no contracts in a
IV. Solicitation of Comments For the Commission, by the Division of series that would execute at any price, the
Interested persons are invited to Trading and Markets, pursuant to delegated System opens the series for trading without
authority.15
submit written data, views and determining an Opening Price. The Opening
arguments concerning the foregoing, Eduardo A. Aleman, Price, if valid pursuant to subparagraph (3),
including whether the proposed rule Assistant Secretary. of a series will be:
change is consistent with the Act. [FR Doc. 2018–10604 Filed 5–17–18; 8:45 am] ([A]i) If there is both an NBB and an NBO,
the midpoint of the NBBO (if the midpoint
Comments may be submitted by any of BILLING CODE 8011–01–P
is a half increment, the System rounds down
the following methods: to the nearest minimum increment) (the
Electronic Comments ‘‘NBBO Midpoint’’);
SECURITIES AND EXCHANGE ([B]ii) if the NBBO Midpoint is not a valid
• Use the Commission’s internet COMMISSION price, the last disseminated transaction price
comment form (http://www.sec.gov/ in the series after 9:30 a.m. (the ‘‘Last Print’’);
rules/sro.shtml); or [Release No. 34–83225; File No. SR–C2– or
• Send an email to rule-comments@ 2018–009] ([C]iii) if the NBBO Midpoint and the Last
sec.gov. Please include File Number SR– Print are not valid prices, the last
NASDAQ–2018–037 on the subject line. Self-Regulatory Organizations; Cboe disseminated transaction in the series from
C2 Exchange, Inc.; Notice of Filing and the previous trading day (the ‘‘Previous
Paper Comments Close’’).
Immediate Effectiveness of a Proposed
• Send paper comments in triplicate Rule Change To Amend Rule 6.11.,
If the NBBO Midpoint, Last Print, and
to Secretary, Securities and Exchange Previous Close are not valid, the Exchange in
Regarding the Opening Process for
daltland on DSKBBV9HB2PROD with NOTICES
its discretion may extend the Order Entry
Commission, 100 F Street NE, Index Options Period by up to 30 seconds or open the series
Washington, DC 20549–1090. for trading.
May 14, 2018.
14 For purposes only of waiving the 30-day Pursuant to Section 19(b)(1) of the 1 15 U.S.C. 78s(b)(1).
operative delay, the Commission has also Securities Exchange Act of 1934 (the 2 17 CFR 240.19b–4.
considered the proposed rule’s impact on
3 15 U.S.C. 78s(b)(3)(A)(iii).
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). 15 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(6).
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(B) Index Options. The System determines A. Self-Regulatory Organization’s Pursuant to Rule 6.11(a)(3), the NBBO
the Opening Price within 30 seconds of an Statement of the Purpose of, and the Midpoint, the Last Print, or the Previous
away options exchange(s) disseminating a Statutory Basis for, the Proposed Rule Close is a valid price if it is no more
quote in a series. Following an away options Change than a specified minimum amount away
exchange’s dissemination of a quote in a from the national best bid or offer for
series, if there are no contracts in a series 1. Purpose the series. Additionally, the Last Print
that would execute at any price, the System The proposed rule change amends the or Previous Close is a valid price if there
opens the series for trading without opening process with respect to index is no NBB and no NBO, or if there is a
determining an Opening Price. The Opening options. C2 intends to migrate its NBB (NBO) and no NBO (NBB) and the
Price, if valid pursuant to subparagraph (3), technology onto the same trading price is equal to or greater (less) than the
of a series will be the NBBO Midpoint. If the platform as one of its affiliated NBB (NBO). Under this Opening
NBBO Midpoint is not valid, the Exchange in exchanges, Cboe EDGX Exchange, Inc. Process, if a series has not opened yet
its discretion may extend the Order Entry (‘‘EDGX’’). C2 recently submitted a on another exchange on a trading (and
Period by up to 30 seconds or open the series proposed rule change to, among other thus there is no NBBO and no Last
for trading. things, align certain system Print), if there is a Previous Close Price,
(3) Validating the Opening Price. For
functionality with EDGX, including the it will be a valid price and will be the
purposes of subparagraph (a)(2):
opening process.5 Pursuant to the Opening Price. Additionally, if there are
(A) The NBBO Midpoint and, for equity
opening process in C2 Rule 6.11(a)(1), no crossed contracts in a series, the
options, the Last Print[,] or the Previous
after a time period determined by the series opens immediately following the
Close, is a valid price if it is not outside the
NBBO, and the price is no more than the Exchange following the first transaction time period referenced above.
in the securities underlying the options The Exchange proposes to modify this
following Minimum Amount away from the
NBB or NBO for the series: on the primary market that is process with respect to index options.
disseminated after 9:30 a.m. with Pursuant to the proposed rule change,
Minimum respect to equity options, or following for index options, the System will
NBB 9:30 a.m. with respect to index options, determine the Opening Price within 30
amount
the related option series open seconds of an away options exchange(s)
Below $2.00 .......................... $0.25 automatically in a random order, disseminating a quote in a series.
$2.00 to $5.00 ...................... 0.40 staggered over regular intervals of time Following an away options exchange’s
Above $5.00 to $10.00 ......... 0.50 pursuant to subparagraphs (a)(2) dissemination of a quote in a series, if
Above $10.00 to $20.00 ....... 0.80 through (5). Rule 6.11(a)(2) states the there are no contracts in a series that
Above $20.00 to $50.00 ....... 1.00 System determines a price at which a would execute at any price, the System
Above $50.00 to $100.00 ..... 1.50 particular option series will be opened opens the series for trading without
Above $100.00 ..................... 2.00 (the ‘‘Opening Price’’) within 30 determining an Opening Price. The
seconds of the applicable triggering Opening Price, if valid, of a series will
and be the NBBO Midpoint. If the NBBO
event noted above. If there are no
(B) for equity options, the Last Print or contracts in a series that would execute Midpoint is not valid, the Exchange in
Previous Close is a valid price if there is no at any price, the System opens the series its discretion may extend the order
NBB and no NBO, or there is a NBB (NBO) for trading without determining an entry period by up to 30 seconds or
and no NBO (NBB) and the price is equal to open the series for trading. In other
Opening Price. The Opening Price, if
or greater (less) than the NBB (NBO). words, the proposed rule change
valid, of a series will be:
(4)–(5) No change. provides that an index option series will
• If there is both an NBB and an NBO,
(b)–(d) No change. not open (with or without a trade) until
the midpoint of the NBBO (if the
* * * * * midpoint is a half increment, the after the series is open on another
The text of the proposed rule change System rounds down to the nearest exchange. To the extent the Exchange
is also available on the Exchange’s minimum increment) (the ‘‘NBBO receives a quote from another Exchange
website (http://www.cboe.com/ Midpoint’’); within the time period referenced
AboutCBOE/CBOELegal • if the NBBO Midpoint is not a valid above, and there are contracts that may
RegulatoryHome.aspx), at the price, the last disseminated transaction trade, the Opening Process will
Exchange’s Office of the Secretary, and price in the series after 9:30 a.m. (the essentially be the same, and a series will
at the Commission’s Public Reference ‘‘Last Print’’); or open with the NBBO Midpoint as an
• if the NBBO Midpoint and the Last Opening Price (if valid). Additionally,
Room.
Print are not valid prices, the last the Exchange will continue to have the
II. Self-Regulatory Organization’s disseminated transaction in the series ability to use a contingent opening to
Statement of the Purpose of, and from the previous trading day (the open a series for trading if there is no
Statutory Basis for, the Proposed Rule ‘‘Previous Close’’). valid Opening Price. The proposed rule
Change If the NBBO Midpoint, Last Print, and change delays opening of a series on C2
Previous Close are not valid, the in an index option series if there are no
In its filing with the Commission, the crossed contracts, and eliminates the
Exchange in its discretion may extend
Exchange included statements possibility to open using the Last Print
the order entry period by up to 30
concerning the purpose of and basis for or Previous Close (as those will
seconds or open the series for trading (a
the proposed rule change and discussed generally not be necessary if C2 waits
‘‘contingent opening’’).
any comments it received on the for another exchange to open).
daltland on DSKBBV9HB2PROD with NOTICES
proposed rule change. The text of these 5 See SR–C2–2018–005 (April 27, 2018). That Currently, Russell 2000 Index
statements may be examined at the proposed rule change as filed for immediate (‘‘RUT’’) options is the only index
places specified in Item IV below. The effectiveness and a request for a waiver of the 30- option class trading on C2. RUT options
Exchange has prepared summaries, set day operative delay to permit effectiveness on May also trade on Cboe Exchange, Inc.
14, 2018, the date on which the proposed C2
forth in sections A, B, and C below, of technology migration is currently expected to occur.
(‘‘Cboe Options’’), an affiliated exchange
the most significant aspects of such The rule text and numbers in this filing reference of C2. Under current C2 Rule 6.11, if a
statements. the rule text and numbers in that filing. RUT series was open on Cboe Options,
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![23322 Federal Register / Vol. 83, No. 97 / Friday, May 18, 2018 / Notices
and if there are crossed orders on C2, similar to the proposed rule change, in and coordination with persons engaged
the RUT series on C2 would open with that a valid NBBO Midpoint must be in regulating, clearing, settling,
an Opening Price equal to the NBBO present for an index option series to processing information with respect to,
Midpoint (if valid). If a RUT series was open with a trade (which on C2 would and facilitating transactions in
not yet open on C2 after 9:30 a.m., and only occur if another exchange was securities, to remove impediments to
there was a Previous Close for the series, open for trading, because on C2, the and perfect the mechanism of a free and
the series would open on C2 with the NBBO that is used to determine the open market and a national market
Previous Close as the Opening Price. If Opening Price is based on disseminated system, and, in general, to protect
there are no crossing orders on C2, a quotes of other exchanges and does not investors and the public interest.
RUT series would open without an include orders and quotes on C2 prior Additionally, the Exchange believes the
opening price, possibly before the RUT to the opening of trading).8 proposed rule change is consistent with
series was open on Cboe Options. Additionally, if no trade is possible on the Section 6(b)(5) 13 requirement that
RUT options on Cboe Options BX, then BX will depend on one of the the rules of an exchange not be designed
generally open within 30 seconds after following to open: (1) A valid width to permit unfair discrimination between
9:30 a.m., and thus the Exchange NBBO, (2) a certain number of other customers, issuers, brokers, or dealers.
expects RUT options on C2 following options exchanges (as determined by In particular, the proposed rule
the technology migration to open for BX) having disseminated a firm quote change eliminates the possibility of RUT
trading within 30 seconds (as set forth on OPRA, or (3) a certain period of time options on C2 automatically opening for
in the rule) at an Opening Price equal (as determined by the Exchange) has trading prior to those options being
to the NBBO Midpoint if there are elapsed. As proposed, if no trade is open on Cboe Options and thus
orders that can be crossed. However, it possible, C2 will open an index option interfering with the calculation of
will be possible for a RUT series to open series after another exchange as [sic] volatility index derivative settlement
prior to the opening of that series on disseminated a quote, which is values, which promotes just and
Cboe Options. The series on C2 would consistent with number (2) above (for equitable principles of trade and
open without an Opening Price (if there example, under BX’s rule, it could perfects the mechanism of a free and
are no crossed orders) or with an determine to open if one other options open market and national market
Opening Price equal to the Previous exchange was open). While the system. As discussed above, under
Close (if there are crossed orders) prior proposed rule change does not certain circumstances, the proposed rule
to the settlement value determination explicitly provide for additional change is expected to have a de minimis
being completed on Cboe Options. If alternatives in the event no trade is impact on the opening of index option
this were to occur, trading on C2 may possible, pursuant to Rule 6.11(c), C2 series on C2 because, to the extent the
then be occurring at very different may adjust the timing of the Opening Exchange receives a quote from another
prices than what is ultimately the Process in a class if it believes it is Exchange within the time period
opening trade price on Cboe Options. necessary in the interests of a fair and following 9:30 a.m., and there are
This is significant because, on certain orderly market.9 Therefore, like BX, C2 contracts that may trade, the Opening
dates, Cboe Options uses prices of RUT could open a series after a certain Process will essentially be the same, and
options trading on Cboe Options to amount of time has passed if the series a series will open with the NBBO
determine settlement values for does not open on another exchange.10 Midpoint as an Opening Price (if valid).
volatility index derivatives.6 While Additionally, the Exchange will
2. Statutory Basis continue to have the ability to use a
trading in these options on volatility
index derivative settlement days also The Exchange believes the proposed contingent opening to open a series for
generally opens within a few seconds rule change is consistent with the trading if there is no valid Opening
after 9:30, there have been times when Securities Exchange Act of 1934 (the Price. Therefore, if an index option
series being used to determine the ‘‘Act’’) and the rules and regulations series is not yet open on another
settlement value took longer to open. thereunder applicable to the Exchange exchange, C2 will still have the ability
Trading on another Exchange while and, in particular, the requirements of to open the series for trading. As
Cboe Options is not yet open may Section 6(b) of the Act.11 Specifically, discussed above, the proposed rule
impact the volatility settlement value the Exchange believes the proposed rule change is similar to the opening process
determination and disrupt trading of change is consistent with the Section of another options exchange, which also
volatility index derivatives. The 6(b)(5) 12 requirements that the rules of provides that opening for trading may
proposed rule change eliminates the an exchange be designed to prevent be dependent on whether another
possibility of RUT options on C2 fraudulent and manipulative acts and options exchange is open.14
automatically opening for trading prior practices, to promote just and equitable B. Self-Regulatory Organization’s
to those options being open on Cboe principles of trade, to foster cooperation Statement on Burden on Competition
Options and thus interfering with the
orders and quotes received on BX, within a C2 does not believe that the proposed
calculation of volatility index derivative
specified bid/ask differential. See BX Rule Section rule change will impose any burden on
settlement values.
While options exchanges have varying
8(a)(6). competition that is not necessary or
8 See C2 Rule 1.1 (definition of NBBO).
opening processes, the opening process appropriate in furtherance of the
9 Number (1) above would not apply because, as
on Nasdaq BX, LLC (‘‘BX’’) is similar to purposes of the Act. The proposed rule
noted above, the NBBO on C2 prior to the opening
the proposed rule change. Pursuant to of trading does not include orders and quotes on change will apply in the same manner
C2. to all market participants that
daltland on DSKBBV9HB2PROD with NOTICES
BX Rule Section 8(b), if there is a
possible trade on BX, a series will open
10 As stated in Rule 6.11(c), C2 makes and participate in the C2 Opening Process
maintains records to document all determinations for index options. The Exchange
with a valid width NBBO.7 This is to deviate from the standard manner of the Opening
Process, and periodically reviews these
believes it is appropriate to limit the
6 See Cboe Options Rule 6.2, Interpretation and determinations for consistency with the interests of proposed change to index options,
Policy .01. a fair and orderly market.
7 On BX, a valid width NBBO is defined as the 11 15 U.S.C. 78f(b). 13 Id.
combination of all away option market quotes and 12 15 U.S.C. 78f(b)(5). 14 See BX Rule Section 8(b).
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![Federal Register / Vol. 83, No. 97 / Friday, May 18, 2018 / Notices 23323
because some, such as RUT, are used to According to the Exchange, waiver of All submissions should refer to File
determine the settlement value for the 30-day operative delay would avoid Number SR–C2–2018–009. This file
volatility index derivatives. A similar trading on C2 potentially interfering number should be included on the
process does not occur for equity with the calculation of volatility index subject line if email is used. To help the
options, and thus, the risk of opening derivative settlement values by ensuring Commission process and review your
trading in an equity option interfering that on May 16, trading in RUT options comments more efficiently, please use
with a settlement process on another on C2 will not begin before those only one method. The Commission will
exchange is not present. As discussed options are open on Cboe Options. post all comments on the Commission’s
above, the proposed rule change is Accordingly, the Commission believes internet website (http://www.sec.gov/
similar to the opening process of the waiver of the operative delay is rules/sro.shtml). Copies of the
another options exchange, which also consistent with the protection of submission, all subsequent
provides that opening for trading may investors and the public interest amendments, all written statements
be dependent on whether another because it will avoid investor confusion with respect to the proposed rule
options exchange is open.15 that could result from C2 opening a change that are filed with the
dually and exclusively listed index Commission, and all written
C. Self-Regulatory Organization’s
option concurrently with, or prior to, communications relating to the
Statement on Comments on the
Cboe Options, which could lead the two proposed rule change between the
Proposed Rule Change Received From
exchanges potentially to open at Commission and any person, other than
Members, Participants, or Others
different prices given the material those that may be withheld from the
The Exchange neither solicited nor differences in their opening processes. public in accordance with the
received comments on the proposed The possibility for such divergence provisions of 5 U.S.C. 552, will be
rule change. could be particularly confusing to available for website viewing and
III. Date of Effectiveness of the investors on a volatility index printing in the Commission’s Public
Proposed Rule Change and Timing for settlement day, which will next occur Reference Room, 100 F Street NE,
Commission Action on May 16. Therefore, the Commission Washington, DC 20549, on official
hereby waives the operative delay and business days between the hours of
Because the foregoing proposed rule designates the proposal operative on
change does not: (i) Significantly affect 10:00 a.m. and 3:00 p.m. Copies of the
May 14, 2018.21 filing also will be available for
the protection of investors or the public At any time within 60 days of the
interest; (ii) impose any significant inspection and copying at the principal
filing of the proposed rule change, the office of the Exchange. All comments
burden on competition; and (iii) become Commission summarily may
operative for 30 days from the date on received will be posted without change.
temporarily suspend such rule change if Persons submitting comments are
which it was filed, or such shorter time it appears to the Commission that such
as the Commission may designate, it has cautioned that we do not redact or edit
action is: (i) Necessary or appropriate in personal identifying information from
become effective pursuant to Section the public interest; (ii) for the protection
19(b)(3)(A) 16 of the Act and Rule 19b– comment submissions. You should
of investors; or (iii) otherwise in submit only information that you wish
4(f)(6) thereunder.17 furtherance of the purposes of the Act.
A proposed rule change filed to make available publicly. All
If the Commission takes such action, the submissions should refer to File
pursuant to Rule 19b–4(f)(6) under the Commission shall institute proceedings
Act 18 normally does not become Number SR–C2–2018–009, and should
to determine whether the proposed rule be submitted on or before June 8, 2018.
operative for 30 days after the date of its should be approved or disapproved.
filing. However, Rule 19b–4(f)(6)(iii) 19 For the Commission, by the Division of
permits the Commission to designate a IV. Solicitation of Comments Trading and Markets, pursuant to delegated
shorter time if such action is consistent authority.22
Interested persons are invited to
with the protection of investors and the submit written data, views, and Eduardo A. Aleman,
public interest. The Exchange has asked arguments concerning the foregoing, Assistant Secretary.
the Commission to waive the 30-day including whether the proposed rule [FR Doc. 2018–10601 Filed 5–17–18; 8:45 am]
operative delay so that the proposal is change is consistent with the Act. BILLING CODE 8011–01–P
operative on May 14, 2018, which is Comments may be submitted by any of
also the date the C2 technology the following methods:
migration is to occur.20 The Exchange SMALL BUSINESS ADMINISTRATION
states that on May 16, 2018 Cboe Electronic Comments
Options will determine settlement • Use the Commission’s internet [Disaster Declaration #15522 and #15523;
comment form (http://www.sec.gov/ Hawaii Disaster Number HI–00047]
values for certain volatility index
derivatives by using the prices of RUT rules/sro.shtml); or Presidential Declaration of a Major
options trading on Cboe Options. • Send an email to rule-comments@
Disaster for Public Assistance Only for
sec.gov. Please include File Number SR–
the State of Hawaii
15 See BX Rule Section 8(b). C2–2018–009 on the subject line.
16 15 U.S.C. 78s(b)(3)(A).
Paper Comments AGENCY: U.S. Small Business
17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
Administration.
4(f)(6) requires a self-regulatory organization to give • Send paper comments in triplicate
the Commission written notice of its intent to file ACTION: Notice.
the proposed rule change, along with a brief
to Secretary, Securities and Exchange
daltland on DSKBBV9HB2PROD with NOTICES
description and the text of the proposed rule Commission, 100 F Street NE, SUMMARY: This is a Notice of the
change, at least five business days prior to the date Washington, DC 20549–1090. Presidential declaration of a major
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
disaster for Public Assistance Only for
21 For purposes only of waiving the 30-day
Exchange has satisfied this requirement. the State of Hawaii (FEMA–4366–DR),
operative delay, the Commission has also
18 17 CFR 240.19b–4(f)(6).
considered the proposed rule’s impact on dated 05/11/2018.
19 17 CFR 240.19b–4(f)(6)(iii).
efficiency, competition, and capital formation. See
20 See supra note 5. 15 U.S.C. 78c(f). 22 17 CFR 200.30–3(a)(12).
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Document Created: 2018-05-18 02:15:31
Document Modified: 2018-05-18 02:15:31
| 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 | 83 FR 23320 |
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