83 FR 9032 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 6.56, Compression Forums, To Provide Additional Opportunities To Disclose Compression-List Positions Monthly

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 42 (March 2, 2018)

Page Range		9032-9035
FR Document		2018-04208
Federal Register, Volume 83 Issue 42 (Friday, March 2, 2018)
[Federal Register Volume 83, Number 42 (Friday, March 2, 2018)]
[Notices]
[Pages 9032-9035]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-04208]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82771; File No. SR-CBOE-2018-017]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 6.56, Compression Forums, To Provide Additional Opportunities To 
Disclose Compression-List Positions Monthly

February 26, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 13, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``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.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.56, Compression Forums.
(additions are italicized; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc. Rules

* * * * *

Rule 6.56. Compression Forums

    (a)
    (1) Prior to 4:30 p.m. Chicago time on the second, third, and 
fourth to last business day of each calendar month, in a manner and 
format determined by the Exchange, a Trading Permit Holder may provide 
the Exchange with a list of open SPX options positions that it would 
like to close through the compression forum for that calendar month 
(``compression-list positions''). Trading Permit Holders may also 
permit their Clearing Trading Permit Holders or the Clearing 
Corporation to submit a list of these positions to the Exchange on 
their behalf.

[[Page 9033]]

    (2) Prior to the open of Regular Trading Hours on the last business 
day, second to last business day, and third to last business day of 
each calendar month, the Exchange will make available to all Trading 
Permit Holders a list including the size of the offsetting compression-
list positions (including all possible combinations of offsetting 
multi-leg positions) in each series (and multi-leg position) for which 
both long and short compression-list positions have been submitted to 
the Exchange (``compression-list positions file'').
    (3)-(6) (No change).
    (b)-(c) (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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend rule 6.56 (Compression Forums) to 
modify the frequency with which Trading Permit Holders (``TPHs'') may 
submit compression-list positions to the Exchange.
    Currently, TPHs may submit lists of existing SPX positions to the 
Exchange that they wish to close during a compression forum 
(``compression-list positions'') by submitting such positions to the 
Exchange prior to 4:30 p.m. Chicago time on the fourth to last business 
day of each calendar month.\5\ Following the submission of compression-
list positions and prior to the open of Regular Trading Hours on the 
third to last business day of each calendar month, the Exchange makes 
available to all TPHs a list including the size of the offsetting 
compression-list positions (including all possible combinations of 
offsetting multi-leg positions) in each series (and multi-leg position) 
for which both long and short compression-list positions have been 
submitted to the Exchange (``compression-list positions file'').\6\ In 
addition to making the compression-list positions file available to all 
TPHs, the Exchange: (1) Distributes the compress-list positions file to 
TPHs that submitted compression-list positions; \7\ (2) distributes an 
individualized list of multi-leg positions (``multi-leg positions 
file'') to each TPH that submitted compression-list positions; \8\ and 
(3) facilitates a process by which a TPH may grant the Exchange 
permission to share the TPH's identity with contra-party TPHs that have 
offsetting multi-leg positions.\9\
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    \5\ See Rule 6.56. (a)(1).
    \6\ See Rule 6.56(a)(2).
    \7\ See Rule 6.56(a)(3).
    \8\ See Rule 6.56(a)(4).
    \9\ See Rule 6.56(a)(5).
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    As previously noted, TPH compression-list positions are due by 4:30 
p.m. Chicago time on the fourth to last business day of each calendar 
month. Thus, compression-list positions submitted by TPHs and the 
subsequent files and information generated from the compression-list 
positions cannot account for positions that have been opened or closed 
on the last three business days of the month (i.e., after the current 
submission deadline). Therefore, the Exchange proposes to amend Rule 
6.56 to allow TPHs to also submit compression-list positions to the 
Exchange prior to 4:30 p.m. Chicago time on the second and third to 
last business days of each calendar month. The Exchange believes that 
allowing TPHs to reassess their positions at the end of the second and 
third to last business day of each calendar month--and submit 
compression list positions by 4:30 p.m. Chicago time on those days--
will allow TPHs to more efficiently and effectively close open 
positions during compression forums.
    The Exchange notes that it is not proposing to modify the process 
by which the Exchange utilizes compression-list positions to generate 
files. The Exchange will simply perform those processes three times 
instead of once. For example, from the compression-list positions 
submitted prior to 4:30 p.m. Chicago time on the fourth to last 
business day, the Exchange will generate and distribute the files and 
information described in Rule 6.56(a)(2)-(5), and such files and 
information are likely to be used by TPHs in the compression forum that 
occurs on the third to last business day. From the compression-list 
positions submitted prior to 4:30 p.m. Chicago time on the third to 
last business day, the Exchange will generate and distribute the files 
and information described in Rule 6.56(a)(2)-(5), and such files and 
information are likely to be used by TPHs in the compression forum that 
occurs on the second to last business day. Finally, from the 
compression-list positions submitted prior to 4:30 p.m. Chicago time on 
the second to last business day, the Exchange will generate and 
distribute the files and information described in Rule 6.56(a)(2)-(5), 
and such files and information is likely to be used by TPHs in the 
compression forum that occurs on the last business day. The Exchange 
notes that if, for example, a TPH submits compression-list positions on 
the fourth to last business day but not on the second or third to last 
business day, the compression-list positions submitted on the fourth to 
last business day will be used in the first file generation process, 
not each time the Exchange generates files. In short, each time the 
Exchange runs its file generation process the Exchange processes only 
the compression-list positions specific to each deadline (i.e., all 
compression list positions submitted prior to 4:30 p.m. Chicago time on 
the fourth to last business day of the calendar month are processed 
together; all compression list positions submitted prior to 4:30 p.m. 
Chicago time on the third to last business day of the calendar month 
are processed together; and so on).
    The proposed rule change will allow TPHs to submit to the Exchange 
more accurate information regarding their open positions in order to 
facilitate the generation of a more accurate assessment of potential 
offsetting interest, specifically, on the second and third to last 
business days of the calendar month. Giving TPHs a more accurate 
assessment of potential offsetting interest allows TPHs to more 
efficiently and effectively execute closing transactions in compression 
forums on the last business day and the second to last business day of 
the calendar month. The ability to more efficiently and effectively 
execute closing transactions in compression forums helps to alleviate 
the adverse impact of bank capital requirements.
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

[[Page 9034]]

thereunder applicable to the Exchange and, in particular, the 
requirements of Section 6(b) of the Act.\10\ Specifically, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    In particular, the proposed rule change will allow TPHs to submit 
to the Exchange more accurate information regarding their open 
positions in order to facilitate the generation of a more accurate 
assessment of potential offsetting interest, specifically, on the 
second and third to last business days of the calendar month. Giving 
TPHs a more accurate assessment of potential offsetting interest allows 
TPHs to more efficiently and effectively execute closing transactions 
in compression forums on the last business day and the second to last 
business day of the calendar month, which, in general, helps to protect 
investors and the public interest because closing positions via the 
compression process serves to alleviate the adverse impact of bank 
capital requirements.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe Options 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 change would 
encourage the closing of positions, which, once closed, may serve to 
alleviate the capital requirement constraints on TPHs and improve 
overall market liquidity by freeing capital currently tied up in 
certain SPX positions. The Exchange does not believe that the proposed 
rule changes will impose any burden on intermarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
because the proposed rule change applies only to the trading of SPX 
options, which are exclusively-listed on Cboe Options. To the extent 
that the proposed changes make the Exchange a more attractive 
marketplace for market participants at other exchanges, such market 
participants are eligible to participant through Cboe Options TPHs. 
Furthermore, participation in compression forums is completely 
voluntary and open to all TPHs.

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)(iii) of the Act \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative upon filing. The Commission notes 
that the proposal is not modifying the procedures for collecting or 
distributing compression-list positions, but is only providing 
additional opportunities for TPHs to disclose their positions using 
existing procedures. The Exchange has stated that the proposed rule 
change, by giving a more accurate assessment of potential offsetting 
interest, specifically on the second and third to last business days of 
the calendar month, will allow TPHs to more efficiently and effectively 
execute closing transactions in SPX options. Therefore, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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).
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    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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2018-017 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-2018-017. 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

[[Page 9035]]

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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of CBOE. 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-CBOE-2018-017 and should be submitted on 
or before March 23, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04208 Filed 3-1-18; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 42 / Friday, March 2, 2018 / Notices 9035

proposed rule change between the 4(n)(1)(i) 2 under the Securities NSCC’s potential losses associated with
Commission and any person, other than Exchange Act of 1934, as amended the liquidation of a Member’s portfolio
those that may be withheld from the (‘‘Exchange Act’’). On January 10, 2018, should the Member default.10 The
public in accordance with the NSCC filed Amendment No. 1 to the aggregate of all Members’ Required
provisions of 5 U.S.C. 552, will be advance notice.3 The advance notice, as Deposits constitutes NSCC’s Clearing
available for website viewing and modified by Amendment No. 1 Fund, which NSCC can access should a
printing in the Commission’s Public (hereinafter, the ‘‘Advance Notice’’) was defaulting Member’s own Required
Reference Room, 100 F Street NE, published for comment in the Federal Deposit be insufficient to satisfy NSCC’s
Washington, DC 20549, on official Register on February 8, 2018.4 The losses caused by the liquidation of the
business days between the hours of 10 Commission did not receive any Member’s portfolio.11
a.m. and 3 p.m. Copies of such filing comments on the Advance Notice. This
A. Evenly-Weighted Volatility
also will be available for inspection and publication serves as notice that the
Estimation
copying at the principal office of CBOE. Commission does not object to the
All comments received will be posted changes set forth in the Advance Notice. Each Member’s Required Deposit
without change. Persons submitting consists of several components.12
I. Description of the Advance Notice
comments are cautioned that we do not Generally, the largest component of a
redact or edit personal identifying The Advance Notice consists of Member’s Required Deposit is the
information from comment submissions. changes to NSCC’s Rules & Procedures volatility component, which is designed
You should submit only information (‘‘Rules’’) 5 that would enhance NSCC’s to capture the market price risk
that you wish to make available method for calculating the daily margin associated with each Member’s portfolio
publicly. All submissions should refer requirement for each NSCC member at a 99th percentile level of
to File Number SR–CBOE–2018–017 (‘‘Member’’).6 Specifically, NSCC confidence.13 NSCC currently calculates
and should be submitted on or before proposes to (1) add three new ways to the volatility component using a
March 23, 2018. calculate the volatility component of its parametric Value-at-Risk (‘‘VaR’’)
For the Commission, by the Division of
Members’ margin requirements, and (2) model.14 NSCC’s current VaR
Trading and Markets, pursuant to delegated eliminate an outdated component of the calculation places more emphasis on
authority.18 margin calculation, as described more recent market observations (such as
Eduardo A. Aleman, fully below.7 NSCC states that the new recent price history) for the purpose of
Assistant Secretary.
volatility component calculations would estimating current market price
enable NSCC to mitigate the credit risks volatility levels, based on the
[FR Doc. 2018–04208 Filed 3–1–18; 8:45 am]
presented by Member portfolios in a assumption that the most recent price
BILLING CODE 8011–01–P
broader range of scenarios and market history is more relevant and accurate for
conditions than NSCC’s current measuring current market price
SECURITIES AND EXCHANGE volatility component calculation.8 volatility levels (referred to as an
COMMISSION A key tool that NSCC uses to manage ‘‘exponentially-weighted volatility
its credit exposures to Members is the estimation’’).15 However, volatility in
[Release No. 34–82780; File No. SR–NSCC– daily calculation and collection of the equity markets often rapidly reverts
2017–808] margin from each Member (‘‘Required to more commonly observed levels,
Deposit’’).9 NSCC collects Required followed by a subsequent spike.16 While
Self-Regulatory Organizations; Deposits from Members to mitigate
National Securities Clearing a VaR calculation that applies
Corporation; Notice of No Objection To exclusively an exponentially-weighted
www.treasury.gov/initiatives/fsoc/Documents/
Advance Notice Filing, as Modified by 2012%20Annual%20Report.pdf. Therefore, NSCC
volatility estimation can capture sudden
Amendment No. 1, To Enhance the is required to comply with the Payment, Clearing increases in volatility, it may result in
Calculation of the Volatility Component and Settlement Supervision Act and file advance a swift decline in margin that does not
notices with the Commission. See 12 U.S.C. adequately capture the risks related to a
of the Clearing Fund Formula That 5465(e).
Utilizes a Parametric Value-at-Risk 2 17 CFR 240.19b–4(n)(1)(i).
rapid decrease in market price volatility
Model and Eliminate the Market Maker 3 In Amendment No. 1 to the advance notice, levels.17 NSCC proposes to mitigate this
Domination Charge NSCC amended and replaced in its entirety the shortcoming by adding another method
originally filed confidential Exhibit 3a with a new for computing the VaR calculation that
February 26, 2018. confidential Exhibit 3a in order to remove does not diminish the value of older
references to a practice that was not intended for
National Securities Clearing consideration as part of the filing.
market observations.18 Specifically,
Corporation (‘‘NSCC’’) filed with the 4 Securities Exchange Act Release No. 82631 NSCC proposes to add a VaR calculation
U.S. Securities and Exchange (February 5, 2018), 83 FR 5658 (February 8, 2017) that gives equal weight to all historical
Commission (‘‘Commission’’) on (SR–NSCC–2017–808) (‘‘Notice’’). NSCC also filed a volatility observations during a
December 28, 2017 the advance notice related proposed rule change with the Commission specified look-back period (referred to
pursuant to Section 19(b)(1) of the Exchange Act
SR–NSCC–2017–808 pursuant to and Rule 19b–4 thereunder, seeking approval of by NSCC as an ‘‘evenly-weighted
Section 806(e)(1) of Title VIII of the changes to its rules necessary to implement the volatility estimation’’),19 which could
Dodd-Frank Wall Street Reform and Advance Notice. 15 U.S.C. 78s(b)(1) and 17 CFR
Consumer Protection Act entitled the 240.19b–4, respectively. The proposed rule change 10 Id.
was published in the Federal Register on January
Payment, Clearing, and Settlement 19, 2018. Securities Exchange Act Release No.
11 Id.

Supervision Act of 2010 (‘‘Clearing 82494 (January 12, 2018), 83 FR 2828 (January 19,
12 See Procedure XV (Clearing Fund Formula and
daltland on DSKBBV9HB2PROD with NOTICES

Supervision Act’’) 1 and Rule 19b– 2018) (SR–NSCC–2017–020). The Commission did Other Matters) of the Rules, supra note 5.
13 Notice, 83 FR at 5659–60.
not receive any comments on that proposal.
5 NSCC’s Rules, available at http://dtcc.com/∼/ 14 Notice, 83 FR at 5660.
18 17CFR 200.30–3(a)(12).
1 12 media/Files/Downloads/legal/rules/nscc_rules.pdf. 15 Id.
U.S.C. 5465(e)(1). The Financial Stability 6 Notice, 83 FR at 5659. 16 Id.
Oversight Council designated NSCC a systemically
7 Id. 17 Id.
important financial market utility on July 18, 2012.
8 Id. 18 Id.
See Financial Stability Oversight Council 2012
Annual Report, Appendix A, http:// 9 Id. 19 Id.

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Document Created: 2018-03-01 23:56:07
Document Modified: 2018-03-01 23:56:07
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 9032