[Federal Register Volume 77, Number 210 (Tuesday, October 30, 2012)]
[Notices]
[Pages 65751-65752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26640]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68095, File No. SR-CBOE-2012-085]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving Proposed Rule Change Relating to the
Complex Order Auction Process
October 24, 2012.
I. Introduction
On August 30, 2012, the Chicago Board Options Exchange
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to modify CBOE Rule 6.53C(d),
``Process for Complex Order RFR Auction,'' to: (i) Include the side of
the market in the request for response (``RFR'') message sent to
Trading Permit Holders at the start of a Complex Order Auction
(``COA''); and (ii) require responses to an RFR message (``RFR
Responses'') to be on the opposite side of the market from the order
being auctioned in a COA. The proposed rule change was published for
comment in the Federal Register on September 17, 2012.\3\ The
Commission received no comment letters regarding the proposal. This
order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67827 (September 11,
2012), 77 FR 57171 (``Notice'').
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II. Description of the Proposal
COA is an automated RFR auction process for COA-eligible orders.\4\
On receipt of a COA-eligible order and a request from the Trading
Permit Holder representing the order that the order be subjected to a
COA, CBOE sends an RFR message to all Trading Permit Holders that have
elected to receive RFR messages.\5\ The RFR message identifies the
component series, the size of the COA-eligible order, and any
contingencies, if applicable, but not the side of the market (i.e.
whether the order is to buy or to sell).\6\ Responders to the COA, who
do not know the side of the market of the order being auctioned, may
submit RFR Responses on both sides of the market.\7\ Because RFR
Responses on the same side of the market as the COA-eligible order
cannot trade with the order and thus are unnecessary, CBOE's trading
system automatically rejects these RFR Responses.\8\
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\4\ A ``COA-eligible order'' is a complex order that, as
determined by the Exchange on a class-by-class basis, is eligible
for a COA considering the order's marketability (defined as a number
of ticks away from the current market), size, complex order type,
and complex order origin type. See CBOE Rule 6.53C(d)(i)(2).
\5\ See CBOE Rule 6.53C(d)(ii).
\6\ See id.
\7\ See Notice, supra note 3, at 57172.
\8\ See id.
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The Exchange proposes to amend CBOE Rule 6.53C(d) to: (i) Include
the side of the market in the RFR message sent to Trading Permit
Holders at the start of a COA; and (ii) require RFR Responses to be on
the opposite side of the market from the order being auctioned in a
COA. CBOE believes that these proposed changes will make the COA
process more efficient by eliminating the entry of unnecessary RFR
Responses that cannot trade with the COA order.\9\ CBOE also believes
that this increased efficiency could lead to more meaningful and
competitively priced RFR Responses, which could result in better prices
for customers.\10\
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\9\ See id.
\10\ See id.
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III. Discussion
After careful consideration of the proposed rule change, the
Commission finds that the proposal is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities exchange.\11\ The Commission believes that the
proposed rule change is consistent with Section 6(b) of the Act, in
general, and Section 6(b)(5) of the Act,\12\ in particular, in that it
is designed 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.
More specifically, the Commission believes that the proposal could
improve the efficiency of the COA process by eliminating unnecessary
RFR Responses, which otherwise would have been rejected automatically
by CBOE's trading system.
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\11\ 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).
\12\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the
[[Page 65752]]
proposed rule change (SR-CBOE-2012-085) is approved.
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\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26640 Filed 10-29-12; 8:45 am]
BILLING CODE 8011-01-P