[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60971-60973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24000]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70509; File No. SR-CBOE-2013-091]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the CBSX Clearly Erroneous Policy
Pilot Program
September 26, 2013.
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 September 23, 2013, Chicago Board Options Exchange,
Incorporated (the ``Exchange'' or ``CBOE'') 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 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend a pilot program related to Rule
52.4 (Clearly Erroneous Executions) and remove certain references to
individual stock trading pauses contained in Rule 52.4(c)(4). The text
of the proposed rule change is available on the Exchange's Web site
(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 is proposing to extend the effectiveness of the
Exchange's current rule applicable to Clearly Erroneous Executions and
to remove references to individual stock trading pauses described in
CBOE Stock Exchange, LLC (``CBSX'') Rule 52.4(c)(4). Portions of CBSX
Rule 52.4, explained in further detail below, are currently operating
as a pilot program set to expire on September 30, 2013. The Exchange
proposes to extend the pilot program to April 8, 2014.
On September 10, 2010, the Commission approved, on a pilot basis,
changes to CBSX Rule 52.4 to provide for uniform treatment: (1) Of
clearly erroneous execution reviews in multi-stock events involving
twenty or more securities; and (2) in the event transactions occur that
result in the issuance of an individual stock trading pause by the
primary listing market and subsequent transactions that occur before
the trading pause is in effect on the Exchange. The Exchange also
adopted additional changes to CBSX Rule 52.4 that reduced the ability
of the Exchange to deviate from the objective standards set forth in
CBSX Rule 52.4, and in 2013, adopted a provision designed to address
the operation of the Plan to Address Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS under the Act (the ``Limit Up-
Limit Down Plan'' or the ``Plan''). The Exchange believes the benefits
to market participants from the more objective clearly erroneous
executions rule should continue on a pilot basis through April 8, 2014,
which is one year following the commencement of operations of the Plan.
The Exchange believes that continuing the pilot during this time will
protect against any unanticipated consequences. Thus, the Exchange
believes that the protections of the Clearly Erroneous Rule should
continue while the industry gains further experience operating the
Plan.
The Exchange also proposes to eliminate all references in CBSX Rule
52.4 to individual stock trading pauses issued by a primary listing
market. Specifically, CBSX Rule 52.4(c)(4)
[[Page 60972]]
provides specific rules to follow with respect to review of an
execution as potentially clearly erroneous when there was an individual
stock trading pause issued pursuant to Rule 6.3C.03(a). The stock
trading pauses described in CBSX Rule 52.4(c)(4) are being phased out
as securities become subject to the Plan pursuant to a phased
implementation schedule. The Plan is already operational with respect
to all securities included in Rule 6.3C.03(a), and thus, the Exchange
believes that all references to individual stock trading pauses should
be removed, including all cross-references to CBSX Rule 52.4(c)(4)
contained in other portions of CBSX Rule 52.4.\3\
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\3\ The Exchange notes that certain Exchange Traded Products
(``ETPs'') are not yet subject to the Plan. Because such ETPs are
not on the pilot list of securities, such ETPs are not subject to
Rule 52.4(c)(4). See Securities Exchange Act Release No. 65103
(August 11, 2011), 76 FR 51094 (August 17, 2011) (SR-CBOE-2011-078)
(notice of filing and immediate effectiveness Proposed Rule Change
Related to the CBSX Clearly Erroneous Policy Pilot Program).
Accordingly, the proposed rule change does not change the status quo
with respect to such ETPs. As amended, all securities, including
ETPs not subject to the Plan, will continue to be subject to Rule
52.4(c)(1) through (3).
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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.\4\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \5\ 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) \6\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ Id.
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In particular, the Exchange believes that the extension of the
pilot would help assure that the determination of whether a clearly
erroneous trade has occurred will be based on clear and objective
criteria, and that the resolution of the incident will occur promptly
through a transparent process. The proposed rule change would also help
assure consistent results in handling erroneous trades across the U.S.
markets, thus furthering fair and orderly markets, the protection of
investors and the public interest. Although the Plan will become fully
operational during the same time period as the proposed extended pilot,
the Exchange believes that maintaining the pilot will help to protect
against unanticipated consequences. To that end, the extension will
allow the Exchange to determine whether CBSX Rule 52.4 is necessary
once the Plan is fully operational and, if so, whether improvements can
be made. Finally, the elimination of references to individual stock
trading pauses will help to avoid confusion amongst market
participants, which is consistent with the protection of investors and
the public interest and therefore consistent with the Act. As described
above, individual stock trading pauses have been replaced by the Plan.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE 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. To the contrary, the Exchange
believes that the Financial Industry Regulatory Authority (``FINRA'')
and other national securities exchanges are also filing similar
proposals, and thus, that the proposal will help to ensure consistency
across market centers.
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 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 if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6)(iii) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with 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.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest,
as it will allow the pilot program to continue uninterrupted, thereby
avoiding investor confusion that could result from a temporary
interruption in the pilot program. For this reason, the Commission
designates the proposed rule change to be operative upon filing.\9\
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\9\ 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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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-CBOE-2013-091 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2013-091. 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
[[Page 60973]]
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 such filing also will be available for inspection
and copying at the principal offices 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-2013-091, and should be
submitted on or before October 23, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24000 Filed 10-1-13; 8:45 am]
BILLING CODE 8011-01-P