[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62817-62820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24567]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70611; File No. SR-CFE-2013-005]
Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to the Notification and Reporting Provisions for Exchange of
Contract for Related Position Transactions and Block Trades
October 4, 2013.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 20, 2013, CBOE
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change described in Items I, II, and III below, which
Items have been prepared by CFE. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons. CFE also has filed this proposed rule change with the
Commodity Futures Trading Commission (``CFTC''). CFE filed a written
certification with the CFTC under Section 5c(c) of the Commodity
Exchange Act (``CEA'') \2\ on September 20, 2013.
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\1\ 15 U.S.C. 78s(b)(7).
\2\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule
Change
CFE proposes to revise the notification and reporting provisions
contained in CFE Rules 414 (Exchange of Contract for Related Position)
(``ECRP'') and 415 (Block Trading).
The scope of this filing is limited solely to the application of
the rule changes to security futures traded on CFE. The only security
futures currently traded on CFE are traded under Chapter 16 of CFE's
Rulebook which is applicable to Individual Stock Based and Exchange-
Traded Fund Based Volatility Index (``Volatility Index'') security
futures.
The text of the proposed rule change is attached as Exhibit 4 to
the filing
[[Page 62818]]
submitted by the Exchange but is not attached to the published notice
of the filing.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CFE 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. CFE 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
CFE Rule 414 sets forth requirements relating to ECRP transactions,
and CFE Rule 415 sets forth requirements relating to Block Trades. Each
of these types of transactions occurs off-exchange, and CFE Rules
414(i) and 415(g) each set forth notification and reporting
requirements, which are substantially the same. The current proposal
seeks to amend these provisions. The impetus for these proposed changes
is the planned expansion of extended trading hours for CBOE Volatility
Index (VIX) futures, which is planned to occur in two phases with the
first phase to begin in late September and the second phase to begin in
the weeks that follow.\3\
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\3\ See CFE Information Circular IC13-029 for additional
information regarding the expansion of extended trading hours for
VIX futures. This rule filing is intended to address how the
notification and reporting provisions for ECRP transactions and
Block Trades will operate when CFE introduces a new 45-minute
extended trading hours period for VIX futures. This new trading
period of extended trading hours in VIX futures will be from 3:30
p.m.-4:15 p.m. on Mondays through Thursdays.
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Because CFE's Help Desk will be staffed during longer periods of
time than previously, the Exchange is proposing to amend the
notification and reporting provisions contained in CFE Rules 414
(Exchange of Contract for Related Position) and 415 (Block Trades),
which apply to all products traded on the Exchange.
For purposes of efficiency, the Exchange will describe below the
current notification and reporting provisions and the proposed changes
to those provisions, which would apply equally to both CFE Rule 414 and
CFE Rule 415.
The current notification and reporting provisions require that each
party to the transaction have an Authorized Reporter call or email the
CFE Help Desk after the transaction is agreed upon to notify CFE of the
terms of the transaction.\4\ These provisions are described in terms of
when there is agreement to the transaction, which triggers the ten-
minute time period during which the transaction must be reported to the
CFE Help Desk.\5\ Unless otherwise specified in the rules governing the
relevant Contract:
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\4\ For this purpose, agreement to the transaction includes,
without limitation, agreement to the actual price or premium of the
Contract leg of the ECRP transaction or Block Trade (except in the
case of a trade at settlement (``TAS'') transaction that is
permitted by the rules governing the relevant Contract, in which
case agreement to the transaction includes, without limitation,
agreement upon whether the price or premium of the Contract leg of
the ECRP transaction or Block Trade will be the daily settlement
price or an agreed upon differential above or below the daily
settlement price). The Exchange is also taking this opportunity to
make further explicit that agreement to the terms of an ECRP
transaction or Block Trade includes agreement to the quantity of the
Contract leg of an ECRP transaction or the quantity of the Block
Trade.
\5\ All times included in this filing and in CFE's Rules are
Chicago time.
If the transaction is agreed upon between the time that
Trading Hours commence in the relevant Contract and 3:15 p.m., the
notification to the CFE Help Desk must be made without delay and by
no later than ten minutes after the transaction is agreed upon (in
which event the CFE Help Desk will report the transaction to CFE's
trading system and provide a written transaction summary on that
day); \6\
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\6\ Additional details regarding the written transaction summary
prepared by the CFE Help Desk are set forth in CFE Rules 414(k) and
415(i).
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if the transaction is agreed upon between 3:15 p.m. and
3:25 p.m., the notification to the CFE Help Desk must be made either
on the day the transaction is agreed upon by no later
than 3:25 p.m. (in which event the CFE Help Desk will report the
transaction to CFE's trading system and provide a written
transaction summary to the Authorized Reporters on that day) or
on the following business day by no later than ten
minutes from the time that Trading Hours commence in the relevant
Contract (in which event the CFE Help Desk will report the
transaction to CFE's trading system and provide and provide a
written transaction summary to the Authorized Reporters on that
business day); and
if the transaction is agreed upon after 3:25 p.m. and
prior to the time that Trading Hours commence in the relevant
Contract on the following business day, the notification to the CFE
Help Desk must be made on that following business day by no later
than ten minutes from the time that Trading Hours commence in the
relevant Contract (in which event the CFE Help Desk will report the
transaction to CFE's trading system and provide a written
transaction summary to the Authorized Reporters on that business
day).
The current proposal would extend the time frames during which ECRP
transactions and Block Trades may be reported. Also, the notification
provisions would be described in terms of the time of notification to
the Exchange (instead of when there is agreement to the
transaction).\7\
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\7\ The Exchange notes that Authorized Reporters would still be
required to notify the CFE Help Desk without delay and by no later
than ten minutes after the transaction is agreed upon.
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Specifically, based upon the time of notification to the CFE Help
Desk of an ECRP or Block Trade, these Rules would be amended to include
charts that specify the manner in which the notification of an ECRP or
Block Trade must be provided to the CFE Help Desk, the Business Day for
which the ECRP Contract leg or Block Trade will be submitted for
clearing, and when the Help Desk will report the ECRP Contract leg or
Block Trade to CFE's trading system. The CFE Help Desk will provide a
written transaction summary to each Authorized Reporter on the Business
Day for which the ECRP Contract leg or Block Trade is submitted for
clearing. The Exchange notes that between 7:00 a.m. and 4:00 p.m. on
each business day, notification may be made by phone or email. The
Exchange proposes to limit the method of notification to email only
during all other times. The proposed rule charts \8\ would be as
follows:
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\8\ A separate chart would be set forth in both CFE Rule 414 and
CFE Rule 415 and each chart would set forth the same reporting and
notification provisions. For purposes of efficiency, the Exchange is
setting forth one chart in the purpose section of this filing.
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Business day for which
Time of notification to the Notification method contract Leg/Block Trade When Help Desk reports
Exchange submitted for clearing contract Leg/Block Trade
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7:00 a.m.-3:15 p.m. Monday-Friday. Phone or E-Mail...... Business Day of As soon as practicable
transaction. following required
notifications to Help
Desk.
Next Business Day for
Trade at Settlement (TAS)
transactions reported
after 3:12 p.m.
[[Page 62819]]
3:15 p.m. to 3:30 p.m. Monday- Phone or E-Mail...... Calendar day of As soon as practicable
Friday. transaction or next after trading next
Business Day, as commences following
designated by Authorized required notifications
Reporters. to Help Desk.
Next Business Day for TAS
transactions..
3:30 p.m. to 4:00 p.m. Monday- Phone or E-Mail Calendar day of As soon as practicable
Thursday \9\. transaction or Business following required
Day of transaction, as notifications to Help
designated by Authorized Desk.
Reporters.
Business Day of
transaction for TAS
transactions.
3:30 p.m. Friday to 7:00 a.m. E-Mail............... Next Business Day......... As soon as practicable
Monday. after trading next
commences following
required notifications
to Help Desk.
4:00 p.m. to 4:15 p.m. Monday- Phone or E-Mail...... Business Day of As soon as practicable
Thursday. transaction. following required
notifications to Help
Desk (which may occur
either during first
period of extended
trading hours or after
trading next commences).
4:15 p.m. to 7:00 am (next E-Mail............... Business Day of As soon as practicable
calendar day) Monday-Thursday. transaction. after trading next
commences following
required notifications
to Help Desk.
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CFE also proposes to amend CFE Rules 414(i) and 415(g) by providing
that the Exchange may modify the days and times during which the
notification, reporting, and clearance submission provisions set forth
in the chart above would be applicable in the event that the Exchange
is not be open for business or has shortened Trading Hours in
connection with a holiday or a period of mourning.
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\9\ As described in footnote 4, the Exchange will be introducing
a new trading period of extended trading hours in VIX futures that
will be from 3:30 p.m.-4:15 p.m. on Mondays through Thursdays.
Authorized Reporters are able between 3:30 p.m. and 4:00 p.m. to
report the Contract leg of an ECRP transaction or a Block Trade for
clearing on either the calendar day of the transaction or the next
business day. However, after 4:00 p.m., Authorized Traders will only
be able to report trades for clearing on the next Business Day. The
Exchange is providing this detail as background as to why the chart
does not line up directly with the new trading period of extended
trading hours being introduced for VIX futures.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Section 6(b)(5) \11\ in particular in that it is designed
to foster cooperation and coordination with persons engaged in
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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change would benefit
investors and market participants because it would enhance CFE's ECRP
and Block Trade reporting provisions by extending the time frames
during which ECRP transactions and Block Trades may be reported. The
Exchange also believes that the proposed rule change is equitable and
not unfairly discriminatory because amended CFE Rules 414 and 415 would
apply to all TPHs and Authorized Reporters and do not discriminate
between market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
CFE does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act, in that the rule change makes enhancements to
CFE's Block Trade and ECRP reporting process. In addition, the Exchange
believes that the expansion of the ability to report Block Trades and
ECRP transactions in security futures in conjunction with the expansion
of trading hours in VIX futures will promote competition because it
will provide for the reporting and dissemination of security futures
Block Trades and ECRPs during additional time frames which will serve
to promote additional transparency and thus potential further price
competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change will become operative on or after October
7, 2013.
At any time within 60 days of the date of effectiveness of the
proposed rule change, the Commission, after consultation with the CFTC,
may summarily abrogate the proposed rule change and require that the
proposed rule change be refiled in accordance with the provisions of
Section 19(b)(1) of the Act.\12\
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\12\ 15 U.S.C. 78s(b)(1).
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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-CFE-2013-005 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-CFE-2013-005. This file
number should be included on the subject line if email is used. To help
the
[[Page 62820]]
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of 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-CFE-2013-005, and should be
submitted on or before November 12, 2013.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24567 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P