[Federal Register Volume 79, Number 6 (Thursday, January 9, 2014)]
[Notices]
[Pages 1660-1661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00119]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71233; File No. SR-CBOE-2013-127]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Order Format 1
January 3, 2014.
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 December 24, 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, II, and III 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 amend CBOE Rule 6.53A (Types of Order
Formats). 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 proposes to amend Rule 6.53A. (Types of Order
Formats), which rule describes the types of order formats available to
Trading Permit Holders (TPHs) to facilitate order entry. Specifically
the Exchange proposes to amend where Order Format 1 orders are
processed.
By way of background, order formats are message types that are used
to send orders into CBOE Command \3\ through a user's selected API.
Currently, all orders must be submitted to CBOE using the message type
Order Format 1 (``OF1''). Orders using the OF1 format must pass through
various processes, including validation checks in the Order Handling
Service (``OHS''),\4\ before execution, entry into the book,
cancellation, or routing for manual handling. Where an order is routed
for processing by the OHS depends on various parameters configured by
the Exchange and the order entry firm itself. Examples of such
parameters are firm-specific volume restrictions (i.e., orders larger
than a firm-imposed quantity are routed to booth/order management
terminal) or inbound limit order price reasonability (i.e., orders may
be rerouted to booth/order management terminal for manual review if
``too marketable''). OF1 supports all order types, including auction
responses.
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\3\ CBOE Command is the trading engine platform for CBOE, C2,
CBSX and CBOE Futures Exchange (``CFE''). CBOE Command incorporates
both order handling and trade processing on the same platform.
\4\ The Order Handling System (``OHS'') performs basic
validation checks and has the capability to route orders to the
trade engine for automatic execution and book entry, to Trading
Permit Holder and PAR Official workstations located in the trading
crowds for manual handling, and/or to other order management
terminals (``OMTs'') generally located in booths on the trading
floor for manual handling.
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The Exchange proposes to change where OF1 orders are processed.
Specifically, the Exchange proposes to have orders using the OF1 format
pass through various processes, including the validation checks in the
trade engine, as opposed to the OHS. The Exchange notes that OF1 orders
will still be subject to the same validation checks. The proposed rule
change merely changes where these checks occur.
As before, orders using OF1 can still be executed in the trade
engine, routed to TPH and PAR Official workstations located in the
trading crowds for manual handling, and/or routed to other order
management terminals (``OMTs'') generally located in booths on the
trading floor for manual handling. Where an order is routed will still
depend upon various parameters set by the Exchange and the order entry
firms. For example, if during these checks in the trade engine an order
hits a certain parameter that requires it to be routed to a booth/order
management terminal (e.g. a firm-specific volume restriction which
requires orders larger than the firm-imposed quantity to be routed to
booth/order management terminal), that order will be routed to the OHS,
and the OHS will then route the order to the appropriate booth/order
management terminal for manual review and processing. The Exchange
believes that allowing OF1 orders to pass straight to the trade engine
for validation checks, as opposed to stopping first in the OHS for
these checks, increases overall efficiency. The Exchange finally notes
that the proposed new Order Format 1 will operate substantially similar
to how C2 Order Format 1 currently operates on C2.\5\
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\5\ See C2 Rule 6.19(i).
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The Exchange will announce the implementation date of the proposed
rule change in an Information Circular to be published no later than 90
days following the effective date of this rule filing. The
implementation date will be no later than 180 days following the
effective date of this rule filing.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) \6\ of
the Act. Specifically, the Exchange believes the proposed rule
[[Page 1661]]
change is consistent with the requirements under Section 6(b)(5) \7\
that the rules of an exchange be designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove impediments to and to perfect the mechanism for a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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First, the proposed rule change to have orders using the OF1 format
pass through various processes, including validation checks, in the
trade engine as opposed to the OHS provides for increased efficiency
while still maintaining important validation checks, thereby protecting
investors and the public interest. Additionally, clearly specifying the
manner in which inbound orders are submitted and processed provides
additional transparency in the rules and provides market participants
an additional avenue to easily understand the system and processes CBOE
offers. The Exchange believes additional transparency removes a
potential impediment to and perfecting the mechanism for a free and
open market and a national market system, and, in general, protecting
investors and the public interest. Additionally, the Exchange believes
that the proposed change to Order Format 1 still allows for the
Exchange to receive from TPHs information in a uniform format, which
aids the Exchange's efforts to monitor and regulate CBOE's markets and
TPHs and helps prevent fraudulent and manipulative practices. The
Exchange finally believes that the proposed rule change is designed to
not permit unfair discrimination among market participants, as the
proposed change is applicable to all TPHs and provides that all TPHs
must submit their orders using Order Format 1.
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 not necessary or appropriate in furtherance of
the purposes of the Act. The Exchange does not believe the proposed
rule changes impose any burden on intramarket competition because it
applies to all TPHs and all orders must be submitted to CBOE using the
OF1 message type. The Exchange does not believe the proposed rule
change will impose any burden on intermarket competition as it is
merely proposing to change the location of where an order using OF1 is
processed. The Exchange believes the proposed rule change promotes
transparency in the rules without adding any burden on market
participants.
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:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. 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) of the Act \8\ and
Rule 19b-4(f)(6) \9\ thereunder. 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. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
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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-CBOE-2013-127 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-2013-127. 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 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-2013-127,
and should be submitted on or before January 30, 2014.
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. 2014-00119 Filed 1-8-14; 8:45 am]
BILLING CODE 8011-01-P