[Federal Register Volume 79, Number 70 (Friday, April 11, 2014)]
[Notices]
[Pages 20288-20290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08119]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71883; File No. SR-CBOE-2014-034]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Market-Maker Appointment Adjustments
April 7, 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 April 1, 2014 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add language to Rule 8.3 (Appointment of
Market-Makers) to add clarity to when a Market-Maker must notify the
Exchange of an appointment adjustment in advance of an upcoming tier
rebalance. 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, at the Commission's Public Reference Room, and on the
Commission's Web site (http://www.sec.gov).
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
[[Page 20289]]
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 Exchange Rule 8.3 regarding Market-
Maker appointment cost rebalances and the resulting assignment of
additional Trading Permits when necessary. Currently, Rule 8.3 provides
that appointments to act as a Market-Maker ``cost'' different amounts
for different classes (with no classes costing more than 1.0). Each
Trading Permit held by a Market-Maker has an appointment credit of 1.0.
The Exchange, on a quarterly basis, can rebalance the tiers into which
different classes fall, which means that the Exchange can elect to move
a class from one tier to another. As a result, the appointment costs
for the corresponding classes could change.
The Exchange recently added to Rule 8.3(c)(iv) language stating
that ``If a Market-Maker with a VTC appointment holds a combination of
appointments whose aggregate revised appointment cost is greater than
the number of Trading Permits that Market-Maker holds, the Market-Maker
will be assigned as many Trading Permits as necessary to ensure that
the Market-Maker no longer holds a combination of appointments whose
aggregate revised appointment cost is greater than the number of
Trading Permits that Market-Maker holds.'' \3\ However, this proposed
change can be read to give Market-Makers until 11:59 p.m. on the day
before a rebalance takes effect to change their appointments in order
to no longer hold a combination of appointments whose aggregate revised
appointment cost is greater than the number of Trading Permits that
Market-Maker holds. Under this reading, the Exchange's Registration
Department may not be provided enough time to review and manage such
changes. As such, the Exchange proposes to set a cutoff time of 3:30
p.m. Central Time to make such changes in order to provide the Exchange
with the requisite time.\4\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act No. 71223 (January 2, 2014), 79
FR 1412 (January 8, 2014) (SR-CBOE-2013-109), which also stated that
the Exchange shall announce rebalances via Regulatory Circular at
least ten (10) business days before the rebalance takes effect.
\4\ Following the proposed change, the last sentence of Rule
8.3(c)(iv) would read:
``If, after 3:30 p.m. (Central Time) on the business day before
a rebalance is to take effect, a Market-Maker with a VTC appointment
holds a combination of appointments whose aggregate revised
appointment cost is greater than the number of Trading Permits that
Market-Maker holds, the Market-Maker will be assigned as many
Trading Permits as necessary to ensure that the Market-Maker no
longer holds a combination of appointments whose aggregate revised
appointment cost is greater than the number of Trading Permits that
Market-Maker holds.''
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Act and the rules and regulations thereunder applicable to the Exchange
and, in particular, the requirements of Section 6(b) of the Act.\5\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \6\ 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) \7\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
---------------------------------------------------------------------------
The proposed rule change will ensure that the Exchange's
Registration Department will be provided enough time to review and
manage appointment changes without imposing an unnecessary burden on
Market-Makers (since they will still be provided with at least ten
business days of notice prior to a rebalance taking effect), thereby
removing impediments to and perfecting the mechanism of a free and open
market and a national market system. The proposed change will apply to
all Market-Makers (who are the only market participants who have class
appointments).
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. CBOE does not believe that the
proposed rule change will impose any burden on intramarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because it will apply to all Market-Makers (who are the only
market participants who have class appointments). CBOE does not believe
that the proposed rule change 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 only applies to
the Market-Maker appointment process on CBOE and is not intended for
competitive purposes, but to streamline an Exchange process.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 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, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)
thereunder.\10\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and 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. The
Exchange has satisfied this requirement.
\10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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
[[Page 20290]]
under Section 19(b)(2)(B) \11\ of the Act to determine whether the
proposed rule should be approved or disapproved.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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-2014-034 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-2014-034. 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 the filing also will be available
for inspection and copying at the principal office 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-2014-034 and should be
submitted on or before May 2, 2014.
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08119 Filed 4-10-14; 8:45 am]
BILLING CODE 8011-01-P