[Federal Register Volume 81, Number 125 (Wednesday, June 29, 2016)]
[Notices]
[Pages 42386-42388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15322]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78143; File No. SR-CFE-2016-002]
Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice
of Proposed Rule Change To Make Clarifying Updates to Prohibited
Disruptive Trading Practices
June 23, 2016.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
[[Page 42387]]
(``Act''),\1\ notice is hereby given that on May 31, 2016 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 May
27, 2016.
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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
The Exchange proposes to amend its rule provisions related to
disruptive trading practices. The scope of this filing is limited
solely to the application of the rule amendments to security futures
traded on CFE. The only security futures that have been offered for
trading on CFE were traded under Chapter 16 of CFE's Rulebook, which is
applicable to Individual Stock Based and Exchange-Traded Fund Based
Volatility Index security futures. CFE does not currently list any
security futures for trading. The text of the proposed rule change is
attached as Exhibit 4 to the filing but is not attached to the
publication of this notice.
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 620 (Disruptive Trading Practices) prohibits various
disruptive trading practices and CFE Policy and Procedure XVIII of the
Policies and Procedures section of the CFE Rulebook lists various
factors that CFE may consider in assessing whether conduct violates
Rule 620. The proposed rule change proposes clarifying updates in
relation to these provisions with respect to security futures. These
rule amendments will also apply to all other products traded on CFE.
List of Rules Applicable to Market Participants Subject to CFE
Jurisdiction
CFE Rule 308(d) sets forth the list of rules which are applicable
to market participants that are not CFE Trading Privilege Holders
(``TPHs'') or related parties of TPHs and are subject to CFE
jurisdiction under CFE Rule 308 (Consent to Exchange Jurisdiction). The
proposed rule change adds Policy and Procedure XVIII to the list of
rules that already apply to these market participants. This is a
clarifying change since Rule 620 is one of the rules listed in Rule
308(d) and Policy and Procedure XVIII simply describes how CFE applies
Rule 620.
Submission of Trade at Settlement Orders
Policy and Procedure XVIII currently provides guidance on
prohibited disruptive trading practices. The proposed rule change adds
reference to an existing prohibition under CFE Rule 404A(c) as an
example of conduct that could also violate Rule 620. Rule 404A(c)
provides that during the time period between business days for a CFE
contract, entry into CFE's trading system of a Trade at Settlement
order in that contract prior to the time at which CFE's trading system
disseminates the pre-opening notice for that contract is prohibited.
Bona Fide Orders That Also Serve a Risk Management Purpose
Additionally, the amendment clarifies that a market participant is
not precluded from entering a bona fide order that is intended to be
executed where that execution may also serve some other risk management
purpose, such as verifying the flow of the executed trades through the
market participant's back-office systems.
The proposed rule change is consistent with similar updated
guidance provided by other designated contract markets (``DCMs'')
regarding disruptive practices.\3\
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\3\ These DCMs are Chicago Mercantile Exchange, Inc. (``CME''),
The Board of Trade of the City of Chicago, Inc., New York Mercantile
Exchange, Inc., and Commodity Exchange, Inc. Each submitted self-
certification rule filings to the CFTC pursuant to CFTC Regulation
Sec. 40.6(a) to effectuate their respective updated guidance. See,
e.g., CME Submission No. 15-436 (October 8, 2015), which is
available on the CFTC's Web site.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\4\ in general, and furthers the
objectives of Sections 6(b)(5) \5\ and 6(b)(7) \6\ in particular in
that it is designed:
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ 15 U.S.C. 78f(b)(7).
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To prevent fraudulent and manipulative acts and practices;
to promote just and equitable principles of trade; and
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.
The Exchange believes that the proposed rule change will benefit
market participants because it will provide greater clarity regarding
the Exchange's current prohibited disruptive trading practices and the
various factors that CFE may consider in assessing whether conduct
violates Rule 620. Additionally, the Exchange believes that the
proposed rule change will strengthen its ability to carry out its
responsibilities as a self-regulatory organization by providing further
guidance regarding the type of activity that is prohibited under CFE
Rule 620. In addition, the proposed rule change benefits market
participants by contributing to the protection of CFE's market and
market participants from abusive practices and to the promotion of a
fair and orderly market.
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. Specifically, the Exchange believes that the
proposed rule change will not burden competition because the new
clarifying updates to the prohibited disruptive trading practices will
apply equally to all market participants and will help to foster a fair
and orderly market. Additionally, the proposed rule change is designed
to make CFE's disruptive trading practice rules consistent with the
existing rules and guidance published by other DCMs.
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.
[[Page 42388]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change will become effective on June 13, 2016.
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.\7\
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\7\ 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-2016-002 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-CFE-2016-002. 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 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-CFE-2016-002, and should be
submitted on or before July 20, 2016.
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\8\ 17 CFR 200.30-3(a)(73).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Brent J. Fields,
Secretary.
[FR Doc. 2016-15322 Filed 6-28-16; 8:45 am]
BILLING CODE 8011-01-P