[Federal Register Volume 83, Number 42 (Friday, March 2, 2018)]
[Notices]
[Pages 9032-9035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04208]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82771; File No. SR-CBOE-2018-017]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 6.56, Compression Forums, To Provide Additional Opportunities To
Disclose Compression-List Positions Monthly
February 26, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 13, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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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 Rule 6.56, Compression Forums.
(additions are italicized; deletions are [bracketed])
* * * * *
Cboe Exchange, Inc. Rules
* * * * *
Rule 6.56. Compression Forums
(a)
(1) Prior to 4:30 p.m. Chicago time on the second, third, and
fourth to last business day of each calendar month, in a manner and
format determined by the Exchange, a Trading Permit Holder may provide
the Exchange with a list of open SPX options positions that it would
like to close through the compression forum for that calendar month
(``compression-list positions''). Trading Permit Holders may also
permit their Clearing Trading Permit Holders or the Clearing
Corporation to submit a list of these positions to the Exchange on
their behalf.
[[Page 9033]]
(2) Prior to the open of Regular Trading Hours on the last business
day, second to last business day, and third to last business day of
each calendar month, the Exchange will make available to all Trading
Permit Holders a list including the size of the offsetting compression-
list positions (including all possible combinations of offsetting
multi-leg positions) in each series (and multi-leg position) for which
both long and short compression-list positions have been submitted to
the Exchange (``compression-list positions file'').
(3)-(6) (No change).
(b)-(c) (No change).
The text of the proposed rule change is also available on the
Exchange's website (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 6.56 (Compression Forums) to
modify the frequency with which Trading Permit Holders (``TPHs'') may
submit compression-list positions to the Exchange.
Currently, TPHs may submit lists of existing SPX positions to the
Exchange that they wish to close during a compression forum
(``compression-list positions'') by submitting such positions to the
Exchange prior to 4:30 p.m. Chicago time on the fourth to last business
day of each calendar month.\5\ Following the submission of compression-
list positions and prior to the open of Regular Trading Hours on the
third to last business day of each calendar month, the Exchange makes
available to all TPHs a list including the size of the offsetting
compression-list positions (including all possible combinations of
offsetting multi-leg positions) in each series (and multi-leg position)
for which both long and short compression-list positions have been
submitted to the Exchange (``compression-list positions file'').\6\ In
addition to making the compression-list positions file available to all
TPHs, the Exchange: (1) Distributes the compress-list positions file to
TPHs that submitted compression-list positions; \7\ (2) distributes an
individualized list of multi-leg positions (``multi-leg positions
file'') to each TPH that submitted compression-list positions; \8\ and
(3) facilitates a process by which a TPH may grant the Exchange
permission to share the TPH's identity with contra-party TPHs that have
offsetting multi-leg positions.\9\
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\5\ See Rule 6.56. (a)(1).
\6\ See Rule 6.56(a)(2).
\7\ See Rule 6.56(a)(3).
\8\ See Rule 6.56(a)(4).
\9\ See Rule 6.56(a)(5).
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As previously noted, TPH compression-list positions are due by 4:30
p.m. Chicago time on the fourth to last business day of each calendar
month. Thus, compression-list positions submitted by TPHs and the
subsequent files and information generated from the compression-list
positions cannot account for positions that have been opened or closed
on the last three business days of the month (i.e., after the current
submission deadline). Therefore, the Exchange proposes to amend Rule
6.56 to allow TPHs to also submit compression-list positions to the
Exchange prior to 4:30 p.m. Chicago time on the second and third to
last business days of each calendar month. The Exchange believes that
allowing TPHs to reassess their positions at the end of the second and
third to last business day of each calendar month--and submit
compression list positions by 4:30 p.m. Chicago time on those days--
will allow TPHs to more efficiently and effectively close open
positions during compression forums.
The Exchange notes that it is not proposing to modify the process
by which the Exchange utilizes compression-list positions to generate
files. The Exchange will simply perform those processes three times
instead of once. For example, from the compression-list positions
submitted prior to 4:30 p.m. Chicago time on the fourth to last
business day, the Exchange will generate and distribute the files and
information described in Rule 6.56(a)(2)-(5), and such files and
information are likely to be used by TPHs in the compression forum that
occurs on the third to last business day. From the compression-list
positions submitted prior to 4:30 p.m. Chicago time on the third to
last business day, the Exchange will generate and distribute the files
and information described in Rule 6.56(a)(2)-(5), and such files and
information are likely to be used by TPHs in the compression forum that
occurs on the second to last business day. Finally, from the
compression-list positions submitted prior to 4:30 p.m. Chicago time on
the second to last business day, the Exchange will generate and
distribute the files and information described in Rule 6.56(a)(2)-(5),
and such files and information is likely to be used by TPHs in the
compression forum that occurs on the last business day. The Exchange
notes that if, for example, a TPH submits compression-list positions on
the fourth to last business day but not on the second or third to last
business day, the compression-list positions submitted on the fourth to
last business day will be used in the first file generation process,
not each time the Exchange generates files. In short, each time the
Exchange runs its file generation process the Exchange processes only
the compression-list positions specific to each deadline (i.e., all
compression list positions submitted prior to 4:30 p.m. Chicago time on
the fourth to last business day of the calendar month are processed
together; all compression list positions submitted prior to 4:30 p.m.
Chicago time on the third to last business day of the calendar month
are processed together; and so on).
The proposed rule change will allow TPHs to submit to the Exchange
more accurate information regarding their open positions in order to
facilitate the generation of a more accurate assessment of potential
offsetting interest, specifically, on the second and third to last
business days of the calendar month. Giving TPHs a more accurate
assessment of potential offsetting interest allows TPHs to more
efficiently and effectively execute closing transactions in compression
forums on the last business day and the second to last business day of
the calendar month. The ability to more efficiently and effectively
execute closing transactions in compression forums helps to alleviate
the adverse impact of bank capital requirements.
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
[[Page 9034]]
thereunder applicable to the Exchange and, in particular, the
requirements of Section 6(b) of the Act.\10\ Specifically, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
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In particular, the proposed rule change will allow TPHs to submit
to the Exchange more accurate information regarding their open
positions in order to facilitate the generation of a more accurate
assessment of potential offsetting interest, specifically, on the
second and third to last business days of the calendar month. Giving
TPHs a more accurate assessment of potential offsetting interest allows
TPHs to more efficiently and effectively execute closing transactions
in compression forums on the last business day and the second to last
business day of the calendar month, which, in general, helps to protect
investors and the public interest because closing positions via the
compression process serves to alleviate the adverse impact of bank
capital requirements.
B. Self-Regulatory Organization's Statement on Burden on Competition
Cboe Options 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. The proposed change would
encourage the closing of positions, which, once closed, may serve to
alleviate the capital requirement constraints on TPHs and improve
overall market liquidity by freeing capital currently tied up in
certain SPX positions. The Exchange does not believe that the proposed
rule changes 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 applies only to the trading of SPX
options, which are exclusively-listed on Cboe Options. To the extent
that the proposed changes make the Exchange a more attractive
marketplace for market participants at other exchanges, such market
participants are eligible to participant through Cboe Options TPHs.
Furthermore, participation in compression forums is completely
voluntary and open to all TPHs.
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: (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, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \15\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposal may become operative upon filing. The Commission notes
that the proposal is not modifying the procedures for collecting or
distributing compression-list positions, but is only providing
additional opportunities for TPHs to disclose their positions using
existing procedures. The Exchange has stated that the proposed rule
change, by giving a more accurate assessment of potential offsetting
interest, specifically on the second and third to last business days of
the calendar month, will allow TPHs to more efficiently and effectively
execute closing transactions in SPX options. Therefore, the Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposal operative upon filing.\17\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ 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: (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 to determine whether the
proposed rule should be approved or disapproved.
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-2018-017 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-2018-017. 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 website (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
[[Page 9035]]
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 website 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
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of CBOE. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2018-017 and should be submitted on
or before March 23, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04208 Filed 3-1-18; 8:45 am]
BILLING CODE 8011-01-P