10026 Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 

30 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3COA is a process for auctioning eligible complex 

orders, including stock-option orders, for price 

improvement. See Rule 6.53C(d) and .06(d). 

4This provision for a designated broker-dealer is 

similar to a provision in the International Securities 

Exchange Rule 722.02, except that CBOE’s proposed 

provision makes it clear the broker-dealer(s) that are 

designated by the Exchange to perform this function 

are not affiliated with CBOE. 

5 17 CFR 242.611(a). 

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 20549–1090, 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 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–C2– 

2012–004, and should be submitted on 

or before March 13, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3901 Filed 2–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66394; File No. SR–CBOE– 

2012–005] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of a 

Proposed Rule Change Related to 

Stock-Option Processing 

February 14, 2012. 

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 February 

7, 2012, the Chicago Board Options 

Exchange, Incorporated (‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange is proposing to amend 

its complex order processing rules to 

revise the procedures for electronically 

processing stock-option orders. The text 

of the rule proposal is available on the 

Exchange’s Web site (http:// 

www.cboe.org/legal), at the Exchange’s 

Office of the Secretary and at the 

Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to revise is 

[sic] procedures for electronically 

processing stock-option orders under 

Rule 6.53C in order to (i) revise the 

procedures for routing the stock leg of 

a stock-option order; (ii) modify the 

procedure for executing for [sic] stockoption orders to no longer permit 

‘‘legging,’’ except in one limited context; 

(iii) modify the default electronic 

allocation algorithm applicable for 

stock-option orders in the complex 

order book (‘‘COB’’) and the complex 

order RFR auction (‘‘COA’’); 3 (iv) 

incorporate an additional price check 

parameter specific to the electronic 

processing of stock-option orders and 

modify an existing price check 

parameter and re-COA features 

(described in more detail below) to 

apply to stock-option orders; and (v) 

make other changes to reorganize and 

simplify the rule text. In addition, the 

Exchange is proposing certain changes 

to simplify the definitions for complex 

orders, including stock-option orders, 

subject to electronic processing under 

Rule 6.53C. 

Designated Broker-Dealer(s) 

The first purpose of this proposed 

rule change is to revise the procedures 

for routing the stock leg of a stockoption order. Interpretation and Policy 

.06 to Rule 6.53C, Complex Orders on 

the Hybrid System, currently describes 

the procedure for processing electronic 

stock-option orders. The procedure 

provides that the stock portion of a 

stock-option order shall be 

electronically executed on the CBOE 

Stock Exchange, LLC (‘‘CBSX,’’ CBOE’s 

stock execution facility) consistent with 

CBSX order execution rules. The 

Exchange proposes to revise the process 

to instead provide that the Exchange 

will electronically transmit orders 

related to a stock leg for execution by a 

broker-dealer designated by the 

Exchange (a ‘‘designated broker-dealer’’) 

on behalf of the parties to the trade. The 

Exchange will transmit the underlying 

stock leg order to a designated brokerdealer for execution once the Exchange 

trading system determines that a stockoption order trade is possible and at 

what net prices. The stock leg 

component will be transmitted to the 

designated broker-dealer as two paired 

orders with a designated limit price, 

subject to one limited exception 

pertaining to the stock leg of an 

unmatched market stock-option order 

(which is described in more detail 

below). The designated broker-dealer 

will act as agent for the stock leg of the 

stock-option orders. The designated 

broker-dealer may determine to match 

the orders on an exchange or ‘‘over-thecounter.’’ 

To participate in this automated 

process for stock-option orders, an 

Exchange Trading Permit Holder 

(‘‘TPH’’) must enter into a customer 

agreement with one or more designated 

broker-dealers that are not affiliated 

with the Exchange.4 In addition, TPHs 

may only submit complex orders with a 

stock component if such orders comply 

with the Qualified Contingent Trade 

Exemption (the ‘‘QCT Exemption’’) from 

Rule 611(a) of Regulation NMS.5 TPHs 

submitting such complex orders 

represent that such orders comply with 

the QCT Exemption. The Exchange 

intends to address fees related to routing 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 10027 

6See existing Rule 6.53C.01(a) and proposed 

changes thereto. 

7See Securities Exchange Act Release No. 57620 

(April 4, 2008), 73 FR 19271 (April 9, 2008) (‘‘QCT 

Release’’); see also Securities Exchange Act Release 

No. 54389 (August 31, 2006), 71 FR 52829 

(September 7, 2006). 

8As discussed in more detail below, the stock 

component of all stock-option orders will be 

transmitted to a designated routing broker as paired 

stock orders with a specified limit price, with one 

limited exception. The exception pertains to the 

stock leg of an unmatched market stock-option 

order. In the limited circumstances when the 

Exchange transmits the stock component leg of an 

unmatched market stock-option order to the 

designed [sic] routing broker, such a stock 

component leg will be subject to NBBO pricing (and 

therefore not be processed subject to the QCT 

Exemption). 

9Stock-option orders may be represented in open 

outcry by floor brokers or Exchange PAR Officials. 

See, e.g., Rules 6.45A(b) and 6.45B(b). 

10Currently under Rule 6.53C complex orders, 

including stock-option orders, are eligible to trade 

with other complex orders or by ‘‘legging’’ with the 

individual orders and quotes residing in the EBook 

for the individual component legs provided the 

complex order can be executed in full (or in a 

permissible ratio) by the orders and quotes in the 

EBook in those individual component legs. In the 

case of stock-option orders that are ‘‘legged,’’ the 

stock leg would trade with CBSX’s EBook and the 

option series leg(s) with the CBOE EBook. 

the stock portion of stock-option trades 

in a separate rule change filing. 

The Exchange believes that the 

electronic communication of the orders 

by the Exchange to the designated 

broker-dealer is a more efficient means 

for processing stock-option orders than 

the system of routing orders to CBSX. 

The designated broker-dealer will be 

responsible for the proper execution, 

trade reporting and submission to 

clearing of the stock trade that is part of 

a stock option order. In this regard, once 

the orders are communicated to the 

broker-dealer for execution, the brokerdealer has complete responsibility for 

determining whether the orders may be 

executed in accordance with all the 

rules applicable to execution of equity 

orders, including compliance with the 

applicable short sale, trade-through and 

trade reporting rules. As with the 

current procedure, if the broker-dealer 

cannot execute the equity orders at the 

designated price, the stock-option 

combination order will not be executed 

on the Exchange.6

With respect to trade throughs in 

particular, the Exchange believes that 

the stock component of a stock-option 

order is eligible for the QCT Exemption 

from Rule 611(a) of Regulation NMS. A 

Qualified Contingent Trade (‘‘QCT’’) is 

a transaction consisting of two or more 

component orders, executed as agent or 

principal, that satisfy the six elements 

in the Commission’s order exempting 

QCTs from the requirements of Rule 

611(a), which requires trading centers to 

establish, maintain, and enforce written 

policies and procedures that are 

reasonably designed to prevent tradethroughs.7 The Exchange believes that 

the stock portion of a complex order 

under this proposal complies with all 

six requirements.8 Moreover, as 

explained below, CBOE’s Hybrid 

System will validate compliance with 

each requirement such that any matched 

order received by a designated brokerdealer under this proposal has been 

checked for compliance with the 

exemption to the extent noted below: 

(1) At least one component order is in 

an NMS stock: The stock component 

must be an NMS stock, which is 

validated by the Hybrid System; 

(2) All components are effected with 

a product or price contingency that 

either has been agreed to by the 

respective counterparties or arranged for 

by a broker-dealer as principal or agent: 

A complex order, by definition, is 

executed at a single net credit/debit 

price and this price contingency applies 

to all the components of the order, such 

that the stock price computed and sent 

to the designated broker-dealer allows 

the stock order to be executed at the 

proper net debit/credit price based on 

the execution price of each of the option 

legs, which is determined by the Hybrid 

System; 

(3) The execution of one component 

is contingent upon the execution of all 

other components at or near the same 

time: Once a stock-option is accepted 

and validated by the Hybrid System, the 

entire package is processed as a single 

transaction and each of the option leg(s) 

and stock components are 

simultaneously processed; 

(4) The specific relationship between 

the component orders (e.g., the spread 

between the prices of the component 

orders) is determined at the time the 

contingent order is placed: Stock-option 

orders, upon entry, must have a size for 

each component and a net debit/credit 

price (or market price), which the 

Hybrid System validates and processes 

to determine the ratio between the 

components; an order is rejected if the 

net debit/credit price (or market price) 

and size are not provided on the order; 

(5) The component orders bear a 

derivative relationship to one another, 

represent different classes of shares of 

the same issuer, or involve the securities 

of participants in mergers or with 

intentions to merge that have been 

announced or since cancelled: Under 

this proposal, the stock component must 

be the underlying security respecting 

the option leg(s), which is validated by 

the Hybrid System; and 

(6) The transaction is fully hedged 

(without regard to any prior existing 

position) as a result of the other 

components of the contingent trade: 

Under this proposal and as discussed in 

more detail below, the ratio between the 

options and stock must be a conforming 

ratio (e.g., largest option leg to stock 

cannot exceed a ratio of eight-to-one and 

multiple options legs cannot exceed a 

ratio of three-to-one), which the Hybrid 

System validates, and which under 

reasonable risk valuation 

methodologies, means that the stock 

position is fully hedged. In addition, if 

all option and stock component legs are 

on the same side of the market, which 

the Hybrid System also validates, then 

the order will not be eligible for 

electronic processing pursuant to Rule 

6.53C. 

Furthermore, as noted above, 

proposed Rule 6.53C.06(a) provides that 

TPHs may only submit complex orders 

with a stock component if such orders 

comply with the QCT Exemption. TPHs 

submitting such complex orders with a 

stock component represent that such 

orders comply with the QCT Exemption. 

Thus, the Exchange believes that 

complex orders consisting of a stock 

component will comply with the 

exemption and that the Hybrid System 

will validate such compliance as noted 

above to assist its designated routing 

broker(s) in carrying out its 

responsibilities as agent for these orders. 

The Exchange believes the new 

process offers effective and efficient 

automatic execution for both the options 

and stock components of a stock-option 

order and it should promote just and 

equitable principles of trade and remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

enhancing the electronic processing of 

the stock-option orders. However, this 

process is not exclusive. The Exchange 

notes that TPHs will be able to continue 

using open outcry procedures for 

executing stock-option orders if they 

choose to do so.9 TPHs can also utilize 

other exchanges’ systems (several of 

which offer stock-option processing) or 

avoid using stock-option orders. 

Legging 

In conjunction with this change, the 

second purpose of this proposed rule 

change is to revise the stock-option 

procedure to provide that ‘‘legging’’ 

against the individual orders and quotes 

in the CBOE and CBSX electronic books 

(‘‘EBooks’’) will no longer occur for 

stock-option orders,10 except that that 

legging may occur in the limited 

instance provided in Rule 6.53C.06(d) 

for eligible market orders that have been 

subject to a COA (which market order 

mstockstill on DSK4VPTVN1PROD with NOTICES

10028 Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 

11The Exchange notes that at least one other 

options exchange that offers electronic complex 

order processing does not ‘‘leg’’ stock-option orders. 

See, e.g., NASDAQ OMX PHLX LLC (‘‘Phlx’’) Rule 

1080.08(f)(iii)(A)(1). 12That is not to say that the Exchange would not 

determine to permit additional ‘‘legging’’ of stockoption orders under Rule 6.53C in the future. Any 

such change to the electronic processing of stockoption orders under Rule 6.53C would be subject 

to a separate rule change filing. 

13For purposes of this legging functionality, an 

‘‘eligible market order’’ means a stock-option order 

that is within the designated size and order type 

parameters, determined by the Exchange on a classby-class basis, and for which the national best bid 

or offer (‘‘NBBO’’) is within designated size and 

price parameters, as determined by the Exchange 

for the individual leg. The rule currently provides 

that the designated NBBO price parameters will be 

determined based on a minimum bid price for sell 

orders and a maximum offer price for buy orders. 

The Exchange may also determine to limit the 

trading times within regular trading hours that the 

legging functionality will be available. See Rule 

6.53C.06(d). Pursuant to Rule 6.53C.01, any 

determination by the Exchange on these parameters 

will be announced to TPHs via Regulatory Circular. 

14Pursuant to Rule 6.53C.01, any determination 

by the Exchange to route stock-option market orders 

in this manner will be announced to TPHs via 

Regulatory Circular. 

15See, e.g., CBOE’s Rules 6.14A, Hybrid Agency 

Liaison 2 (HAL2), and 6.14B, Order Routing to 

Other Exchanges, and CBSX’s Rule 52.6, Processing 

of Round-lot Orders. 

16See note 13, supra, for a description of ‘‘eligible 

market orders.’’ The Exchange is proposing to 

eliminate an eligible market order provision that 

permits the Exchange to specify a designated NBBO 

price parameter based on a maximum offer price for 

buy orders. The Exchange has no intention of 

utilizing this parameter feature and is therefore 

proposing to delete it from the rules at this time. 

(By contrast, the Exchange will maintain a 

provision that permits the Exchange to specify a 

designated NBBO price parameter based on a 

minimum bid price for sell orders.) See proposed 

changes to Rule 6.53C.06(d). 

17The allocation algorithms for the individual 

series legs include price-time, pro-rata, and the 

ultimate matching algorithm (‘‘UMA’’) base 

priorities and a combination of various optional 

priority overlays pertaining to public customer 

priority, Market-Maker participation entitlements, 

small order preference, and market turner. See 

Rules 6.45A, Priority and Allocation of Equity 

Option Trades on the CBOE Hybrid System, and 

6.45B, Priority and Allocation of Trades in Index 

Options and Options on ETFs on the CBOE Hybrid 

System. 

process is proposed to be revised as 

described below).11 The Exchange 

believes that limiting the electronic 

trading of stock-option orders pursuant 

to Rule 6.53C to executions against 

other stock-option orders in the manner 

proposed will provide for more efficient 

execution and processing of stockoption orders and will assist with the 

maintenance of fair and orderly markets 

by helping to mitigate the potential risks 

associated with legging stock-option 

orders, including the risk of one leg of 

the stock-option order going unexecuted 

(and thereby not achieving a complete 

stock-option order execution and having 

a partial position that is unhedged).12

A limited exception will continue to 

apply for certain market stock-option 

orders, with certain modifications. 

Currently, under Rule 6.53C.06(d), if at 

the conclusion of a COA a stock-option 

order that is an eligible market order 13

cannot be filled in whole or in a 

permissible ratio, then any remaining 

balance of the option leg(s) routes to the 

CBOE Hybrid Trading System for 

processing as a simple market order(s) 

consistent with CBOE’s order execution 

rules and any remaining balance of the 

stock leg routes to CBSX for processing 

as a simple market order consistent with 

CBSX’s order execution rules.14 This 

alternate legging functionality is 

intended to assist in the automatic 

execution and processing of stockoption orders that are market orders. 

The Exchange notes that when a stockoption order is legged in this manner, it 

is possible for CBOE to route the option 

leg(s) to another options exchange and/ 

or for CBSX to route the stock leg to 

another stock exchange, consistent with 

their respective rules.15 As proposed to 

be revised, the Exchange may determine 

to continue to make this ‘‘legging’’ 

functionality available for stock-option 

orders that are eligible market orders. 

The legging functionality will continue 

to operate in the same manner, with the 

exception that the stock leg will no 

longer route to CBSX and an order 

eligibility provision will be eliminated 

from the rule.16 Instead, the Exchange 

will electronically transmit the stock leg 

to a designated broker-dealer, who will 

represent the order on behalf of the 

party that submitted the stock-option 

order. 

This legging functionality is intended 

to assist in the automatic execution and 

processing of stock-option orders that 

are market orders. The Exchange 

believes the order eligibility parameters 

provide the Exchange with the 

flexibility to assist with the 

maintenance of orderly markets by 

helping to mitigate the potential risks 

associated with legging stock option 

orders, e.g., the risk of a [sic] order 

drilling through multiple price points 

on another exchange (thereby resulting 

in execution at prices that are away 

from the NBBO and potentially 

erroneous), and/or the risk of one leg of 

the stock-option order going unexecuted 

(thereby not achieving a complete stockoption order execution and having a 

partial position that is unhedged). 

Allocation Algorithms 

The third purpose of this proposed 

rule change is to modify the default 

electronic allocation algorithm 

applicable for stock-option orders in 

COB and COA. With respect to COB, 

Interpretation and Policy .06(b), (c) and 

(f), taken together, currently provide 

that stock-option orders submitted to 

COB will trade in the following 

sequence: (i) Public customer orders 

resting in the EBook in each of the 

individual options leg(s) of a stockoption order have first priority; (ii) 

stock-option orders resting in COB have 

second priority, with public customer 

priority and then time priority; and (iii) 

individual orders and quotes resting in 

the EBook in each of the individual 

options leg(s) have third priority 

provided the order can be executed in 

full or in a permissible ratio. Because 

the Exchange is proposing to no longer 

permit ‘‘legging’’ of orders in COB 

against the individual orders and quotes 

in the component legs, the Exchange is 

proposing to the [sic] amend the 

algorithm with respect to COB to 

provide that stock-option orders that are 

marketable against each other will 

automatically execute. In the event there 

are multiple stock-option orders at the 

same price, they will be allocated 

pursuant to the rules of trading priority 

otherwise applicable to incoming 

electronic orders in the individual series 

legs (or such other allocation algorithm 

as the Exchange may designate pursuant 

to Rule 6.53C.09).17

As a condition for a stock-option 

order to execute against another stockoption order in COB, the execution must 

be at a net price where the individual 

options series leg(s) of the stock-option 

order has priority over the individual 

orders and quotes residing in the CBOE 

EBook (the ‘‘EBook Priority Condition’’). 

To satisfy the EBook Priority Condition, 

the individual option series leg(s) of a 

stock-option order (i) must not trade 

inferior to CBOE’s best bid (offer) in the 

individual component series, and (ii) 

must not trade at CBOE’s best bid (offer) 

in the individual component series if 

one or more public customer orders are 

resting at the best bid (offer) in each of 

the component series and the stockoption order could otherwise be 

executed in full (or in a permissible 

ratio). 

Again, because there will be no 

legging, the Exchange is also proposing 

to amend the algorithm with respect to 

COA. Interpretation and Policy .06(b), 

(d) and (f), taken together, currently 

provide that stock-option orders 

submitted to COA will trade in the 

following sequence: (i) Public customer 

orders resting in the EBook in each of 

the individual options leg(s) of a stockoption order have first priority; (ii) 

public customer stock-option orders 

resting in COB before, or that are 

received during, the COA Response 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 10029 

18The COA ‘‘Responses [sic] Time Interval’’ 

means the period of time during which responses 

to the RFR may be entered. The Exchange 

determines the length of the Response Time Interval 

on a class-by-class basis, however, the duration 

shall not exceed three (3) seconds. See Rule 

6.53C(d)(iii)(2). 

19The Exchange notes that, in these 

circumstances when a resting stock-option order 

becomes marketable, COA will automatically 

initiate regardless of whether a TPH has requested 

that the stock-option order be COA’d pursuant to 

Rule 6.53C.04. In this regard, the Exchange notes 

that, currently, all of its TPHs have elected to have 

their COA-eligible orders COA’d. In addition, the 

Exchange notes that other markets have programs 

in place that provide for the automatic auctioning 

of complex orders. See, e.g., Phlx Rule 1080(e)(i)(A) 

which, among other things, provides that a complex 

order live auction (‘‘COLA’’) will initiate if the Phlx 

system receives a complex order that improves the 

Phlx complex order best debit or credit price 

respecting the specific complex order strategy that 

is the subject of the complex order. During a COLA, 

Phlx market participants may bid and offer against 

the COLA-eligible order pursuant to the Phlx Rule. 

20However, if the Exchange has activated the 

market stock-option order ‘‘legging’’ functionality 

and the and the [sic] order is eligible, in lieu of 

routing to PAR or a booth, any remaining balance 

of the option leg will route to the CBOE Hybrid 

Trading System for processing as a simple market 

order and any remaining balance of the stock leg 

will be electronically transmitted by the Exchange 

to a designated broker-dealer, who will represent 

the order on behalf of the party that submitted the 

stock-option order. See note 13, supra, and 

surrounding discussion on Legging. 

Time Interval 18 and public customer 

responses collectively have second 

priority, with multiple orders ranked by 

time priority; (iii) non-public customer 

stock-option orders resting in the COB 

before the COA Response Time Interval 

have third priority, with multiple orders 

subject to the UMA allocation algorithm 

described in Rule 6.45A or 6.45B, as 

applicable; (iv) non-public customer 

stock-option orders resting in COB that 

are received during the Response Time 

Interval and non-public customer 

responses collectively have fourth 

priority, with multiple orders subject to 

the Capped UMA (‘‘CUMA’’) allocation 

described in Rule 6.45A or 6.45B, as 

applicable; and (iv) all other individual 

orders and quotes residing in the EBook 

have fifth priority, with multiple 

interest subject to the UMA allocation 

algorithm described in Rule 6.45A or 

6.45B, as applicable. Because the 

Exchange is proposing to no longer 

permit ‘‘legging’’ of orders in COA 

against the individual orders and quotes 

in the component legs (except in the 

limited instance involving market 

orders described above), items (i) and 

(vi) above will no longer be applicable. 

Instead, the Exchange is proposing to 

amend the algorithm with respect to 

COA to provide that, in the event there 

are multiple stock-option orders at the 

same price, they will trade in the 

following sequence: (i) Public customer 

stock-option orders resting in COB 

before, or that are received during, the 

COA Response Time Interval and public 

customer responses collectively have 

first priority, with multiple orders 

ranked by time priority; (ii) non-public 

customer stock-option orders resting in 

the COB before the COA Response Time 

Interval have second priority, with 

multiple orders subject to the UMA 

allocation algorithm described in Rule 

6.45A or 6.45B, as applicable; and (iii) 

non-public customer stock-option 

orders resting in COB that are received 

during the Response Time Interval and 

non-public customer responses 

collectively have third priority, with 

multiple orders subject to the CUMA 

allocation described in Rule 6.45A or 

6.45B, as applicable. 

As with COB, as a condition for a 

stock-option order to execute against 

another stock-option order through 

COA, the execution must satisfy the 

EBook Priority Condition described 

above. 

The system also has some features 

that would apply to the extent that a 

stock-option order is or becomes 

marketable. First, to the extent that a 

marketable stock-option order cannot 

automatically execute in full (or in a 

permissible ratio) when it is routed to 

COB or after being subject to COA 

because there are individual orders and 

quotes residing in the EBook that have 

priority (but the order resting in COB 

would not trade against them because 

there will be no ‘‘legging’’), any part of 

the order that may be executed would 

be executed automatically and the part 

that cannot automatically execute 

would be routed on a class-by-class 

basis to PAR or, at the order entry firm’s 

discretion, to the order entry firm’s 

booth. If an order is not eligible to route 

to PAR, then the remaining balance 

would be cancelled. Second, to the 

extent that a stock-option order resting 

in COB becomes marketable against the 

derived net market (and cannot 

automatically execute because there is 

no ‘‘legging’’), the full order would be 

subject to COA (and the processing 

described above). For purposes of this 

feature, the ‘‘derived net market’’ for a 

given stock-option strategy would be 

calculated using the Exchange’s best bid 

or offer in the individual option series 

leg(s) and the NBBO in the stock leg. 

The Exchange notes this feature would 

only be applicable to resting stockoption orders that become marketable 

against the derived net market. This 

feature would not be applicable to 

resting stock-option [sic] that would 

become marketable with other stockoption orders. Having the system 

automatically initiate a COA once such 

a stock-option order resting in COB 

becomes marketable against the derived 

net market provides an opportunity for 

other market participants to match or 

improve the net price and allows for an 

opportunity for an automatic execution 

before a marketable stock-option order 

is routed for manual handling to PAR or 

a booth.19 As noted above, after being 

subject to COA, any part of the order 

that may be executed would be executed 

automatically and the part of the order 

that cannot automatically execute 

would be routed on a class-by-class 

basis to PAR or, at the order entry firm’s 

discretion, to the order entry firm’s 

booth. If an order is not eligible to route 

to PAR, then the remaining balance 

would be cancelled. 

The following examples illustrate the 

operation of the proposed system 

functionality: 

Example 1: Assume an incoming market 

stock-option order for 75 units is submitted 

to COA, where the strategy involves the sale 

of 75 call contracts and purchase of 7,500 

stock shares. At the conclusion of COA, 

assume the best net price response is $9.13 

for 50 units and the best derived net market 

price is 9.15 for 100 units. The incoming 

market order to purchase 75 units of the 

stock-option strategy would receive a partial 

execution of 50 units at a net price of $9.13. 

Because the remaining 25 units are 

marketable against individual orders and 

quotes in the EBook, the 25 units would be 

routed to PAR or, at the order entry firm’s 

discretion, to the order entry firm’s booth, for 

manual handling. If the order would 

otherwise route to PAR but is not eligible to 

route to PAR, then the remaining 25 units 

will be cancelled.20

Example 2: Assume a stock-option order 

for 75 units is resting in COB, where the 

strategy involves the sale of 75 call contracts 

and purchase of 7,500 stock shares at a net 

debit price of $9.13. By virtue of the fact that 

it is resting [sic] the COB, the stock-option 

order is not marketable—meaning there are 

no orders or quotes within the derived net 

market price or other stock-option orders 

within COB against which the resting stockoption order may trade. Assume there are no 

other stock-option orders representing [sic] in 

the COB for the strategy and also assume the 

best derived net market price for the strategy 

is a net price of $9.15 per unit for 100 units. 

If the price of the component option series 

leg or the stock is thereafter updated such 

that the derived net market price becomes 

$9.13 per unit for 100 units, then the full size 

of the resting stock-option order will become 

marketable but cannot automatically execute. 

As a result, the full size (75 units) of the 

resting stock-option order would be subject 

to COA. At the conclusion of COA, any part 

of the stock-option order that may be 

executed against other stock-option orders or 

auction responses will be automatically 

executed. Any part of the order that is 

marketable and cannot automatically execute 

mstockstill on DSK4VPTVN1PROD with NOTICES

10030 Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 

21 It should be noted that this is simply a 

parameter for determining whether a stock-option 

order will be subject to automatic execution, or 

routed to PAR, a booth or cancelled. A stock-option 

order that is subject to automatic execution remains 

subject to the applicable priority requirements 

prescribed in Rule 6.53C. 

It should also be noted that the Exchange has not 

proposed to prescribe a minimum acceptable tick 

distance for this parameter (e.g., the acceptable tick 

distance may be established at 0). This will provide 

the Exchange with the flexibility to set the price 

check feature so that automatic executions of stockoption orders must be within the derived net 

market, which considers the Exchange’s best bid or 

offer for the options component leg(s) and the 

NBBO for the stock component leg. The Exchange 

believes it is reasonable and appropriate to utilize 

the Exchange best bid and offer in the calculation 

as the option component leg(s) are not permitted to 

trade at a price inferior to the Exchange’s best bid 

and offer. The Exchange also believes it is 

reasonable and appropriate to consider the NBBO 

for the stock component leg in the calculation as the 

NBBO should serve as a reasonable proxy for what 

may be considered a reasonable price for the 

automatic execution of the stock component leg. 

However, the Exchange also recognizes that some 

range outside the NBBO may also be appropriate for 

determining whether an automatic execution 

should occur as the QCT Exemption does not 

require the stock component leg of a qualifying 

stock-option order to be executed at the NBBO. The 

proposed parameter therefore provides the 

Exchange with the flexibility to determine to utilize 

the NBBO (which equates to an acceptable tick 

distance of 0) or some range outside the NBBO 

(which equates to the derived net part plus/minus 

an acceptable tick distance of 1, 2, 3 or some other 

number of ticks) for determining whether to 

automatically execute a stock-option order. 

22AIM, SAM and CTC are mechanisms that may 

be used to cross two paired orders. COA is a 

mechanism that may be used to expose an unpaired 

complex order for price improvement. Orders 

submitted for COA, AIM or SAM processing are 

exposed for price improvement through an auction 

(and thus other market participants may submit 

responses), whereas orders submitted for CTC 

processing are executed immediately without 

exposure. 

(because the stock-option order cannot ‘‘leg’’ 

against the derived net market) will be routed 

on a class-by-class basis to PAR or, at the 

order entry firm’s discretion, to the order 

entry firm’s booth. If an order is not eligible 

to route to PAR, then the remaining balance 

will be cancelled. To the extent any part of 

the stock-option order is not marketable, it 

will continue resting in COB. 

Price Protection and Re-COA Features 

The fourth purpose of this proposed 

rule change is to adopt a new price 

check parameter applicable to the 

electronic processing of stock-option 

orders and to make some modification 

to an existing price check parameter to 

address stock-option orders. In 

particular, the Exchange is proposing to 

provide that, on a class-by-class basis, 

the Exchange may determine (and 

announce to TPHs via Regulatory 

Circular) to not automatically execute a 

stock-option order that is marketable if, 

following COA, the execution would not 

be within the acceptable derived net 

market for the strategy that existed at 

the start of COA. As indicated above, a 

‘‘derived net market’’ for a strategy will 

be calculated using the Exchange’s best 

bid or offer in the individual option 

series leg(s) and the NBBO in the stock 

leg. An ‘‘acceptable derived net market’’ 

for a strategy will be calculated using 

the Exchange’s best bid or offer in the 

individual option series leg(s) and the 

NBBO in the stock leg plus/minus an 

acceptable tick distance. The 

‘‘acceptable tick distance’’ will be 

determined by the Exchange on a classby-class and premium basis.21 Such a 

stock-option order will route on a classby-class basis to PAR or, at the order 

entry firm’s discretion, to the order 

entry firm’s booth. If an order is not 

eligible to route to PAR, then the 

remaining balance will be cancelled. 

The Exchange believes that users are 

more concerned about obtaining a net 

price execution of their stock-option 

strategy orders than about achieving an 

execution of the stock leg at the NBBO. 

The price check parameter, however, 

would serve to prevent automatic 

executions at extreme prices beyond the 

NBBO. 

The following example illustrates the 

operation of the proposed system 

functionality: 

Example 3: Assume that at the start of COA 

the CBOE best bid and offer for the option 

leg of a stock-option strategy is $1.00–$1.20 

(100 × 100) and the NBBO for the stock leg 

of the strategy is $10.05–$10.15 (10,000 × 

10,000). Thus, the derived net market for the 

strategy is $8.85–$9.15 (calculated as $1.20– 

$10.05 and ¥$1.00 + $10.15, respectively). In 

addition, assume that the acceptable tick 

distance for the stock leg is two ticks ($0.02). 

Under this parameter, an order to sell stock 

could not execute at a price below $10.03 

and an order to buy stock could not execute 

at a price above $10.17. Thus, the acceptable 

derived net market for the strategy would be 

calculated as $8.83–$9.17 (calculated as 

$1.20–$10.03 and ¥$1.00 + $10.17, 

respectively). Under this scenario, following 

COA, a marketable stock-option order to sell 

the option series and buy the stock that 

would trade with another stock-option order 

at [sic] net debit price of $9.17 (within the 

acceptable derived net market for the 

strategy) will be executed. However, a 

marketable stock-option [sic] to sell the 

option series and buy the stock that would 

trade with another stock-option order at a net 

debit price of $9.18 ($0.01 outside the 

acceptable derived net market for the 

strategy) will be routed to PAR or, at the 

order entry firm’s discretion, to the order 

entry firm’s booth. If an order is not eligible 

to route to PAR, then the remaining balance 

will be cancelled. 

In addition to the foregoing, 

additional parameters would apply. In 

classes where these price check 

parameters are available, they will also 

be available for COA stock-option 

responses under Rule 6.53C(d), stockoption orders and responses under 

Rules 6.74, Automated Improvement 

Mechanism (‘‘AIM’’), and 6.74B, 

Solicitation Auction Mechanism 

(‘‘SAM’’), or AIM customer-to-customer 

immediate cross of stock-option orders 

under Rule 6.74A.08 (‘‘CTC’’).22 Under 

these provisions, such paired stockoption orders and responses would not 

be accepted. In this regard, if any paired 

stock-option order submitted by an 

order entry firm for AIM, SAM or CTC 

processing exceeds the parameters, then 

both the order that exceeds the 

parameters and the paired contra-side 

order would not be accepted regardless 

of whether the contra-side order exceeds 

the parameters. However, to the extent 

that only the paired contra-side order 

submitted by an order entry firm for 

AIM or SAM processing would exceed 

the price check parameter, the paired 

contra-side order would not be accepted 

while the original Agency Order would 

not be accepted or, at the order entry 

firm’s discretion, continue processing as 

an unpaired stock-option order (e.g., the 

original Agency Order would route to 

COB or COA for processing). The 

proposal also provides that, to the 

extent a contra-side order or response is 

marketable, its price will be capped at 

the price inside the acceptable derived 

net market. 

Example 4: Assume the acceptable derived 

net market is $1.00–$1.20. Also assume two 

paired stock-option orders are submitted to 

an AIM auction. If the original Agency Order 

to sell the option leg and buy the stock is a 

market order, but the contra-side order to buy 

the option leg and sell the stock has a net 

credit price of $1.25, the AIM auction will 

not initiate because the contra-side order 

does not satisfy the price check parameter. 

Such a contra-side order would not be 

accepted because it is outside the acceptable 

net market price range. The paired original 

Agency Order would either not be accepted 

along with the contra-side order or, at the 

order entry firm’s discretion, would continue 

processing as an unpaired complex order. By 

comparison, if the contra-side order has a net 

credit price of $0.95, the price will be capped 

at $1.01. 

The Exchange is also proposing to 

modify its existing ‘‘market width’’ 

parameters under Rule 6.53C.08(a) to 

extend the application of the individual 

series leg width parameters to stockoption orders. Under this price check 

parameter, eligible market complex 

orders will not be automatically 

executed if the width between the 

Exchange’s best bid and best offer in any 

individual series leg is not within an 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 10031 

23The ‘‘acceptable price range’’ is determined by 

the Exchange on a class-by-class basis (and 

announced to TPHs via Regulatory Circular) on a 

series by series basis for each series comprising a 

complex order and is currently defined to be no less 

than 1.5 times the corresponding bid/ask 

differentials for individual series legs determined 

by the Exchange pursuant to Rule 8.7(b)(iv). See 

also SR–CBOE–2012–004 (wherein the Exchange is 

proposing, among other things, to expand the 

application of this price check parameter to include 

marketable limit orders (currently the rule text only 

addresses market complex orders) and to specify 

particular minimum acceptable price ranges within 

the rule that are equal to 1.5 times the bid/ask 

differential requirements that the Exchange had in 

its rules at the time the price check parameters were 

adopted and are the same as the acceptable price 

range parameters set forth in Rule 6.13(b)(v)–(vi)). 

24This feature will apply regardless of whether 

the stock-option order was subject to COA before 

it was booked in COB. See note 19, supra. 

25 Determinations by the Exchange regarding the 

classes where the re-COA feature is activated and 

related tick distance and frequency parameters will 

be announced to TPHs via Regulatory Circular. 

26 In a prior rule change filing, the Exchange 

provided an example indicating that if the setting 

for the interval timer was once every 15 seconds for 

1 interval, then a total of 2 re-COA auctions would 

occur during the interval—the original re-COA 

auction and a second re-COA auction after the 

expiration of the 15-second interval timer. See 

Securities Exchange Act Release No. 65939 

(December 12, 2011), 76 FR 78708 (December 19, 

2011)(SR–CBOE–2011–119). However, the 

Exchange notes that only one re-COA auction will 

occur under these settings. Therefore, Example 5 

above is intended to update the previous example 

and provide a more detailed illustration of the 

interval timer. 

acceptable price range.23 As proposed, 

the Exchange may also determine on a 

class-by-class basis to make this price 

check parameter available for market 

and marketable limit stock-option 

orders. 

The Exchange believes that the 

application of these price protection 

features will assist with the 

maintenance of fair and orderly markets 

by helping to mitigate the potential risks 

associated with stock-option orders 

drilling through multiple price points 

(thereby resulting in executions at 

prices that are extreme and potentially 

erroneous). Rather than automatically 

executing or booking orders at extreme 

and potentially erroneous prices, the 

Exchange would route orders that are 

not within the price check parameters to 

PAR or the order entry firm’s booth so 

that the orders can be further evaluated. 

In addition, the Exchange is 

proposing to extend the application of 

its ‘‘re-COA’’ feature to stock option 

orders. Under this feature, to the extent 

any non-marketable order resting at the 

top of the COB is priced within the 

acceptable tick distances of the derived 

net market, the full order would be 

subject to COA (referred to herein as a 

‘‘re-COA’’).24 The Exchange notes that 

this re-COA feature for resting orders 

would only be applicable to resting nonmarketable stock-option orders that 

move close to the derived net market. 

This feature is not applicable to resting 

stock-option orders that become 

marketable with other stock-option 

orders. The Exchange may also 

determine on a class-by-class and 

strategy basis to limit the frequency of 

re-COA auctions initiated for stockoption orders resting in COB. For 

example, the Exchange might determine 

to limit the frequency of re-COA 

auctions to once every ‘‘X’’ seconds (the 

‘‘interval timer’’) for a total of ‘‘Y’’ 

intervals. Once this cycle is complete, 

the Exchange may determine to wait for 

a period of time ‘‘Z’’ (the ‘‘sleep timer’’) 

and then reactivate the re-COA 

feature.25 All timers would be reset if a 

new stock-option order improves the 

top of the COB (i.e., improves the best 

net price bid or offer of the stock-option 

orders resting in COB). These 

limitations on the frequency of COA 

auctions due to the re-COA feature are 

intended to address system efficiency 

and effectiveness considerations, such 

as limiting repeated initiations of COA 

auctions (and related messaging) when 

there are flickering quotes. Once the reCOA feature is initiated for a resting 

order, all other aspects of the COA 

process described in Rule 6.53C would 

apply unchanged. The Exchange 

believes this re-COA feature facilitates 

the orderly execution of stock-option 

orders by providing an automated 

opportunity for price improvement to 

(and execution of) resting orders priced 

near the current market, similar to what 

a TPH might seek to do if the TPH were 

representing a stock-option order in 

open outcry (or just entering an order 

initially into COB). 

The following example illustrates the 

operation of this proposed system 

functionality: 

Example 5: Assume that the acceptable tick 

distance to re-COA is 2 ticks ($0.02). Also 

assume the frequency for the re-COA feature 

is limited to once every 15 seconds (the 

interval timer) for 1 interval. Under this 

setting, only 1 re-COA auctions [sic] could be 

triggered—the original re-COA auction.26 No 

further auctions would be triggered until the 

sleep timer expires, and only then if a quote 

update which is received AFTER the sleep 

timer expires would result in the order being 

within 2 ticks of the derived net market. 

Assume the sleep timer is set at 60 minutes. 

Assume the current derived net market is 

$8.85–$9.15. If a stock-option order resting in 

the COB is priced at a net credit price of 

$8.88, the stock-option order is not 

marketable and is priced inside the derived 

net market by 3 ticks. If subsequently the 

individual leg prices are updated such that 

the current derived net market for the 

strategy moves to a net price of $8.86–$9.14 

the resting order priced at a net credit price 

of $8.88 would trigger the re-COA feature and 

initiate the re-COA auction process (as the 

order is now priced within 2 ticks of the 

derived net market). If there are no responses, 

the order would be placed back in COB. The 

resting order would not initiate the re-COA 

feature again until the 60-minute sleep timer 

has expired, and only then if a quote update 

received AFTER the 60-minute sleep timer 

expires would result in the order being 

within 2 ticks of the derived net market. 

If the number of attempts was set to a value 

greater than 1 (assume 2 for the below 

discussion), when the 15-second interval 

timer expires, the order would be eligible to 

initiate the re-COA feature again if the 

current market moves after the expiration of 

the timer and the order meets the tick 

distance parameter (the order would not 

automatically initiate the re-COA feature 

after the expiration of the interval timer; 

instead there must be an update to the 

current market after the expiration of the 

interval timer and the order must meet the 

tick distance parameter for the system to reCOA again). For example, if after the end of 

the 15-second interval timer the derived net 

market moves to $8.87–$9.13 (or, for 

example, if the derived market moves back to 

$8.85–$9.15 and then, after the end of the 15- 

second interval timer moves back again to 

$8.86–$9.14), then the resting complex order 

would again initiate the re-COA feature. If 

there are no responses, the order would be 

placed back in COB. The cycle is complete. 

Now that the resting order has been subject 

to COA 2 times since it was booked in COB, 

the 60-minute sleep timer will begin and the 

resting order will not be eligible for the reCOA feature again until the sleep timer 

expires and there is a quote update after that 

timer expires that is within the tick distance 

parameter. All timers would be reset anytime 

there is a price change at the top of the COB. 

For example, if five minutes into the sleep 

interval a second stock-option order is 

entered to rest in COB at a price of $8.87 

($0.01 better than the original resting order 

priced at $8.88), the original resting order 

would no longer be at the top of the COB and 

subject to the re-COA feature. The timers 

would reset and the second complex order 

(which now represents the top of the COB) 

would be subject to the re-COA process. If, 

for example, the second order subsequently 

trades (constituting a price change at the top 

of the COB), the original order would be at 

the top of the COB again and could become 

subject to the re-COA feature again. 

Other Changes Related to Stock-Option 

Orders 

The fifth purpose of this proposed 

rule change is to make certain other 

changes to generally reorganize and 

simplify the rule text pertaining to 

stock-option orders. As noted above, the 

current priority rules for stock-option 

orders for COB are contained in four 

locations—paragraphs (b), (c) and (f) of 

Interpretation and Policy .06 to Rule 

6.53C. Similarly, the current priority 

rules for stock-option orders processed 

through COA are contained in three 

locations—paragraphs (b), (d) and (f) of 

mstockstill on DSK4VPTVN1PROD with NOTICES

10032 Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 

27The ‘‘N-second group timer’’ refers to a timer 

that the Exchange may establish when market 

participants (as defined in Rule 6.45A or 6.45B, as 

applicable) quotes and/or orders interact with 

orders in the EBook. See Rules 6.45A(c), 6.45B(c), 

6.53C.03 and proposed changes to Rule 6.53C.06 for 

additional information on the N-second timer 

group. 

28Currently the rule limits the number of legs to 

four. See existing Rule 6.53C(b)(iii). This limitation 

is proposed to be removed. In addition, a 

duplicative reference to the one-to-three ratio for 

complex orders in Rule 6.53C(b)(iii) is proposed to 

be removed as the applicable ratio will now be 

included within the proposed definitions contained 

in proposed Rule 6.53C(a)(1). 

29See, e.g., International Securities Exchange 

Rule 722(a). 

30 15 U.S.C. 78f(b). 

31 15 U.S.C. 78f(b)(5). 

Interpretation and Policy .06 of Rule 

6.53C. The Exchange is proposing to 

eliminate paragraph (e)(which provides 

that the N-second group timer 27 for 

executions by market participants 

against orders in the COB shall not be 

in effect for stock-option orders) and to 

combine it with paragraph (c)(which 

also addresses executions against the 

COB). The Exchange is proposing to 

eliminate paragraph (f) (which relates to 

stock-option orders with more than one 

option leg) and to simplify and combine 

it with paragraph (b) (which relates to 

stock-option orders with one option 

leg). The Exchange is also proposing 

various other miscellaneous changes, 

such as revising the text to consistently 

use the term ‘‘stock-option order(s)’’ 

with no capitalization and to use the 

phrase ‘‘not be accepted’’ to replace 

various references to ‘‘rejected.’’ 

Complex Order Definitions 

Finally, the sixth purpose of this 

proposed rule change is to simplify 

some of the definitions contained 

within Rule 6.53C. By way of 

background, for many years, the options 

exchanges have recognized that 

strategies involving more than one 

option series or more than one 

instrument associated with an 

underlying security are different from 

regular buy and sell orders for a single 

series, and an order to achieve such 

strategies should be defined separately. 

As the sophistication of the industry as 

[sic] grown, so have the strategies, and 

the options exchanges have regularly 

added new strategies to the list of 

defined complex order types. The 

investing industry, however, creates 

new, legitimate investment strategies 

that do not necessarily fit into one of the 

narrow definitions for complex order 

types that the exchanges presently use. 

These order types are often developed 

for a particular strategy, specific to a 

particular issue. To attempt to define 

every individual strategy, and file 

additional rules to memorialize them, 

would be a time consuming and 

extremely onerous process, and would 

serve only to confuse the investing 

public. As a result, bona fide 

transactions to limit risk are not 

afforded the facility of execution 

afforded more common complex orders. 

Rule 6.53C currently defines at least 

ten specific complex strategies 

(including stock-option order strategies). 

These are the most comprehensive list 

of complex strategies defined in a rule 

set, yet they do not cover all of the 

possibilities of complex orders. To 

provide for greater flexibility in the 

design and use of complex strategies, 

the Exchange proposes to eliminate 

specific complex order types described 

in Rule 6.53C, and to adopt generic 

definitions. Specifically, under the 

proposed new definitions, first, a 

complex order will be defined as any 

order involving the execution of two or 

more different options series in the 

same underlying security, for the same 

account, occurring at or near the same 

time in a ratio that is equal to or greater 

than one-to-three (.333) and less than or 

equal to three-to-one (3.00) (or such 

lower ratio as may be determined by the 

Exchange on a class-by-class basis) and 

for the purpose of executing a particular 

investment strategy. In addition, only 

those complex orders with no more than 

the applicable number of legs, as 

determined by the Exchange on a classby-class basis, will be eligible for 

electronic processing.28 Second, a stockoption order will be defined is as an 

order to buy or sell a stated number of 

units of an underlying stock or a 

security convertible into the underlying 

stock (‘‘convertible security’’) coupled 

with the purchase or sale of options 

contract(s) on the opposite side of the 

market representing either (i) the same 

number of units of the underlying stock 

or convertible security, or (ii) the 

number of units of the underlying stock 

necessary to create a delta neutral 

position, but in no case in a ratio greater 

than eight (8) options contracts per unit 

of trading of the underlying stock or 

convertible security established for that 

series by The Options Clearing 

Corporation (referred to in the text as 

the ‘‘Clearing Corporation’’) (or such 

lower ratio as may be determined by the 

Exchange on a class-by-class basis). 

Only those stock-option orders with no 

more than the applicable number of 

legs, as determined by the Exchange on 

a class-by-class basis, will be eligible for 

processing. 

The Exchange believes adopting these 

generic definitions will give investors 

more flexibility in creating strategies 

with greater accuracy. Further, these 

definitions would conform with 

definitions used in other exchanges’ 

rules 29 and is modeled after the generic 

definitions approved for use for 

exemptions from Trade Through 

Liability by the Options Linkage 

Authority as described in the ‘‘Plan For 

The Purpose of Creating And Operation 

An Intermarket Options Linkage’’ (the 

‘‘Linkage Plan’’) and as provided in 

Exchange Rules 6.80(4) and 6.81(b)(7). 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the Act 30

in general and furthers the objectives of 

Section 6(b)(5) of the Act 31 in particular 

in that it should promote just and 

equitable principles of trade, serve to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and 

protect investors and the public interest. 

The Exchange believes the proposed 

rule change will assist in the electronic 

processing of stock-option orders by 

providing a more efficient mechanism 

for carrying out these strategies. The 

Exchange also believes the proposed 

additional stock-option order related 

price check parameters will enhance the 

functionality and assist with the 

maintenance of fair and orderly markets 

by helping to mitigate the potential risks 

associated with an order drilling 

through multiple price points (thereby 

resulting in execution at prices that are 

extreme and potentially erroneous). The 

Exchange believes the additional 

changes to reorganize and simplify the 

rule text will make it easier for users to 

read and understand the electronic 

processing procedures for stock-option 

orders. Finally, the Exchange believes 

adopting generic definitions for 

complex orders, including stock-option 

orders, as proposed, is appropriate in 

that complex orders and stock-option 

orders are widely recognized and 

utilized by market participants and are 

invaluable, both as an investment 

strategy and a risk management strategy. 

The proposed change will provide the 

opportunity for a more efficient 

mechanism for carrying out these 

strategies. 

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. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 34 / Tuesday, February 21, 2012 / Notices 10033 

32 17 CFR 200.30–3(a)(12). 

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 proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be 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 rulecomments@sec.gov. Please include File 

Number SR–CBOE–2012–005 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–CBOE–2012–005. 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 20549–1090, 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 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– 

2012–005, and should be submitted on 

or before March 13, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3902 Filed 2–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice: 7762] 

Advisory Committee International 

Postal and Delivery Services 

AGENCY: Department of State. 

ACTION: Notice; FACA Committee 

meeting announcement. 

SUMMARY: As required by the Federal 

Advisory Committee Act, Public Law 

92–463, the Department of State gives 

notice of a meeting of the Advisory 

Committee on International Postal and 

Delivery Services. This Committee has 

been formed in fulfillment of the 

provisions of the 2006 Postal 

Accountability and Enhancement Act 

(Pub. L. 109–435) and in accordance 

with the Federal Advisory Committee 

Act. 

Date and Time: The meeting will be 

held on Tuesday, March 20, 2012, from 

1 to 5 p.m. 

Location: The American Institute of 

Architects, 1735 New York Ave. NW., 

Washington, DC 20006. 

Public input: Any member of the 

public interested in providing public 

input to the meeting should contact Mr. 

Matthew Hillsberg, whose contact 

information is listed under FOR FURTHER

INFORMATION CONTACT section of this 

notice. Each individual providing oral 

input is requested to limit his or her 

comments to five minutes. Requests to 

be added to the speaker list must be 

received in writing (letter, email or fax) 

prior to the close of business on March 

13, 2012; written comments from 

members of the public for distribution at 

this meeting must reach Mr. Hillsberg 

by letter, email or fax by this same date. 

A member of the public requesting 

reasonable accommodation should make 

the request to Mr. Hillsberg by that same 

date. 

Meeting agenda: The agenda of the 

meeting will include a review of the 

results of the November 2011 UPU 

Council of Administration and the 

February–March 2012 joint session of 

the UPU Postal Operations Council and 

Council of Administration, issues and 

proposals related to the 2012 UPU 

Congress, and other subjects related to 

international postal and delivery 

services of interest to Advisory 

Committee members and the public. 

For further information, please 

contact Mr. Matthew Hillsberg of the 

Office of Global Systems (IO/GS), 

Bureau of International Organization 

Affairs, U.S. Department of State, at 

(202) 736–7039 or by email at 

HillsbergM@state.gov. 

Dated: February 14, 2012. 

Patricia Lacina, 

Director, Office of Global Systems, Bureau 

of International Organization Affairs, 

Department of State. 

[FR Doc. 2012–3968 Filed 2–17–12; 8:45 am] 

BILLING CODE 4710–19–P 

DEPARTMENT OF STATE 

[Public Notice: 7803] 

30–Day Notice of Proposed 

Information Collection: Gender 

Assessment Surveys, OMB Control 

Number 1405-xxxx 

ACTION: Notice of request for public 

comment and submission to OMB of 

proposed collection of information. 

SUMMARY: The Department of State has 

submitted the following information 

collection request to the Office of 

Management and Budget (OMB) for 

approval in accordance with the 

Paperwork Reduction Act of 1995. 

• Title of Information Collection: 

Gender Assessment Surveys. 

• OMB Control Number: None. 

• Type of Request: New Collection. 

• Originating Office: Bureau of 

Educational and Cultural Affairs, Office 

of Policy and Evaluation, Evaluation 

Division (ECA/P/V). 

• Form Number: SV2011–0027 

(FORTUNE Survey); SV2011–0028 

mstockstill on DSK4VPTVN1PROD with NOTICES