[Federal Register Volume 80, Number 51 (Tuesday, March 17, 2015)]
[Notices]
[Pages 13934-13936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06013]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74483; File No. SR-CFE-2015-002]


Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Regarding Exchange of Contract for Related Position Transactions and 
Block Trades

March 11, 2015.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 25, 2015 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 February 25, 2015.
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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 rules related to Exchange of 
Contract for Related Position (``ECRP'') transactions and block trades. 
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 currently traded on CFE are traded under Chapter 16 of CFE's 
Rulebook which is applicable to Individual Stock Based and Exchange-
Traded Fund Based Volatility Index security futures. 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

[[Page 13935]]

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
    The purpose of the proposed CFE rule amendments included as part of 
this rule change is to: (i) Amend CFE Rule 414 (Exchange of Contract 
for Related Position) to extend the time to report ECRP transactions to 
the Exchange from ten minutes to thirty minutes; and (ii) amend CFE 
Rules 414 and 415 (Block Trading) to clarify that the CFE Help Desk can 
provide written transaction summaries for ECRP transactions and block 
trades on the business day for which the transaction is submitted for 
clearing or the calendar day of the transaction. The rule amendments 
included as part of this rule change are to apply to all products 
traded on CFE, including both non-security futures and security 
futures.
Reporting Timeframe for ECRP Transactions
    CFE is proposing to amend CFE Rule 414 (Exchange of Contract for 
Related Position) to extend the timeframe for reporting ECRP 
transactions. CFE Rule 414 currently provides that each party to an 
ECRP transaction is obligated to have an Authorized Reporter (which is 
defined in CFE Rule 414(h) and 415(f)) \3\ notify the CFE Help Desk of 
the terms of the ECRP transaction no later than ten minutes after the 
transaction is agreed upon. The amendments extend this current 
reporting window for ECRP transactions to thirty minutes.
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    \3\ CFE Rule 414(h) and CFE Rule 415(f) require that each CFE 
Trading Privilege Holder (``TPH'') executing an Exchange of Contract 
for Related Position transaction or a side of a block trade must 
have designated at least one Authorized Reporter that is pre-
authorized by a CFE clearing member to report the ECRP transaction 
or block trade on behalf of the TPH.
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    CFE believes this extension is justified for the following reasons. 
First, it will allow CFE to stay competitive with other futures 
exchanges that currently provide market participants with additional 
time to report these transactions. Specifically, CME Group provides 
that such transactions ``must be submitted within one hour after the 
relevant terms have been determined,'' \4\ and ICE Futures U.S. 
provides no definitive timeframe and rather that such transactions 
``should be submitted to the Exchange as soon as possible following 
agreement to the terms by the relevant parties.'' \5\ Second, the 
extension takes into account the specific, logistical aspects 
associated with these off-exchange transactions, which entail related 
transactions in two different instruments. Specifically, ECRP 
transactions in CFE products frequently involve contra-parties that 
operate on a trading floor instead of an office setting. In addition, 
the required recordkeeping presents logistical issues as each contra-
party to an ECRP must coordinate with an Authorized Reporter to report 
to the CFE Help Desk the relevant ECRP transaction as well as collect 
or create records evidencing compliance with the criteria set forth in 
CFE Rule 414 as required by CFE Rule 414 (g).\6\ CFE believes a limited 
additional window for compliance is justified given these logistical 
aspects. Accordingly, CFE believes that extending the timeframe from 
ten to thirty minutes represents a sound balance that takes into 
account the above competitive and logistical considerations while 
remaining sufficiently limited in duration so as not to be detrimental 
to CFE's market.
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    \4\ CME Group, Market Regulation Advisory Notice (Aug. 4, 2014), 
Q&A22, available at http://www.cmegroup.com/rulebook/files/ra1311-5r.pdf.
    \5\ ICE Futures U.S., EFRP FAQs (Sept. 5, 2014), Q&A 17, 
available at https://www.theice.com/publicdocs/futures_us/EFRP_FAQ.pdf.
    \6\ CFE Rule 414 (g) requires that each TPH involved in any ECRP 
transaction shall either maintain records evidencing compliance with 
the criteria set forth in Rule 414 or be able to obtain such records 
from its Customer involved in the ECRPs. Information required to be 
maintained but which is not systematically provided in conjunction 
with the processing of these trades may include the options delta 
utilized at the time of the trade in order to demonstrate that the 
Contract transaction would serve as an appropriate hedge for the 
Related Position.
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Clarification Regarding Written Summaries for ECRP Transactions and 
Block Trades
    CFE is proposing to amend CFE Rule 414 (Exchange of Contract for 
Related Position) and CFE Rule 415 (Block Trading) to clarify that the 
CFE Help Desk can provide written transaction summaries for ECRP 
transactions and block trades on the business day for which the 
transaction is submitted for clearing or the calendar day of the 
transaction. CFE Rules 414 and 415 currently contain language that 
imply that the CFE Help Desk always provides a written transaction 
summary of an ECRP transaction or a block trade on the business day for 
which the transaction is submitted for clearing. The amendments clarify 
that the CFE Help Desk can provide a written transaction summary of an 
ECRP transaction or block trade to each Authorized Reporter on either 
the business day for which the transaction is submitted for clearing or 
on the calendar day of the transaction.
    For ECRP transactions and block trades that occur during most of 
the trading day, the CFE Help Desk would provide a transaction summary 
on the business day for which the transaction is submitted for 
clearing. However, there are circumstances in which the CFE Help Desk 
would provide a transaction summary on the calendar day of the 
transaction and not on the business day for which the transaction is 
submitted for clearing. For example, this could occur if an ECRP 
transaction or block trade in CBOE Volatility Index (``VIX'') futures 
was reported to the CFE Help Desk between 3:30 p.m. and 4:00 p.m. on a 
Monday through Thursday and was designated by the parties for clearance 
on the calendar day of the transaction. In that case, the next business 
day would have already started when the transaction is reported to the 
CFE Help Desk pursuant to the extended trading hours schedule in VIX 
futures, as the prior business day would have ended at 3:15 p.m. and 
the new business day would have started at 3:30 p.m. Accordingly, the 
CFE Help Desk would be providing a written transaction summary to the 
Authorized Reporters on the calendar day of the transaction and not on 
the business day for which the transaction would be submitted for 
clearing (since in this case the transaction would be submitted for 
clearing for the prior business day).
    CFE is also making a technical, non-substantive change to CFE Rule 
415(c) to correct a typographical error. Rule 415(c) incorrectly 
references Rule 415(i) for the reporting deadline instead of to Rule 
415(g) where the relevant reporting deadline is contained and this rule 
change corrects this cross-reference.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(5) \8\ and 6(b)(7) \9\ in particular in 
that it is designed:
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(7).
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    <bullet> To foster cooperation and coordination with persons 
engaged in facilitating transactions in securities, and
    <bullet> 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.

[[Page 13936]]

    The Exchange believes that the proposed rule change would benefit 
market participants because it would provide them with a limited amount 
of additional time to report ECRP transactions. First, the change will 
allow CFE to stay competitive with other futures exchanges that 
currently provide market participants with additional time to report 
these transactions.\10\ Second, the extension takes into account the 
logistical aspects associated with these transactions, which entail 
related transactions in two different instruments. Specifically, ECRP 
transactions involve contra-parties operating on a trading floor 
instead of an office setting. In addition, the required recordkeeping 
presents logistical issues as each contra-party to an ECRP must 
coordinate with an Authorized Reporter to report to the CFE Help Desk 
its ECRP transaction as well as conduct the required recordkeeping 
manually. CFE believes extending the timeframe from ten to thirty 
minutes represents a sound balance that takes into account the above 
competitive and logistical considerations while remaining sufficiently 
limited in duration so as not to be detrimental to CFE's market.
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    \10\ See CME Group, Market Regulation Advisory Notice (Aug. 4, 
2014), Q&A22, available athttp://www.cmegroup.com/rulebook/files/ra1311-5r.pdf; ICE Futures U.S., EFRP FAQs (Sept. 5, 2014), Q&A 17, 
available athttp://www.theice.com/publicdocs/futures_us/
EFRP_FAQ.pdf.
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    In addition, the proposed rule change benefits market participants 
by clarifying to them that their Authorized Reporters will receive 
written transactions summaries: (i) Regarding ECRP transactions on 
either the business day for which the contract leg of the ECRP 
transaction is submitted for clearing or the calendar day of the 
transaction; and (ii) regarding block trades, on either the business 
day for which the block trade is submitted for clearing or on the 
calendar day of the transaction.

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 ECRP 
reporting timeframe and timeframe for receiving written summaries of 
ECRP transactions and block trades will apply to all persons and the 
revised rule provisions do not discriminate between market 
participants.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change will become effective on March 11, 2015.
    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.\11\
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    \11\ 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#493b3c252c642a2624242c273d3a093a2c2a672e263f"><span class="__cf_email__" data-cfemail="a0d2d5ccc58dc3cfcdcdc5ced4d3e0d3c5c38ec7cfd6">[email protected]</span></a>. Please include 
File Number SR-CFE-2015-002 on the subject line.

Paper Comments

    <bullet> 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-2015-002. 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 offices of the Exchange. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-CFE-2015-002, 
and should be submitted on or before April 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06013 Filed 3-16-15; 8:45 am]
 BILLING CODE 8011-01-P


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