Federal Register / Vol. 81, No. 29 / Friday, February 12, 2016 / Notices 7609 

43 17 CFR 200.30–3(a)(12). 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). 

5Compare Rule 8.85(a)(i) (‘‘[Each DPM shall] 

provide continuous electronic quotes . . . in at 

least 99% of the non-adjusted options series or 

100% of the non-adjusted option series minus one 

call-put pair . . .’’) with Rule 8.7(d)(ii)(B) (‘‘A 

Market-Maker will be required to maintain 

continuous electronic quotes . . . in 60% of the 

non-adjusted option series of the Market-Maker’s 

appointed classes that have a time to expiration of 

less than nine months.’’). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.43

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02838 Filed 2–11–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–77081; File No. SR–CBOE– 

2016–007] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating To Adopting a 

Principles-Based Approach To Prohibit 

the Misuse of Material Nonpublic 

Information by Designated Primary 

Market-Makers (‘‘DPMs’’) and Lead 

Market-Makers (‘‘LMMs’’) 

February 8, 2016. 

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 

1, 2016, Chicago Board Options 

Exchange, Incorporated (the ‘‘Exchange’’ 

or ‘‘CBOE’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Exchange filed the proposal as a ‘‘noncontroversial’’ 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The text of the proposed rule change 

is available on the Exchange’s Web site 

(http://www.cboe.com/AboutCBOE/

CBOELegalRegulatoryHome.aspx), at 

the Exchange’s Office of the Secretary, 

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 adopt a 

principles-based approach to prohibit 

the misuse of material, nonpublic 

information by DPMs and LMMs by 

deleting Rule 8.91, sub-paragraph (b)(5) 

of Rule 8.15 and paragraph(b)(vii) of 

Rule 8.15A. In so doing, the Exchange 

would harmonize its rules related to the 

preventing the misuse of material, 

nonpublic information for every Trading 

Permit Holder (‘‘TPH’’). The Exchange 

believes that Rule 8.91, Rule 8.15(b)(5) 

and Rule 8.15A(b)(vii) are no longer 

necessary because all TPH, including 

DPMs and LMMs are subject to the 

Exchange’s general principles-based 

requirements governing the protection 

against misuse of material, nonpublic 

information, pursuant to Rule 4.18 

(Prevention of the Misuse of Material, 

Nonpublic Information), which obviates 

the need for separately prescribed 

requirements for a subset of market 

participants on the Exchange. 

Background 

The Exchange has three classes of 

registered Market-Makers. Pursuant to 

Rule 8.1, a Market-Maker is an 

individual TPH or TPH organization 

that is registered with the Exchange for 

the purpose of making transactions as a 

dealer-specialist on the Exchange. All 

Market-Makers are subject to the 

requirements of Rule 8.7, which set 

forth the obligations of Market-Makers, 

including quoting activity. 

Rule 8.85 outlines the obligations of 

DPM’s, which, in addition to the 

Market-Maker obligations of Rule 8.7, 

must fulfill a number of increased 

obligations including providing 

continuous electronic quotes, assuring 

that each of the displayed market 

quotations is honored, and complying 

heightened with bid/ask differential 

requirements.5

Rule 8.15 states that the Exchange 

may appoint, in an option class for 

which a DPM has not been appointed, 

one or more Market-Makers in good 

standing as LMMs and Supplemental 

Market-Makers (‘‘SMMs’’) to participate 

in opening rotation procedures for 

Hybrid 3.0 classes and/or to determine 

a formula for generating updated market 

quotations during the trading day. 

LMM’s in Hybrid 3.0 classes are 

obligated to quote a firm two-sided 

market of sufficient size to 

accommodate a relatively active 

opening within the bid/ask differential 

requirements determined by the 

Exchange. 

Rule 8.15A states the Exchange may 

appoint one or more Market-Makers in 

good standing with an appointment in 

a Hybrid-Trading system option class 

for which a DPM has not been 

appointed as LMMs. Much like DPMs 

LMMs in Hybrid Classes are subject to 

increased obligations that include 

providing continuous electronic quotes 

that comply with the bid/ask differential 

requirements determined by the 

Exchange. 

Pursuant to Rules 8.15B and 8.87, the 

exchange may establish participation 

entitlements for LMM’s and DPMs 

appointed pursuant to the 

aforementioned Rules. DPM’s and 

LMM’s must meet specific obligations 

prior to being awarded a participation 

entitlements [sic]. 

Whether operating on the CBOE 

Trading Floor or from a remote location, 

all Market-Makers, including DPMs and 

LMMs, have access to the same 

information in the Consolidated Book 

that is available to all other market 

participants. Moreover, none of the 

Exchange’s Market-Makers have agency 

obligations to the Exchange’s Order 

Book. As such, the primary distinctions 

between Market-Makers and DPMs and 

LMMs are the increased quoting 

requirements and allocation 

entitlements. 

Despite the fact that Market-Makers, 

DPMs and LMMs have access to the 

same trading information as all other 

market participants on the Exchange, 

the Exchange has distinct rules 

governing how DPMs and LMMs may 

operate. Rule 8.91(a) specifies that a 

DPM shall maintain information barriers 

that are reasonably designed to prevent 

the misuse of material, nonpublic 

information with any affiliates that may 

conduct a brokerage business in option 

classes allocated to the DPM or act as a 


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6The Exchange notes that by deleting Rule 8.91, 

the Exchange would no longer require specific 

information barriers for DPMs or require preapproval of any information barriers that a DPM 

would erect for purposes of protecting against the 

misuse of material nonpublic information. 

However, as is the case today with Market-Makers, 

information barriers of new entrants, including new 

DPMs, would be subject to review as part of a new 

firm application. Moreover, the policies and 

procedures of DPMs and LMMs, including those 

relating to information barriers, would be subject to 

review by FINRA, on behalf of the Exchange, 

pursuant to a Regulatory Services Agreement. 

7See Securities Exchange Act Release Nos. 75432 

(July 13, 2015), 80 FR 42597 (July 17, 2015) (Order 

Approving Adopting a Principles-Based Approach 

to Prohibit the Misuse of Material Nonpublic 

Information by Specialists and e-Specialists by 

Deleting Rule 927.3NY and Section (f) of Rule 

927.5NY); 75792 (August 31, 2015), 80 FR 53606 

(September 4, 2015) (SR–ISE–2015–26) (Notice of 

Filing and Immediate Effectiveness of Proposed 

Rule Change Adopting a Principles-Based Approach 

to Prohibit the Misuse of Material, non-public 

Information by Market Makers by Deleting Rule 

810); 75916 (September 14, 2015), 80 FR 56503 

(September 18, 2015) (SR–BOX–2015–31) (Notice of 

Filing and immediate Effectiveness of Proposed 

Rule Change to Adopt a Principles-based Approach 

to Prohibit the Misuse of Material Nonpublic 

Information by Market Makers). 

8See Securities Exchange Act Release Nos. 60604 

(Sept. 2, 2009), 76 FR 46272 (Sept. 8, 2009) (SR– 

NYSEArca–2009–78) (Order approving elimination 

of NYSE Arca rule that required market makers to 

establish and maintain specifically prescribed 

information barriers, including discussion of NYSE 

Arca and Nasdaq rules) (‘‘Arca Approval Order’’); 

specialist or market-maker in any 

security underlying options allocated to 

the DPM. Rule 8.91 also requires a DPM 

provide its information barriers to the 

Exchange and obtain prior written 

approval. 

Rule 8.15(b)(5) requires LMMs in 

Hybrid 3.0 classes maintain information 

barriers that are reasonably designed to 

prevent the misuse of material, 

nonpublic information with any 

affiliates that may conduct a brokerage 

business in option classes allocated to 

the LMM or act as specialist or MarketMaker in any security underlying 

options allocated to the LMM. Rule 

8.15A(b)(vii) similarly requires LMMs in 

Hybrid classes maintain information 

barriers that are reasonably designed to 

prevent the misuse of material, 

nonpublic information with any 

affiliates that may conduct a brokerage 

business in option classes allocated to 

the LMM or act as specialist or MarketMaker in any security underlying 

options allocated to the LMM. Neither 

Rule 8.15 nor 8.15A require the prior 

Exchange approval of information 

barriers outlined in Rule 8.91. 

Proposed Rule Change 

The Exchange believes the 

particularized guidelines in Rules, 8.91, 

8.15(b)(5) and 8.15A(b)(vii) for DPMs, 

LMMs in Hybrid 3.0 classes, and LMMs 

in Hybrid classes, respectively, are no 

longer necessary and proposes to delete 

them. Rather, the Exchange believes that 

Rule 4.18, governing the misuse of 

material, nonpublic information 

provides for an appropriate, principlesbased approach to prevent the type of 

market abuses Rules 8.91, 8.15(b)(5) and 

8.15A(b)(vii) are designed to address. 

Specifically, Rule 4.18 requires every 

TPH shall establish, maintain and 

enforce written policies and procedures 

reasonably designed, taking into 

consideration the nature of such TPH’s 

business, to prevent the misuse, in 

violation of the Exchange Act and 

Exchange Rules, of material, nonpublic 

information by such TPH or persons 

associated with such TPH. For the 

purposes of this Rule, conduct 

constituting the misuse of material, 

nonpublic information in violation of 

the Exchange Act and Exchange Rules 

includes, but is not limited to, the 

following: 

(a) Trading in any securities issued by 

a corporation, partnership, Trust Issued 

Receipts or Units (as defined in 

Exchange Rules) or a trust or similar 

entities, or in any related securities or 

related options or other derivative 

securities, or in any related non-U.S. 

currency options, futures or options on 

futures on such currency, or any other 

derivatives based on such currency, or 

in any related commodity, related 

commodity futures or options on 

commodity futures or in any related 

commodity derivatives, while in 

possession of material, nonpublic 

information concerning that 

corporation, partnership, Trust Issued 

Receipts, or those Units, or that trust or 

similar entities; 

(b) Trading in an underlying security 

or related options or other derivative 

securities, or in any related non-U.S. 

currency, non-U.S. currency options, 

futures or options on futures on such 

currency, or in any related commodity, 

related commodity futures or options on 

commodity futures or any other related 

commodities derivatives, or any other 

derivatives based on such currency 

while in possession of material 

nonpublic information concerning 

imminent transactions in the above; and 

(c) Disclosing to another person or 

entity any material, nonpublic 

information involving a corporation, 

partnership, Trust Issued Receipts, or 

Units or a trust or similar entities whose 

shares are publicly traded or an 

imminent transactions in an underlying 

security or related securities or in the 

underlying non-U.S. currency of any 

related non-U.S. currency options, 

futures or options on futures on such 

currency, or any other derivatives based 

on such currency, or in any related 

commodity, related commodity futures 

or options on commodity futures or any 

other related commodity derivatives, for 

the purpose of facilitating the possible 

misuse of such material, nonpublic 

information. 

Because DPMs and LMMs are already 

subject to the requirements of Rule 4.18, 

the Exchange does not believe that it is 

necessary to separately require specific 

limitations on dealings between DPMs 

and LMMs and affiliates. Deleting Rules 

8.91, 8.15(b)(5) and 8.15A(b)(vii) would 

provide DPMs and LMMs with the 

flexibility to adapt their policies and 

procedures as appropriate to reflect 

changes to their business model, 

business activities, or the securities 

market in a manner similar to how 

Market-Makers on the Exchange 

currently operate consistent with Rule 

4.18. 

As noted above, DPMs and LMMs are 

distinguished under Exchange Rules 

from other types of Market-Makers only 

to the extent that they have certain 

heightened obligations and potential 

allocation entitlements. However, none 

of these heightened obligations provides 

different or greater access to nonpublic 

information than any other market 

participant on the Exchange. 

Specifically, whether on the CBOE 

Trading Floor or remotely, neither 

DPMs nor LMMs on the Exchange have 

access to trading information provided 

by the Exchange, either at, or prior to, 

the point of execution, that is not made 

available to all other market participants 

on the Exchange in a similar manner. 

Further, as noted above, DPMs and 

LMMs on the Exchange do not have any 

agency responsibilities for orders in the 

Order Book. Accordingly, because DPMs 

and LMMs do not have any trading 

advantages at the Exchange due to their 

market role, the Exchange believes that 

they should be subject to the same rules 

regarding the prevention of the misuse 

of material, nonpublic information, 

specifically Rule 4.18.6

The Exchange notes that its proposed 

approach to use a principles-based 

approach to protecting against the 

misuse of material nonpublic 

information for all of its registered 

Market-Makers is consistent with 

recently filed rule changes for NYSE 

MKT, LLC on behalf of NYSE Amex 

Options, International Securities 

Exchange, LLC (‘‘ISE’’) and BOX 

Options Exchange, LLC (‘‘BOX’’).7 The 

proposed approach is also consistent 

with approved rule changes for NYSE 

Arca Equities Inc. (‘‘NYSE Arca’’), BATS 

Exchange Inc. (‘‘BATS’’) and New York 

Stock Exchange, LLC (‘‘NYSE’’) rules 

governing cash equity Market-Makers on 

those respective exchanges.8 Except for 


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61574 (Feb. 23, 2010), 75 FR 9455 (Mar. 2, 2010) 

(SR–BATS–2010–003) (Order approving 

amendments to BATS Rule 5.5 to move to a 

principles-based approach to protecting against the 

misuse of material, non-public information, and 

noting that the proposed change is consistent with 

the approaches of NYSE Arca and Nasdaq) (‘‘BATS 

Approval Order’’); and 72534 (July 3, 2014), 79 FR 

39440 (July 10, 2014), SR–NYSE–2014–12) (Order 

approving amendments to NYSE Rule 98 governing 

designated market makers to move to a principlesbased approach to prohibit the misuse of material 

non-public information) (‘‘NYSE Approval Order’’). 

9See, e.g., BATS Approval Order, supra note 4 at 

9458. 

10 17 CFR part 242.200(f). 

11 15 U.S.C. 78o(g). 

12 17 CFR part 242.200. 

13 17 CFR part 240.15c3–5. 

prescribed rules relating to floor-based 

designated Market-Makers on the NYSE, 

who have access to specified nonpublic 

trading information, each of these 

exchanges have moved to a principlesbased approach to protecting against the 

misuse of material, nonpublic 

information. In connection with 

approving those rule changes, the 

Commission found that eliminating 

redundant information barrier 

requirements should not reduce the 

effectiveness of exchange rules requiring 

its members or participants to establish 

and maintain systems to supervise the 

activities of its members, including 

written procedures reasonably designed 

to ensure compliance with applicable 

federal securities law and regulations, 

and with the rules of the applicable 

exchange.9

The Exchange notes that even with 

this proposed rule change, pursuant to 

Rule 4.18, a DPM or LMM would still 

be obligated to ensure that its policies 

and procedures reflect the current state 

of its business and continue to be 

reasonably designed to prevent the 

misuse of material, nonpublic 

information. While information barriers 

would not specifically be required 

under the proposal, Rule 4.18 already 

requires that a TPH consider the nature 

of the TPH’s business in structuring its 

policies and procedures, which may 

dictate that an information barrier or a 

functional separation be part of the 

appropriate set of policies and 

procedures that would be reasonably 

designed to achieve compliance with 

applicable securities law and 

regulations, and with applicable 

Exchange rules. 

The Exchange is not proposing to 

change what is considered to be 

material, non-public information and, 

thus does not expect there to be any 

changes to the types of information that 

an affiliated brokerage business of a 

market maker could share with such 

market maker. In that regard, the 

proposed rule change will not permit 

the brokerage unit of a TPH firm to have 

access to any non-public order or quote 

information of affiliated market maker, 

including hidden or undisplayed orders 

and quotes on the Exchange. TPHs do 

not expect to receive any additional 

order or quote information as a result of 

this proposed rule change. 

Further, the Exchange does not 

believe that there will be any material 

change to TPH information barriers as a 

result of removal of the Exchange’s preapproval requirements for DPMs. In fact, 

the Exchange anticipates that 

eliminating the pre-approval 

requirement should facilitate 

implementation of changes to TPH 

information barriers as necessary to 

protect against the misuse of material, 

non-public information. The Exchange 

also suggests that the pre-approval 

requirement is unnecessary because 

DPMs do not have agency 

responsibilities to the book. However, as 

is the case today with market makers, 

information barriers of new entrants 

would be subject to review as part of a 

new firm application. Moreover, the 

policies and procedures of market 

makers, including those relating to 

information barriers would be subject to 

review by FINRA, on behalf of the 

Exchange, pursuant to a Regulatory 

Services Agreement. 

The Exchange further notes that under 

Rule 4.18, a TPH would be able [sic] 

would be able to structure its firm to 

provide for its options DPMs or LMMs, 

as applicable, to be structured with its 

equities and customer-facing businesses, 

provided that any such structuring 

would be done in a manner reasonably 

designed to protect against the misuse of 

material, nonpublic information. For 

example, pursuant to Rule 4.18, a DPM 

on the Exchange could be in the same 

independent trading unit, a defined in 

Rule 200(f) of Regulation SHO,10 as an 

equities Market-Maker and other trading 

desks within the firm, including options 

trading desks, so that the firm could 

share post-trade information to better 

manage its risk across related securities. 

The Exchange believes it is appropriate, 

and consistent with Rule 4.18 and 

section 15(g) of the Act 11 for a firm to 

share options position and related 

hedging position information (e.g., 

equities, futures, and foreign currency) 

within a firm to better manage risk on 

a firm-wide basis. The Exchange notes, 

however, that if so structured, a firm 

would need to have appropriate policies 

and procedures, including information 

barriers as applicable, to protect against 

the misuse of material non-public 

information, and specifically customer 

information consistent with Rule 4.18. 

The Exchange further notes that Federal 

rules supersede Exchange rules in the 

event of any conflicts regarding the 

misuse of material non-public 

information. 

The Exchange believes that the 

proposed reliance on the principlesbased Rule 4.18 would ensure that a 

TPH that operates a DPM or LMM 

would be required to protect against the 

misuse of any material nonpublic 

information. As noted above, Rule 4.18 

already requires that firms refrain from 

trading while in possession of material 

nonpublic information concerning 

imminent transactions in a security or 

related product. The Exchange believes 

that moving to a principles-based 

approach rather than prescribing how 

and when to wall off a DPM or LMM 

from the rest of the firm would provide 

TPH operating DPMs or LMMs with 

appropriate tools to better manage risk 

across a firm, including integrating 

options positions with other positions of 

the firm or, as applicable, by the 

respective independent trading unit. 

Specifically, the Exchange believes that 

it is appropriate for risk management 

purposes for a TPH operating a DPM or 

LMM to be able to consider both DPM/ 

LMM traded-positions for the purposes 

of calculating net positions consistent 

with Rule 200 of Regulation SHO,12

calculating intra-day net capital 

positions, and managing risk both 

generally as well as in compliance with 

Rule 15c3–5 under the Act (the ‘‘Market 

Access Rule’’).13 The Exchange notes 

that any risk management operations 

would need to operate consistent with 

the requirement to protect against the 

misuse of material non-public 

information. 

The Exchange further notes that if 

DPMs or LMMs are integrated with 

other Market-Making operations, they 

would be subject to existing rules that 

prohibit TPH from disadvantaging their 

customers or other market participants 

by improperly capitalizing of a TPH 

organization’s access to the receipt of 

material nonpublic information. As 

such, a TPH organization that integrates 

its DPM or LMM operations together 

with equity Market-Making, would need 

to protect customer information 

consistent with existing obligations to 

protect such information. The Exchange 

has rules prohibiting TPHs from 

disadvantaging their customers or other 

market participants by improperly 

capitalizing on the TPH’s access to or 

receipt of material nonpublic 

information. For example, Rule 4.24(e) 

requires Each TPH shall establish, 

maintain, and enforce written 


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14 15 U.S.C. 78f(b). 

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

16 Id. 17See 15 U.S.C. 78o(g) and Rule 4.18. 

supervisory procedures reasonably 

designed to prevent and detect 

violations of applicable securities laws 

and regulations, and applicable 

Exchange rules. Additionally Rule 6.9(e) 

prevents a TPH or person associated 

with a TPH, who has knowledge of all 

material terms and conditions of an 

original order and a solicited order, 

including a facilitation order, to enter, 

based on such knowledge, an order to 

buy or sell an option of the same class 

as an option that is the subject of the 

original order, or an order to buy or sell 

the security underlying such class, or an 

order to buy or sell any related 

instrument unless certain circumstances 

are met. 

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 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

section 6(b) of the Act.14 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the section 

6(b)(5) 15 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) 16 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the Exchange believes 

that the proposed rule change would 

remove impediments to and perfect the 

mechanism of a free and open market by 

adopting a principles-based approach to 

permit a TPH operating a DPM or LMM 

to maintain and enforce policies and 

procedures to, among other things, 

prohibit the misuse of material 

nonpublic information. The proposed 

rule change would further eliminate 

restrictions on how a TPH structures its 

DPM and LMM operations. The 

Exchange notes that the proposed rule 

change is based on an approved rule of 

the Exchange to which DPMs and LMMs 

are already subject-Rule 4.18-and 

harmonizes the rules governing DPMs, 

LMMs and Market-Makers. Moreover, 

TPH operating DPMs and LMMs would 

continue to be subject to federal and 

Exchange requirements for protecting 

material nonpublic order information.17

The Exchange believes that the 

proposed rule change would remove 

impediments to and perfect the 

mechanism of a free and open market 

because it would harmonize the 

Exchange’s approach to protecting 

against the misuse of material nonpublic 

information and no longer subject DPMs 

and LMMs to redundant requirements. 

The Exchange does not believe that the 

existing requirements applicable to 

DPMs and LMMs are narrowly tailored 

to their respective roles because neither 

market participant has access to 

Exchange trading information in a 

manner different from any other market 

participant on the Exchange and they do 

not have agency responsibilities to the 

Order Book. 

The Exchange further believes the 

proposal is designed to prevent 

fraudulent and manipulative acts and 

practices and to promote just and 

equitable principles of trade because 

existing rules make clear to all TPH the 

type of conduct that is prohibited by the 

Exchange. While the proposal 

eliminates certain requirements relating 

to the misuse of material nonpublic 

information, DPMs, LMMs and all other 

TPH would remain subject to existing 

Exchange rules requiring them to 

establish and maintain systems to 

supervise their activities, and to create, 

implement, and maintain written 

procedures that are reasonably designed 

to comply with applicable securities 

laws and Exchange rules, including the 

prohibition on the misuse of material 

nonpublic information. 

The Exchange notes that the proposed 

rule change would still require that a 

TPH operating DPMs and LMMs 

maintain and enforce policies and 

procedures designed to ensure 

compliance with applicable federal 

securities laws and regulations and with 

Exchange rules. Even thought there 

would no longer be pre-approval of 

DPM information barriers, and DPM or 

LMM written policies and procedures 

would continue to be subject to 

oversight by the Exchange and therefore 

the elimination of specific restrictions 

should not reduce the effectiveness of 

the Exchange rules to protect against the 

misuse of material nonpublic 

information. Rather, TPH will be able to 

utilize a flexible, principles-based 

approach to modify their policies and 

procedures as appropriate to reflect 

changes to their business model, 

business activities, or to the securities 

market itself. Moreover, while specified 

information barriers may no longer be 

required, a TPH’s business model or 

business activities may dictate that an 

information barrier or functional 

separation be part of the appropriate set 

of policies and procedures that would 

be reasonably designed to achieve 

compliance with applicable securities 

laws and regulations, and with 

applicable Exchange rules. The 

Exchange therefore believes that the 

proposed rule change will maintain the 

existing protection of investors and the 

public interest that is currently 

applicable to DPM’s and LMM’s, while 

at the same time removing impediments 

to and perfecting a free and open market 

by moving to a principles-based 

approach to protect against the misuse 

of material nonpublic information. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. To the 

contrary, the Exchange believes that the 

proposal will enhance competition by 

allowing DPMs and LMMs to comply 

with applicable Exchange rules in a 

manner best suited to their business 

models, business activities and the 

securities markets, thus reducing 

regulatory burdens while still ensuring 

compliance with applicable securities 

laws and regulations and Exchange 

rules. The Exchange believes that the 

proposal will foster a fair and orderly 

marketplace without being overly 

burdensome upon DPMs and LMMs. 

Moreover, the Exchange believes that 

the proposed rule change would 

eliminate a burden on competition for 

TPH which currently exists as a result 

of disparate rule treatment between the 

options and equities markets regarding 

how to protect against the misuse of 

material, nonpublic information. For 

those TPH that are also members of 

equities exchanges their respective 

equity Market-Maker operations are now 

subject to a principles-based approach 

to protecting against the misuse of 

material nonpublic information. The 

Exchange believes it would remove a 

burden on competition to enable TPH to 

similarly apply a principles-based 

approach to protecting against the 

misuse of material nonpublic 

information in the options space. To 

this end, the Exchange notes that Rule 

4.18 still requires a TPH that operates as 

a Market-Maker on the Exchange, 


asabaliauskas on DSK9F6TC42PROD with NOTICES2
Federal Register / Vol. 81, No. 29 / Friday, February 12, 2016 / Notices 7613 

18 15 U.S.C. 78s(b)(3)(A). 

19 17 CFR 240.19b–4(f)(6). 20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, ICC deleted a factual error 

in the originally filed proposal that stated that no 

changes would be made to ICC’s Risk Management 

Framework. Amendment No. 1 amends and 

replaces the original filing in its entirety. 

including a DPM or LMM, to evaluate 

its business to assure that its policies 

and procedures are reasonably designed 

to protect against the misuse of material, 

non-public information. However, with 

this proposed rule change, a TPH that 

trades equities and options could look at 

its firm more holistically to structure its 

operations in a manner that provides it 

with better tools to manage risks across 

multiple security classes, while at the 

same time protecting against the misuse 

of material nonpublic information. 

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: 

A. Significantly affect the protection 

of investors or the public interest; 

B. impose any significant burden on 

competition; and 

C. 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) of the 

Act 18 and Rule 19b–4(f)(6) 19

thereunder. 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 necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change 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 rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2016–007 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–2016–007. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–CBOE– 

2016–007 and should be submitted on 

or before March 4, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02841 Filed 2–11–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–77079; File No. SR–ICC– 

2016–002] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing, as 

Modified by Amendment No. 1 Thereto, 

of Proposed Rule Change To Provide 

for the Clearance of Certain AsiaPacific Credit Default Swap Contracts 

February 8, 2016. 

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 January 

27, 2016, ICE Clear Credit LLC (‘‘ICC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change to adopt new 

rules that will provide the basis for ICC 

to clear certain Asia-Pacific credit 

default swap (‘‘CDS’’) contracts, as 

described in Items I, II, and III below, 

which Items have been prepared 

primarily by ICC. On January 29, 2016, 

ICC filed Amendment No. 1 to the 

proposal.3 The Commission is 

publishing this notice, as modified by 

Amendment No. 1, to solicit comments 

on the proposed rule change, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

ICC is proposing an amendment to its 

previously submitted proposed rule 

change to adopt new rules that will 

provide the basis for ICC to clear certain 

Asia-Pacific CDS contracts. Specifically, 

ICC proposed to amend Chapter 26 of 

the ICC Rulebook (‘‘ICC Rules’’) to add 

Subchapters 26J and 26L to provide for 

the clearance of iTraxx Asia/Pacific CDS 

contracts (‘‘iTraxx Asia/Pacific 

Contracts’’) and Standard Asia/Pacific 

Sovereign CDS contracts (‘‘SAS 

Contracts’’, collectively with iTraxx 

Asia/Pacific Contracts ‘‘Asia-Pacific 

CDS Contracts’’). Additionally, ICC 

proposed to amend the ICC End-of-Day 

Price Discovery Policies and Procedures 

to add two additional pricing windows 

to accommodate the submission of endof-day prices relating to such AsiaPacific CDS Contracts. Finally, ICC 

proposed to amend the ICC Risk 

Management Framework to include the 

risk horizon utilized for instruments 

traded during Asia-Pacific hours and to 


asabaliauskas on DSK9F6TC42PROD with NOTICES2