65464 Federal Register / Vol. 79, No. 213 / Tuesday, November 4, 2014 / Notices 

6 15 U.S.C. 78s(b)(3)(A)(ii). 

7 17 CFR 240.19b–4(f)(2). 

8 15 U.S.C. 78q–1(b)(3)(D). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(2). 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(2). 

13 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). 

4 17 CFR 240.19b–4(f)(6). 

imposed by CME under Section 

19(b)(3)(A)(ii) 6 of the Securities 

Exchange Act of 1934 and Rule 19b– 

4(f)(2) 7 thereunder. CME believes that 

the proposed fee change is consistent 

with the requirements of the Securities 

Exchange Act of 1934 and the rules and 

regulations thereunder and, in 

particular, to 17A(b)(3)(D),8 because the 

proposed fee changes apply equally to 

all OTC IRS Clearing Members at CME 

and therefore the proposed changes 

provide for the equitable allocation of 

reasonable dues, fees and other charges 

among participants. CME also notes that 

it operates in a highly competitive 

market in which market participants can 

readily direct business to competing 

venues. For these reasons, the proposed 

changes are appropriately filed pursuant 

to Section 19(b)(3)(A) 9 of the Act and 

paragraph (f)(2) of Rule 19b–4 

thereunder.10

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CME does not believe that the 

proposed rule change will have any 

impact, or impose any burden, on 

competition. The proposed change to 

the definition of a back-loaded trade for 

purposes of establishing a fee waiver 

that applies equally to all IRS Clearing 

Members at CME. Back-loaded 

transactions will now be defined as 

where the trade date for the transaction 

is at least five days prior to the cleared 

date and, thus, by definition, are 

transactions which have already 

occurred well before clearing. Backloaded transactions promote the general 

goal of increasing central clearing of 

OTC derivatives products. Further, OTC 

IRS are swaps under the exclusive 

jurisdiction of the CFTC, and, as such, 

these proposed fee changes do not affect 

the security-based swap clearing 

activities of CME in any way and 

therefore do not impose any burden on 

competition that is inappropriate in 

furtherance of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

CME has not solicited, and does not 

intend to solicit, comments regarding 

this proposed rule change. CME has not 

received any unsolicited written 

comments from interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A) 11 of the Act and paragraph 

(f)(2) of Rule 19b–4 12 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. 

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 No. SR– 

CME–2014–44 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–CME–2014–44. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of CME and on CME’s Web site at 

http://www.cmegroup.com/marketregulation/rule-filings.html. 

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–CME–2014–44 and should 

be submitted on or before November 25, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26126 Filed 11–3–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73460; File No. SR–CBOE– 

2014–080] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related To Extending the 

FLEX Exercise Settlement Values Pilot 

October 29, 2014. 

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 October 

16, 2014, 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 Exchange has 

designated the proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) 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 Exchange proposes to extend the 

operation of its Flexible Exchange 


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5FLEX Options provide investors with the ability 

to customize basic option features including size, 

expiration date, exercise style, and certain exercise 

prices. FLEX Options can be FLEX Index Options 

or FLEX Equity Options. In addition, other products 

are permitted to be traded pursuant to the FLEX 

trading procedures. For example, credit options are 

eligible for trading as FLEX Options pursuant to the 

FLEX rules in Chapters XXIVA and XXIVB. See 

CBOE Rules 24A.1(e) and (f), 24A.4(b)(1) and (c)(1), 

24B.1(f) and (g), 24B.4(b)(1) and (c)(1), and 28.17. 

The rules governing the trading of FLEX Options on 

the FLEX Request for Quote (‘‘RFQ’’) System 

platform are contained in Chapter XXIVA. The rules 

governing the trading of FLEX Options on the FLEX 

Hybrid Trading System platform are contained in 

Chapter XXIVB. 

6See Securities Exchange Act Release No. 70752 

(October 24, 2013), 78 FR 65023 (October 30, 2013) 

(SR–CBOE–2013–99). 

7At the same time the permissible exercise 

settlement values pilot was established for FLEX 

Index Options, the Exchange also established a pilot 

program eliminating the minimum value size 

requirements for all FLEX Options. See Securities 

Exchange Act Release Nos. 61439 (January 28, 

2010), 75 FR 5831 (February 4, 2010) (SR–CBOE– 

2009–087) (Approval Order); 61676 (March 9, 

2010), 75 FR 13191 (March 18, 2010) (SR–CBOE– 

2010–026) (technical rule change to include original 

pilots’ conclusion date of March 28, 2011 in the 

rule text); 64110 (March 24, 2011), 76 FR17463 

(March 29, 2011) (SR–CBOE–2011–024) (extending 

the pilots through March 30, 2012), 77 FR 20673 

(April 5, 2012) (SR–CBOE–2012–027) (extending 

the pilots through the earlier of November 2, 2012 

or the date on which the respective pilot program 

is approved on a permanent basis). The pilot 

program eliminating the minimum value size 

requirements was approved on a permanent basis 

in a separate rule change filing. See Securities 

Exchange Act Release No. 67624 (August 8, 2012), 

77 FR 48580 (August 14, 2012) (SR–CBOE–2012– 

040). The permissible exercise settlement values 

pilot, however, has been extended. See Securities 

Exchange Act Release No. 68145 (November 2, 

2012), 77 FR 67044 (November 8, 2012) (SR–CBOE– 

2012–102) (extending the pilot through the earlier 

of November 2, 2013 or the date on which the pilot 

program is approved on a permanent basis). 

8See Rules 24A.4(b)(3) and 24B.4(b)(3); see also 

Securities Exchange Act Release No. 31920 

(February 24, 1993), 58 FR 12280 (March 3, 1993) 

(SR–CBOE–92–17). The Exchange has determined 

to limit the averaging parameters to three 

alternatives: The average of the opening and closing 

index values on the expiration date; the average of 

intra-day high and low index values on the 

expiration date; and the average of the opening, 

closing, and intra-day high and low index values on 

the expiration date. Any changes to the averaging 

parameters established by the Exchange would be 

announced to Trading Permit Holders via circular. 

9For example, prior to the pilot, the exercise 

settlement value of a FLEX Index Option that 

expires on the Tuesday before Expiration Friday 

could have an a.m., p.m. or specified average 

settlement. However, the exercise settlement value 

of a FLEX Index Option that expires on the 

Wednesday before Expiration Friday could only 

have an a.m. settlement. 

10No change was necessary or requested with 

respect to FLEX Equity Options. Regardless of the 

expiration date, FLEX Equity Options are settled by 

physical delivery of the underlying. 

11The annual report also contained certain pilot 

period and pre-pilot period analyses of volume and 

open interest for Expiration Friday, a.m.-settled 

FLEX Index series and Expiration Friday Non-FLEX 

Index series overlying the same index as an 

Expiration Friday, p.m.-settled FLEX Index option. 

12 5 U.S.C. 552. 

Options (‘‘FLEX Options’’) pilot 

program regarding permissible exercise 

settlement values for FLEX Index 

Options.5 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. 

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 

On January 28, 2010, the Exchange 

received approval of a rule change that, 

among other things, established a pilot 

program regarding permissible exercise 

settlement values for FLEX Index 

Options. In October 2013, the Exchange 

filed a proposed rule change that 

extended the pilot period from the 

earlier of November 2, 2013 or the date 

on which the pilot program is approved 

on a permanent basis [sic] to the earlier 

of November 3, 2014 or the date on 

which the pilot program is approved on 

a permanent basis.6 The pilot program 

is currently set to expire on the earlier 

of November 3, 2014 or the date on 

which the pilot program is approved on 

a permanent basis.7 The purpose of this 

rule change filing is to extend the pilot 

program through the earlier of May 3, 

2016 or the date on which the pilot 

program is approved on a permanent 

basis. This filing simply seeks to extend 

the operation of the pilot program and 

does not propose any substantive 

changes to the pilot program. 

Under Rules 24A.4, Terms of FLEX 

Options, and 24B.4, Terms of FLEX 

Options, a FLEX Option may expire on 

any business day specified as to day, 

month and year, not to exceed a 

maximum term of fifteen years. In 

addition, the exercise settlement value 

for a FLEX Index Option can be 

specified as the index value determined 

by reference to the reported level of the 

index as derived from the opening or 

closing prices of the component 

securities (‘‘a.m. settlement’’ or ‘‘p.m. 

settlement,’’ respectively) or as a 

specified average, provided that the 

average index value must conform to the 

averaging parameters established by the 

Exchange.8 However, prior to the 

initiation of the exercise settlement 

values pilot, only a.m. settlements were 

permitted if a FLEX Index Option 

expires on, or within two business days 

of, a third Friday-of-the-month 

expiration (‘‘Expiration Friday’’).9

Under the exercise settlement values 

pilot, this restriction on p.m. and 

specified average price settlements in 

FLEX Index Options was eliminated.10

The exercise settlement values pilot is 

currently set to expire on the earlier of 

November 3, 2014 or the date on which 

the pilot program is approved on a 

permanent basis. 

CBOE is proposing to extend the pilot 

program through the earlier of May 3, 

2016 or the date on which the pilot 

program is approved on a permanent 

basis. CBOE believes the pilot program 

has been successful and well received 

by its membership and the investing 

public for the period that it has been in 

operation as a pilot. In support of the 

proposed extension of the pilot 

program, and as required by the pilot 

program’s Approval Order, the 

Exchange has submitted to the 

Commission pilot program reports 

regarding the pilot, which detail the 

Exchange’s experience with the 

program. Specifically, the Exchange 

provided the Commission an annual 

report analyzing volume and open 

interest for each broad-based FLEX 

Index Options class overlying an 

Expiration Friday, p.m.-settled FLEX 

Index Options series.11 The annual 

report also contained information and 

analysis of FLEX Index Options trading 

patterns. The Exchange also provided 

the Commission, on a periodic basis, 

interim reports of volume and open 

interest. In providing the pilot reports to 

the Commission, the Exchange has 

requested confidential treatment of the 

pilot reports under the Freedom of 

Information Act (‘‘FOIA’’).12 The 

confidentiality of the pilot reports is 

subject to the provisions of FOIA. 

The Exchange believes there is 

sufficient investor interest and demand 

in the pilot program to warrant its 

extension. The Exchange believes that, 

for the period that the pilot has been in 

operation, the program has provided 


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13 In further support, the Exchange also notes that 

the p.m. and specified average price settlements are 

already permitted for FLEX Index Options on any 

other business day except on, or within two 

business days of, Expiration Friday. The Exchange 

is not aware of any market disruptions or problems 

caused by the use of these settlement methodologies 

on these expiration dates (or on the expiration dates 

addressed under the pilot program). The Exchange 

is also not aware of any market disruptions or 

problems caused by the use of customized options 

in the OTC markets that expire on or near 

Expiration Friday and have a p.m. or specified 

average exercise settlement value. In addition, the 

Exchange believes the reasons for limiting 

expirations to a.m. settlement, which is something 

the SEC has imposed since the early 1990s for NonFLEX Options, revolved around a concern about 

expiration pressure on the New York Stock 

Exchange (‘‘NYSE’’) at the close that are no longer 

relevant in today’s market. Today, however, the 

Exchange believes stock exchanges are much better 

able to handle volume. There are multiple primary 

listing and unlisted trading privilege (‘‘UTP’’) 

markets, and trading is dispersed among several 

exchanges and alternative trading systems. In 

addition, the Exchange believes that surveillance 

techniques are much more robust and automated. 

In the early 1990s, it was also thought by some that 

opening procedures allow more time to attract 

contra-side interest to reduce imbalances. The 

Exchange believes, however, that today order flow 

is predominantly electronic and the ability to 

smooth out openings and closes is greatly reduced 

(e.g., market-on-close procedures work just as well 

as openings). Also other markets, such as the 

NASDAQ Stock Exchange, do not have the same 

type of pre-opening imbalance disseminations as 

the NYSE, so many stocks are not subject to the 

same procedures on Expiration Friday. In addition, 

the Exchange believes that the NYSE has reduced 

the required time a specialist has to wait after 

disseminating a pre-opening indication. So, in this 

respect, the Exchange believes there is less time to 

react in the opening than in the close. Moreover, to 

the extent there may be a risk of adverse market 

effects attributable to p.m. settled options (or 

certain average price settled options related to the 

closing price) that would otherwise be traded in a 

non-transparent fashion in the OTC market, the 

Exchange continues to believe that such risk would 

be lessened by making these customized options 

eligible for trading in an exchange environment 

because of the added transparency, price discovery, 

liquidity, and financial stability available. 

14CBOE Rule 4.13(a) provides that ‘‘[i]n a manner 

and form prescribed by the Exchange, each Trading 

Permit Holder shall report to the Exchange, the 

name, address, and social security or tax 

identification number of any customer who, acting 

alone, or in concert with others, on the previous 

business day maintained aggregate long or short 

positions on the same side of the market of 200 or 

more contracts of any single class of option 

contracts dealt in on the Exchange. The report shall 

indicate for each such class of options, the number 

of option contracts comprising each such position 

and, in the case of short positions, whether covered 

or uncovered.’’ For purposes of this Rule, the term 

‘‘customer’’ in respect of any Trading Permit Holder 

includes ‘‘the Trading Permit Holder, any general 

or special partner of the Trading Permit Holder, any 

officer or director of the Trading Permit Holder, or 

any participant, as such, in any joint, group or 

syndicate account with the Trading Permit Holder 

or with any partner, officer or director thereof.’’ 

Rule 4.13(d). 

15See, note 12, supra, and surrounding 

discussion. If the Exchange seeks permanent 

approval of the pilot program, the Exchange 

recognizes that certain information in the pilot 

reports may need to be made available on a public 

basis. 

16For example, a position in a pm-settled FLEX 

Index Option series that expires on Expiration 

Friday in January 2015 could be established during 

the exercise settlement values pilot. If the pilot 

program were not extended (or made permanent), 

then the position could continue to exist. However, 

the Exchange notes that any further trading in the 

series would be restricted to transactions where at 

least one side of the trade is a closing transaction. 

See Approval Order, supra note 7, footnotes 9 and 

10. 

17 15 U.S.C. 78f(b). 

18 15 U.S.C. 78f(b)(5). 

investors with additional means of 

managing their risk exposures and 

carrying out their investment objectives. 

Furthermore, the Exchange believes that 

it has not experienced any adverse 

market effects with respect to the pilot 

program, including any adverse market 

volatility effects that might occur as a 

result of large FLEX exercises in FLEX 

Option series that expire near NonFLEX expirations and use a p.m. 

settlement (as discussed below). 

In that regard, based on the 

Exchange’s experience in trading FLEX 

Options to date and over the pilot 

period, CBOE continues to believe that 

the restrictions on exercise settlement 

values are no longer necessary to 

insulate Non-FLEX expirations from the 

potential adverse market impacts of 

FLEX expirations.13 To the contrary, 

CBOE believes that the restriction 

actually places the Exchange at a 

competitive disadvantage to its OTC 

counterparts in the market for 

customized options, and unnecessarily 

limits market participants’ ability to 

trade in an exchange environment that 

offers the added benefits of 

transparency, price discovery, liquidity, 

and financial stability. 

The Exchange also notes that certain 

position limit, aggregation and exercise 

limit requirements continue to apply to 

FLEX Index Options in accordance with 

Rules 24A.7, Position Limits and 

Reporting Requirements, 24A.8, 

Exercise Limits, 24B.7, Position Limits 

and Reporting Requirements, and 24B.8, 

Exercise Limits. Additionally, all FLEX 

Options remain subject to the position 

reporting requirements in paragraph (a) 

of CBOE Rule 4.13, Reports Related to 

Position Limits.14 Moreover, the 

Exchange and its Trading Permit Holder 

organizations each have the authority, 

pursuant to CBOE Rule 12.10, Margin 

Required is Minimum, to impose 

additional margin as deemed advisable. 

CBOE continues to believe these 

existing safeguards serve sufficiently to 

help monitor open interest in FLEX 

Option series and significantly reduce 

any risk of adverse market effects that 

might occur as a result of large FLEX 

exercises in FLEX Option series that 

expire near Non-FLEX expirations and 

use a p.m. settlement. 

CBOE is also cognizant of the OTC 

market, in which similar restrictions on 

exercise settlement values do not apply. 

CBOE continues to believe that the pilot 

program is appropriate and reasonable 

and provides market participants with 

additional flexibility in determining 

whether to execute their customized 

options in an exchange environment or 

in the OTC market. CBOE continues to 

believe that market participants benefit 

from being able to trade these 

customized options in an exchange 

environment in several ways, including, 

but not limited to, enhanced efficiency 

in initiating and closing out positions, 

increased market transparency, and 

heightened contra-party 

creditworthiness due to the role of OCC 

as issuer and guarantor of FLEX 

Options. 

If, in the future, the Exchange 

proposes an additional extension of the 

pilot program, or should the Exchange 

propose to make the pilot program 

permanent, the Exchange will submit, 

along with any filing proposing such 

amendments to the pilot program, an 

annual report (addressing the same 

areas referenced above and consistent 

with the order approving the 

establishment of the Program) to the 

Commission at least two months prior to 

the expiration date of the Program. The 

annual report will be provided to the 

Commission on a confidential basis. The 

Exchange will also continue, on a 

periodic basis, to submit interim reports 

of volume and open interest consistent 

with the terms of the exercise settlement 

values pilot program as described in the 

pilot program’s Approval Order. All 

such pilot reports would continue to be 

provided by the Exchange along with a 

request for confidential treatment under 

FOIA.15 As noted in the pilot program’s 

Approval Order, any positions 

established under the pilot program 

would not be impacted by the 

expiration of the pilot program.16

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.17 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 18 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, 


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19 Id. 

20 15 U.S.C. 78s(b)(3)(A). 

21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

22 17 CFR 240.19b–4(f)(6). 

23 17 CFR 240.19b–4(f)(6)(iii). 

24For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

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) 19 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 extension of the pilot 

program, which permits additional 

exercise settlement values, would 

provide greater opportunities for 

investors to manage risk through the use 

of FLEX Options. Further, the Exchange 

believes that it has not experienced any 

adverse effects from the operation of the 

pilot program, including any adverse 

market volatility effects that might occur 

as a result of large FLEX exercises in 

FLEX Option series that expire near 

Non-FLEX expirations and use a p.m. 

settlement. The Exchange also believes 

that the extension of the exercise 

settlement values pilot does not raise 

any unique regulatory concerns. In 

particular, although p.m. settlements 

may raise questions with the 

Commission, the Exchange believes 

that, based on the Exchange’s 

experience in trading FLEX Options to 

date and over the pilot period, market 

impact and investor protection concerns 

will not be raised by this rule change. 

The Exchange also believes that the 

proposed rule change would continue to 

provide Trading Permit Holders and 

investors with additional opportunities 

to trade customized options in an 

exchange environment (which offers the 

added benefits of transparency, price 

discovery, liquidity, and financial 

stability as compared to the over-thecounter market) and subject to 

exchange-based rules, and investors 

would benefit as a result. 

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. The 

Exchange believes there is sufficient 

investor interest and demand in the 

pilot program to warrant its extension. 

The Exchange believes that, for the 

period that the pilot has been in 

operation, the program has provided 

investors with additional means of 

managing their risk exposures and 

carrying out their investment objectives. 

Furthermore, the Exchange believes that 

it has not experienced any adverse 

market effects with respect to the pilot 

program, including any adverse market 

volatility effects that might occur as a 

result of large FLEX exercises in FLEX 

Option series that expire near Non-Flex 

expirations and use a p.m. settlement. 

CBOE believes that the restriction 

actually places the Exchange at a 

competitive disadvantage to its OTC 

counterparts in the market for 

customized options, and unnecessarily 

limits market participants’ ability to 

trade in an exchange environment that 

offers the added benefits of 

transparency, price discovery, liquidity, 

and financial stability. Therefore, the 

Exchange does not believe that the 

proposed rule change will impose any 

burden on competition. 

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 proposed rule change 

does not: (i) Significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative prior to 30 days from the date 

on which it was filed, or such shorter 

time as the Commission may designate, 

the proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 20 and Rule 19b–4(f)(6) 

thereunder.21

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 22 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 23

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange has 

requested that the Commission waive 

the 30-day operative delay so that the 

proposed rule change may become 

operative upon filing, noting that waiver 

of the operative delay would allow the 

pilot program to continue 

uninterrupted. The Commission 

believes that waiving the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest. The Commission notes that 

waiving the 30-day operative delay 

would prevent the expiration of the 

pilot program on November 3, 2014, 

prior to the extension of the pilot 

program becoming operative. Therefore, 

the Commission hereby waives the 30- 

day operative delay and designates the 

proposal operative upon filing.24

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–2014–080 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–2014–080. 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 


rmajette on DSK3VPTVN1PROD with NOTICES
65468 Federal Register / Vol. 79, No. 213 / Tuesday, November 4, 2014 / Notices 

25 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A Member is defined as ‘‘any registered broker 

or dealer that has been admitted to membership in 

the Exchange.’’ See Exchange Rule 1.5(n). 

4See Securities Exchange Act Release No. 73411 

(October 23, 2014) (SR–BYX–2014–028), available 

at http://www.sec.gov/rules/sro/byx.shtml. 

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– 

2014–080 and should be submitted on 

or before November 25, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26121 Filed 11–3–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73461; File No. SR–BYX– 

2014–029] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Related to Fees for Use 

of BATS Y-Exchange, Inc. 

October 29, 2014. 

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 October 

24, 2014, BATS Y-Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

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 filed a proposal to 

amend the fee schedule applicable to 

Members 3 and non-members of the 

Exchange pursuant to BYX Rules 15.1(a) 

and (c). Changes to the fee schedule 

pursuant to this proposal are effective 

upon filing. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com/, at the 

principal office of the Exchange, 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 parts 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 modify its 

fee schedule effective immediately in 

order to adopt pricing charged by the 

Exchange for Supplemental Peg Orders, 

as defined in Rule 11.9(c)(19), and 

several new routing strategies, as 

described below. 

Supplemental Peg Orders 

The Exchange recently adopted a new 

order type, the Supplemental Peg Order, 

which is a non-displayed limit order 

described in Rule 11.9(c)(19). The 

Exchange proposes to modify its fee 

schedule to make clear that standard 

pricing for all other types of NonDisplayed Liquidity, as defined in the 

fee schedule, applies to Supplemental 

Peg Orders. Thus, the Exchange 

proposes to charge $0.0024 per share for 

all Supplemental Peg Orders executed 

on the Exchange that add liquidity in 

securities priced $1.00 and above. As 

with all orders adding liquidity to the 

Exchange, Supplemental Peg Orders in 

securities priced below $1.00 would not 

receive a liquidity rebate. 

Routing Strategies 

The Exchange recently filed a 

proposed rule change to adopt several 

new routing options in connection with 

the Exchange’s technology integration 

with EDGA Exchange, Inc. (‘‘EDGA’’) 

and EDGX Exchange, Inc. (‘‘EDGX’’).4

The Exchange proposes to adopt pricing 

for the new routing options, as set forth 

below, and also proposes various 

structural changes to the fee schedule. 

First, the Exchange adopted two new 

routing strategies that are similar to the 

Exchange’s existing standard best 

execution routing strategies. 

Specifically, the Exchange adopted 

ROUT and ROUX, which are similar to 

Parallel D and Parallel 2D. Accordingly, 

the Exchange proposes to charge the 

same fee for ROUT and ROUX routed 

executions as it does for Parallel D and 

Parallel 2D routing strategies. 

Specifically, the Exchange proposes to 

charge $0.0029 per share for orders in 

securities priced $1.00 and above 

executed through ROUT and ROUX at a 

venue other than a dark liquidity venue 

(i.e., through DRT routing). As it does 

currently, any execution through DRT 

routing at a dark liquidity venue will 

continue to be charged $0.0020 per 

share. Because DRT routing can be 

combined with various other new 

routing strategies set forth below, the 

Exchange also proposes to modify the 

description in the ‘‘Other Non-Standard 

Routing Options’’ section of the fee 

schedule to explicitly state that any 

liquidity removed through DRT at a 

venue other than through the SLIM 

routing strategy is $0.0020 per share 

(SLIM currently charges $0.0027 for 

executions at dark liquidity venues). 

This reflects an expansion of the current 

provision that applies a rate of $0.0020 

per share for BYX + DRT Destination 

Specific Orders to apply that same rate 

to all executions that remove liquidity at 

a dark liquidity venue. In addition, to 

conform to the fee charged for Parallel 

D and Parallel 2D routed executions in 

securities priced below $1.00, the 

Exchange proposes to charge a fee that 

is 0.29% of the total dollar value for any 

execution of a ROUT or ROUX routed 

order in securities priced below $1.00. 

Second, the Exchange adopted 

various new strategies that are similar 

(but not identical) to existing 

Destination Specific routing offered by 

the Exchange. The Exchange proposes to 

conform such new strategies with 


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