Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Notices 65263 

8The Commission has considered the proposed 

amendment’s impact on efficiency, competition, 

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

9 15 U.S.C. 78k–1(a)(1). 

10 17 CFR 240.608. 

11 15 U.S.C. 78k–1. 

12 17 CFR 240.608. 

13 17 CFR 200.30–3(a)(27). 

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

2 17 CFR 240.19b–4. 

fee, from unanimity to the affirmative 

vote of two-thirds of all Participants 

entitled to vote; 

• the voting requirement to request 

system changes other than those related 

to the processor function from a 

unanimous vote to the affirmative vote 

of a majority of all Participants entitled 

to vote; 

• establishes as the voting 

requirement to select a new processor— 

the affirmative vote of two-thirds of all 

Participants entitled to vote; 

• the default voting requirement from 

unanimity to the affirmative vote of a 

majority of all Participants entitled to 

vote. 

III. Discussion 

After careful review, the Commission 

finds that the proposed amendment to 

the Plan is consistent with the 

requirements of the Act and the rules 

and regulations thereunder,8 and, in 

particular, Section 11A(a)(1) of the Act 9

and Rule 608 thereunder 10 in that they 

are necessary or appropriate in the 

public interest, for the protection of 

investors and the maintenance of fair 

and orderly markets, to remove 

impediments to, and perfect the 

mechanisms of, a national market 

system. 

A. Fee Setting 

Amending the voting requirements, as 

proposed by the Participants, should 

provide the Participants with greater 

flexibility to accomplish the goals of the 

Plan. The change with respect to 

eliminating a fee and reducing a fee 

would harmonize the voting 

requirement with the counterpart voting 

requirements under the CTA Plan and 

the CQ Plan. Changes with respect to 

reducing a fee would also harmonize the 

Plan with counterpart voting 

requirement under the OPRA Plan. 

These changes to the voting 

requirements should provide the 

Participants with greater flexibility 

when amending the Plan’s fee schedule. 

B. System Changes 

The change with respect to system 

changes subjects all system changes to 

the same voting requirement, thereby 

providing Participants greater flexibility 

and making it easier for the Participants 

to arrive at decisions regarding 

necessary system upgrades and changes. 

The Commission notes that the CTA 

Plan, the CQ Plan, and the OPRA Plan 

all require a majority vote for decisions 

relating to system changes. 

C. Processor Selection 

The Commission believes that a twothirds majority vote, rather than 

unanimity, should facilitate decisionmaking regarding the selection of a 

processor. 

D. Default Voting Requirement 

Changing the default voting 

requirement to the affirmative vote of a 

majority of Participants, from a 

unanimous vote should provide greater 

flexibility and facilitate the Participants’ 

ability to take action under the Plan. 

The Commission notes that the CTA 

Plan, the CQ Plan, and the OPRA Plan 

require majority votes to act on matters 

for which those plans do not specify a 

voting requirement. Thus, the change 

harmonizes requirements under the 

Plan with corresponding requirements 

under the CTA Plan, the CQ Plan, and 

the OPRA Plan. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 11A of the Act,11 and Rule 608 

thereunder,12 that the proposed 

amendment to Nasdaq/UTP Plan (File 

No. S7–24–89) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26008 Filed 10–31–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73450; File No. SR–CBOE– 

2014–081] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to Functionality 

of Public Automated Routing System 

October 28, 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 

15, 2014, 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 

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 adopt Rule 

6.12A (Public Automated Routing 

System (PAR)) to describe the 

functionality of the PAR workstation. 

The text of the proposed rule change is 

below and in Exhibit 1 (additions are 

italicized; deletions are [bracketed]). 

* * * * * 

Chicago Board Options Exchange, 

Incorporated Rules 

* * * * * 

Rule 6.12. Reserved 

* * * * * 

6.12A. Public Automated Routing 

System (PAR) 

Rule 6.12A. The PAR workstation 

(PAR) is an Exchange-provided order 

management tool for use on the 

Exchange’s trading floor by Trading 

Permit Holders or Exchange PAR 

Officials (see Rule 7.12 for a description 

of the responsibilities of PAR Officials). 

The Exchange’s Order Handling System 

allows for orders to be routed to and 

from PAR in accordance with TPH and 

Exchange order routing parameters and 

the Rules including, but not limited to, 

this Rule 6.12A and Chapters VI, VII, 

and VIII of the Rules and Rules 6.2B, 

6.13, 6.14B, 6.53, 6.53C, 6.74, 7.12, and 

8.51 thereunder. 

(a) Order Routing. Eligible orders will 

be routed to PAR in accordance with 

TPH and Exchange order routing 

parameters and the order’s terms. 

(b) Order Handling. Once an order is 

on PAR, the order shall be processed in 

accordance with the manual or 

automatic settings established by the 

user and the order’s terms. Subject to 

the forgoing, once an order is on PAR, 

the user may: 

(i) Submit the order into the Hybrid 

Trading System (including for execution 

against quotes and orders resting in the 

electronic book and exposure to 

appropriate electronic auctions 

pursuant to Rules 6.13A, 6.14A, 6.53C, 

6.74B, and 24B.5B); 

(ii) Execute the order in open outcry, 

including against other orders on PAR 

and with other TPHs or PAR Officials in 

accordance with Rules 6.74 and 7.12; 

(iii) Route the order to an Order 

Management Terminal (OMT) 

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65264 Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Notices 

3The PAR workstation is an Exchange-provided 

facility used to operate the Exchange’s Public 

Automated Routing System. The Public Automated 

Routing System and Public Automated Routing 

workstation are referred to collectively as ‘‘PAR’’ 

herein. 

4The Exchange is currently working on a separate 

filing that would consolidate the Rules that interact 

with PAR (see, e.g., Rule 6.2B.03(c)(ii); Rule 

6.8(d)(iv)(A); Rule 6.13(b)(i)(A)(2); Rule 6.13(b)(iii); 

Rule 6.13(b)(iv); Rule 6.13(b)(v)(B); Rule 6.53C(c); 

Rule 6.53C(d)(vi); Rule 6.53C.06(b); Rule 

6.53C.07(a)(3); Rule 6.53C.07(b); Rule 6.53C.07(e); 

Rule 7.12; Rule 8.51.10) into a single Rule. 

5See, e.g., Regulatory Circular RG97–018 (Order 

Routing of Contingency Orders) (February 7, 1997); 

RG97–019 (New PAR Functionality—Contingency, 

Discretionary Orders) (February 7, 1997); RG03–003 

(Limit Order Display Requirements) (January 10, 

2003); RG03–029 (Market Linkage Implementation 

II) (April 17, 2003); RG03–043 (Failure to Address 

Orders and Honor Firm Quote) (June 25, 2003); 

RG03–064 (Market Maker Orders Now Book-Eligible 

in Hybrid Classes) (July 31, 2003); RG04–056 (How 

Firm Quote Applies to Marketable Orders Entered 

At or Near the Close) (April 30, 2004); RG04–066 

(All or None (AON) Orders in Hybrid Classes) (June 

2, 2004); RG04–068 (Routing of Discretionary 

Orders to DPM PAR Workstations) (June 4, 2004); 

RG05–017 (Autobook) (February 11, 2005); RG07– 

046 (PAR Reporting Enhancements) (April 13, 

2007); RG07–084 (Hybrid 2.0 Auto-Ex on SingleList Classes) (August 3, 2007); RG07–104 (EPW 

Activation in Single-List, Hybrid 2.0 Classes) 

(October 8, 2007); RG07–112 (Hybrid Auto-Ex and 

‘‘Exchange Prescribed Widths’’ (EPWs)) (November 

5, 2007); RG09–084 (New Option Linkage 

Implementation) (August 14, 2009); RG11–005 

(CBOEdirect Version 8.5 System Modifications) 

(January 13, 2011); RG11–074 (Processing of StockOption Strategy Orders) (June 17, 2011); RG11–102 

(Price Protection Enhancements) (August 26, 2011); 

RG12–037 (Prefix Usage for SPX Combination 

(‘‘Combo’’) Orders) (February 29, 2012); RG13–083 

(New Order Designations) (June 5, 2013); RG13–105 

(New Order Designations) (July 29, 2013); RG13– 

154 (Exchange Rule 6.51—‘‘Reporting Duties’’) 

(November 29, 2013); RG14–037 (PAR 

Enhancements) (March 25, 2014); RG14–047 (PAR 

Enhancements) (April 2, 2014); RG14–096 (PAR 

Enhancements) (June 20, 2014); see also 

Information Circular IC03–08 (Systems 

Enhancements—Complex Orders and Linkage) 

(January 23, 2003); IC03–38 (Complex Order TNT 

Entry) (March 21, 2003); IC04–018 (Floor Broker 

Workstation (FBW Enhancements) (February 17, 

2004); IC04–020 (CBOE Systems Enhancements) 

(February 17, 2004); IC05–006 (Complex Order TNT 

Entry) (January 24, 2005); IC05–112 (PAR AutoLink 

and COB) (August 31, 2005); IC06–076 (PAR Routed 

Orders) (June 23, 2006). 

6A PAR Official is an Exchange employee or 

independent contractor whom the Exchange may 

designate as being responsible for (i) operating the 

PAR workstation in a DPM trading crowd with 

respect to the classes of options assigned to him/ 

her; (ii) when applicable, maintaining the book with 

respect to the classes of options assigned to him/ 

her; and (iii) effecting proper executions of orders 

placed with him/her. The PAR Official may not be 

affiliated with any Trading Permit Holder that is 

approved to act as a Market-Maker. Rule 7.12(a). 

The duties and obligations of PAR Officials are set 

forth in Rule 7.12. 

7The Exchange completed the rollout of the OHS 

in 2008, which replaced the Exchange’s Order 

Routing System (‘‘ORS’’). OHS resides within the 

Exchange’s central trading platform, CBOE 

Command and thus, functions on same platform as 

the Exchange’s trade processing engine, resulting in 

speedier processing and improved order handling. 

designated by the TPH or otherwise 

return the order to the order entry firm 

or originating TPH; 

(iv) Route the order or a portion 

thereof to an away exchange in 

accordance with Rules 6.14B and 6.81; 

(v) Reflect the price and/or quantity 

related to the order or a portion thereof 

in the displayed Exchange BBO 

(applicable only in options classes on 

the Hybrid 3.0 Platform); or 

(vi) Cancel the unexecuted order, 

including upon receipt of a cancel 

request from the order entry firm or 

originating TPH or as prescribed by 

Exchange or TPH order routing 

parameters. 

(c) Eligible Order Types. Unless 

otherwise specified in the Rules, all 

order types specified in Rule 6.53 are 

eligible to route to PAR, except that the 

order types defined in Rules 6.53(h), 

6.53(o)–(r), and 6.53(t)–(v) may not be 

routed to PAR. 

(d) Preemption. To the extent that any 

provision(s) of this Rule 6.12A conflicts 

with any provision(s) of any Regulatory 

Circular previously issued by the 

Exchange regarding the operation or 

functionality of PAR, this Rule 

supersedes and supplants the limited 

conflicting provision(s) of any such 

Regulatory Circular. 

* * * * * 

The text of the proposed rule change 

is also 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt new 

Rule 6.12A to describe its existing PAR 

operations and PAR workstation 3

functionality. The Exchange notes that 

PAR is currently in use on the Exchange 

and that PAR is referenced throughout 

the Rules 4 and in various Regulatory 

Circulars.5 While there are various 

references to PAR throughout the Rules 

and in Regulatory Circulars, the Rules 

do not describe the substantive aspects 

of the order handling process available 

to users once orders are received on 

PAR (and thus how Trading Permit 

Holders (‘‘TPHs’’) or PAR Officials,6 as 

applicable, may process such orders). 

The purpose of this rule filing is to 

codify the details of the Exchange’s 

existing PAR operations and 

functionalities within the Rules. The 

Exchange believes that adding details to 

the Rules regarding PAR would be 

useful to TPHs. 

The Exchange is continuously 

evaluating additions to the Rules, 

particularly with respect to systems 

processes and order handling. The 

Exchange believes that the adoption of 

Rule 6.12A describing PAR 

functionality is consistent with this 

effort. 

Background 

PAR is a touch-screen order routing 

and handling tool that is used by TPHs 

and PAR Officials on the floor of the 

Exchange to manage and process orders 

that are routed to PAR for processing. 

PAR is equipped with a dynamic, 

graphical display that allows users to 

manually and automatically execute 

orders electronically through the 

Exchange’s central trading engine and in 

open outcry. In general, PAR allows 

users to specify execution quantities, 

split trades among multiple contra 

parties, report trades, route orders to the 

book, and generate trading reports, 

including a detailed history on all 

activity conducted on the workstation. 

The Exchange operates a dynamic 

order handling system (‘‘OHS’’),7 which 

allows orders to be routed, processed, 

and transmitted to the Exchange’s trade 

engine, in a variety of ways on the 

Hybrid Trading System. The OHS may 

route orders directly to the Exchange’s 

trade engine for automatic execution 

and book entry, to PAR workstations 

located in the trading crowds for 

manual handling, and/or to other order 

management terminals (‘‘OMTs’’) 

located in booths on the floor of the 

Exchange. PAR receives orders through 

the OHS according to Exchange and 

TPH routing parameter configurations. 

A TPH or PAR Official may select an 

order on the workstation and enter trade 

information such as execution quantity, 

price, and contra party information. The 

PAR interface also allows the user to 

direct an order to be executed or booked 

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Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Notices 65265 

8See Securities and Exchange Act Release No. 

34–34876 (October 21, 1994), FR Doc No: 94–26765 

(October 28, 1994) (Order Approving Proposed Rule 

Change and Amendment No. 1 to a Proposed Rule 

Change and Notice of Filing and Order Granting 

Accelerated Approval of Amendment No. 2 to a 

Proposed Rule Change by the Chicago Board 

Options Exchange, Inc. Relating to Firm Quote 

Responsibilities) (SR–CBOE–94–17). 

9See Regulatory Circular RG97–67 (Permanent 

Approval of Order Routing of Contingency Orders) 

(June 4, 1997); see also Securities and Exchange Act 

Release No. 34–38702 (May 30, 1997), 62 FR 31184 

[sic] (Notice of Filing and Order Granting 

Accelerated Approval of Proposed Rule Change 

Relating to Enhancements to the Electronic Order 

Routing System) (June 6, 1997) (SR–CBOE–97–22). 

10See Id. 

11See Securities and Exchange Act Release No. 

34–52798 (November 18, 2005), 70 FR 71134 [sic] 

(Order Approving a Proposed Rule Change and 

Amendment No. 1 Thereto and Notice of Filing and 

Order Granting Accelerated Approval to 

Amendments No. 2 and 4 Thereto Relating to the 

Removal of Agency Responsibilities From 

Designated Primary Market-Makers and the 

Establishment of PAR Officials) (November 28, 

2005) (SR–CBOE–2005–46); see also Regulatory 

Circular RG05–117 (Separation of DPM Agency and 

Principal Functions) (November 22, 2005). 

12The Hybrid 3.0 Platform is an electronic trading 

platform on the Hybrid Trading System that allows 

one or more quoters to submit electronic quotes 

which represent the aggregate Market-Maker 

quoting interest in a series for the trading crowd. 

Standard SPX options contracts are traded on the 

Hybrid 3.0 Platform. The Hybrid Trading System 

refers to the Exchange’s trading platform that allows 

automatic executions to occur electronically and 

open outcry trades to occur on the floor of the 

Exchange. To operate in this ‘‘hybrid’’ environment, 

the Exchange has a dynamic order handling system 

that has the capability to route orders to the trade 

engine for automatic execution and book entry, to 

Trading Permit Holder and PAR Official 

workstations located in the trading crowds for 

manual handling, and/or to other order 

management terminals generally located in booths 

on the trading floor for manual handling. 

by the Exchange’s trade engine. Once 

execution of an order is completed, PAR 

transmits the completed execution (also 

referred to as a ‘‘fill’’), back to the OHS. 

PAR users can also transmit to the trade 

engine a portion of a selected order to 

be executed or booked within the trade 

engine. In addition, PAR allows users to 

execute orders in open outcry and 

record information about open outcry 

trades for audit-trail purposes. These 

functions are described in greater detail 

below. PAR workstations may be used 

in the form of fixed workstation 

terminals or mobile devices. 

PAR was introduced at the Exchange 

in 1994 as an innovative trading 

automation solution. In general, PAR 

was developed to automate the manual 

trading process in open outcry, which 

previously required the use of paper 

tickets to execute customer orders. 

Rather than entering orders and 

executions into TPH computer systems, 

transmitting order and trade execution 

information to and from the Exchange’s 

trade engine, printing order tickets and 

fill reports, and physically delivering 

the order tickets and fill reports to 

counterparty brokers on the floor of the 

Exchange and to the Options Clearing 

Corporation, PAR allows users to 

process orders directly through the OHS 

and from TPH trading systems. 

Initially, PAR was placed in use in 

limited areas on the floor of the 

Exchange.8 By 1997, PAR functionality 

was enhanced to allow the direct 

routing of various order types from the 

Exchange’s system to PAR, including 

the following types of orders: All or 

None; Opening Only; Immediate or 

Cancel; Market on Close; Fill or Kill; 

Closing Only; Minimum Quantity; 

Market if Touched; Stop; Not Held; and 

Stop Limit.9 Notably, whether a 

particular order or order type routed to 

PAR was (and continues to be) a 

function of parameter controls, set by 

TPHs and the Exchange, that allow 

different order types to be selectively 

routed at the discretion of, and in 

accordance with, TPH order routing and 

handling instructions.10 As technology, 

regulation, and trading practices have 

shifted, the Exchange has adapted and 

enhanced PAR to meet the trading needs 

of TPHs and the Exchange. The systemic 

flexibility of PAR has been (and 

continues to be) essential in maintaining 

PAR as an effective order management 

tool. 

Until 2005, only Floor Brokers and 

DPMs used PAR on the floor of the 

Exchange, with DPMs handling agency 

orders on PAR including orders that 

could not be automatically executed and 

thus, routed to PAR for manual 

handling. In 2005, the Exchange 

adopted Rule 7.12, which prohibited 

DPMs from executing agency orders in 

their appointed classes and allowed the 

Exchange to place PAR Officials at PAR 

workstations for the handling of orders 

routed to PAR in accordance with 

Exchange and TPH order routing 

parameters.11 TPHs and PAR Officials 

have continually used PAR on the floor 

of the Exchange since Rule 7.12 was 

adopted. 

The Exchange considers PAR an 

important Exchange facility and order 

management tool for market participants 

on the Exchange. Many of the orders 

that cannot be automatically processed 

by the Exchange’s central trade engine 

are routed to PAR for handling. The 

functionalities provided on PAR that 

allow these orders to be processed are 

essential to the functioning of the 

Exchange and the maintenance of fair 

and orderly markets. The proposed rule 

describes the substantive functions of 

PAR and its central operation. 

Proposal 

The Exchange proposes to adopt Rule 

6.12A to describe the operation of PAR 

and and [sic] functionality of its PAR 

workstations. Among other things, Rule 

6.12A would describe how orders may 

be routed to PAR and what PAR users 

may do to process orders once they are 

received on PAR. Proposed Rule 6.12A 

describes the substantive operation of 

PAR and the primary functionality of 

the PAR workstation. The proposed 

Rule is not intended as a user manual 

or software tutorial. The Exchange notes 

that PAR does not allow market 

participants to perform any functions 

that are not already authorized under 

the Rules. Rather, PAR is a tool that may 

be used by market participants, at their 

discretion, to help facilitate the efficient 

and orderly processing of orders in a 

manner already authorized under the 

Rules. Thus, the purpose of the 

proposed rule is simply to describe and 

clarify the substantive functions of PAR. 

The Exchange believes that the 

proposed rule will add clarity to the 

Rules (inasmuch as PAR is already 

referenced throughout the Rules without 

a description of PAR or the substantive 

functions that may be performed on 

PAR) and that the proposed rule would 

be useful for TPHs. 

Under the Exchange’s proposal, the 

rule would describe the order 

processing functions of PAR including, 

but not limited to how PAR users may: 

Interact with the electronic trade engine 

(including executions with quotes and 

orders resting in the electronic book and 

exposure to applicable electronic 

auctions); execute orders in open outcry 

(including against other orders on the 

same PAR terminal (i.e., cross orders), 

or with other TPHs and PAR Officials); 

route orders to Order Management 

Terminals (‘‘OMTs’’) or otherwise return 

orders to order entry firms or the TPH 

that entered the order; route orders or 

portion thereof to an away exchange; 

route orders to the electronic book; 

reflect a price and/or quantity of orders 

or portion thereof in the CBOE BBO for 

classes trading on the Hybrid 3.0 

Platform; 12 and cancel unexecuted 

orders. Proposed Rule 6.12A(a) would 

describe the process by which orders 

may be routed to PAR. Proposed Rule 

6.12A(b) would describe the order 

handling process on PAR, including the 

functionalities that may be achieved 

using a PAR workstation. Proposed Rule 

6.12A(c) would describe the order types 

that may be handled on PAR. Proposed 

Rule 6.12A(d) would establish the 

controlling nature of the Rule with 

respect to previously issued Regulatory 

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13As stated above, various rules reference PAR 

and Exchange routing parameters for orders 

handled on PAR including, but not limited to Rules 

6.2B(a), Rule 6.13(b), Rule 6.53; and Rules 6.53C(c) 

and 6.53C(d). See supra, note 4. The proposed rule 

change is consistent with Rules and the current 

authority of the Exchange under the Rules. 14See supra, notes 4 and 13. 15See, e.g., Rule 6.53C(d). 

Circulars concerning PAR and its 

functionality. Each of these sections and 

the introductory paragraph of the 

proposed Rule are described in greater 

detail below. 

The Exchange proposes to adopt an 

introductory paragraph to Rule 6.12A 

that would generally describe order 

handling and processing on PAR and 

PAR workstation functionality. Under 

the proposed introductory paragraph to 

Rule 6.12A, PAR would be described as 

an Exchange-provided order 

management tool for use on the 

Exchange’s trading floor by Trading 

Permit Holders or PAR Officials. The 

introductory paragraph would also 

describe the order routing process to 

PAR, explaining that the OHS allows for 

orders to be routed to and from a PAR 

workstation in accordance with 

Exchange and TPH routing parameters 

and as set forth in the Rules.13

Proposed Rule 6.12A(a) would reflect 

the process by which eligible orders will 

route to PAR. Where an order is routed 

for processing depends on various 

parameters configured by the Exchange 

and the TPH. TPHs are afforded 

discretion in where they route orders 

and may route orders onto various order 

management tools available on the 

Exchange according to preset or orderspecific routing parameters. Depending 

on the order routing parameters, certain 

orders may route to PAR. For example, 

a TPH may or the Exchange may set 

default auto-execution ‘‘drill-through’’ 

protection limits in the Hybrid Trading 

System such that any order that exceeds 

a limit will be routed to PAR on the 

floor of the Exchange. These parameters 

may be used, to limit ‘‘drill-throughs’’ or 

protect against extreme and potentially 

erroneous limit prices as part of the 

Exchange’s risk controls. TPHs may also 

customize routing instructions to route 

certain orders to PAR for more detailed 

handling. Thus, the OHS provides TPHs 

with some flexibility in determining 

how best to process their orders on the 

Hybrid Trading System. The Exchange 

believes that the use of routing 

parameters supports TPHs’ various 

trading strategies, mitigates order 

handling and processing risks, assists 

the Exchange in attracting order flow 

and liquidity, and promotes the 

maintenance of a fair and orderly 

market. The Exchange views the use of 

routing parameters as an important tool 

to assist TPHs efficiently manage, 

process, and execute orders in the 

‘‘hybrid’’ trading environment. 

The discretion to set order routing 

parameters to route an order to a 

preferred order management tool on the 

floor of the Exchange, including PAR, is 

codified throughout the Rules.14 For 

example, under Rule 6.13(b)(i)(B), 

orders that are not eligible for automatic 

execution will route on a class-by-class 

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

discretion, to the order entry firm’s 

booth or OMT. Similarly, under Rule 

6.53C(e), complex orders that are 

marketable, but would executed at a 

price that is not within an acceptable 

percentage distance from the derived 

net price of the individual leg series that 

existed at the start of a Complex Order 

Auction (‘‘COA’’) will route on a classby-class basis to PAR, or, at the order 

entry firm’s discretion, to the order 

entry firm’s booth. Accordingly, 

proposed Rule 6.12A(a) is modeled to 

reflect the discretion afforded to TPHs 

under the Rules with routing orders to 

PAR according to an order’s terms and 

Exchange order routing parameters. 

In addition to TPH order routing 

parameters, the Exchange sets certain 

order eligibility requirements for orders 

routing to PAR. For example, reserve 

orders (which are limit orders that have 

both a displayed size as well as an 

additional non-displayed size amount) 

are currently not eligible to route to 

PAR. Accordingly, the Exchange’s 

proposal is modeled to reflect the fact 

that only eligible orders will be 

accepted on PAR. Under proposed Rule 

6.12A(a) only ‘‘eligible’’ orders will be 

routed to PAR. 

Proposed paragraph 6.12A(b) would 

describe the substantive aspects of PAR 

functionality, which include: Routing 

an order for electronic processing; 

executing an order; booking an order; 

routing an order to an away exchange; 

and cancelling an order. Proposed Rule 

6.12A(b)(i), would provide that orders 

may be submitted into the Hybrid 

System (including for execution against 

quotes and orders resting in the 

electronic book and exposure to 

appropriate electronic auctions 

including auctions pursuant to Rules 

6.13A, 6.14A, 6.53C, 6.74B, and 

24B.5B). 

PAR workstations are capable of 

handling both single-legged (‘‘simple’’) 

and multi-legged (‘‘complex’’) options 

orders, including those with a stock leg. 

Simple orders on PAR that are 

marketable may be automatically routed 

to the electronic book to trade with 

quotes or orders in the book or may be 

manually executed in open outcry in 

accordance with preset PAR user 

parameters and the order’s terms. Upon 

partial execution of an order on PAR, 

any remaining balance of an order that 

was previously on PAR may be returned 

to PAR or booked, provided it does not 

lock or cross a quote of another 

exchange. Similarly, complex orders on 

PAR that are marketable may 

automatically initiate an electronic 

auction or trade against orders in the 

Complex Order Book (‘‘COB’’) or with 

quotes of the individual leg series or 

may be manually executed in open 

outcry after the COB is cleared in 

accordance with preset user parameters 

and the order’s terms. The automatic 

routing functions available on PAR are 

reflected in the language of proposed 

Rule 6.12A(b), which provides orders on 

PAR shall be processed in accordance 

with the automatic settings established 

by the user and the order’s terms. 

Proposed Rule 6.12A(b)(i) would also 

reference the auction functions that may 

be performed on PAR. Eligible simple 

and complex orders routed to PAR in 

classes where electronic auction 

functionality is active may also be 

auctioned from PAR. The proposed rule 

would reference the auction functions 

available on the Hybrid Trading System 

under Rules 6.13A, 6.14A, 6.53C(d), 

6.74B, and 24B.5B reflecting the fact 

that orders on PAR may be submitted 

for auction pursuant to routing 

parameter configurations and specific 

order handling instructions. Orders 

auctioned from PAR, which do not fully 

execute at the conclusion of the auction 

process, may be returned to PAR or 

booked in accordance with order 

routing parameters and order handling 

instructions as permitted under the 

Rules.15

Proposed Rule 6.12A(b)(ii) would 

provide for the execution of orders on 

PAR in open outcry, including against 

other orders on PAR and with other 

TPHs or PAR Officials in accordance 

with Rule 6.74 (Crossing Orders). Both 

simple and complex orders on PAR may 

be crossed with other orders on PAR by 

PAR users, including by PAR Officials. 

Proposed Rule 6.12A(b)(ii) would 

describe the process by which orders 

may be crossed on PAR in open outcry, 

including by PAR Officials, after being 

verbalized to the crowd. Orders that 

may be crossed on PAR include, but are 

not limited to buy and sell orders in the 

same options series that are marketable 

against each other and complex orders 

and inter-regulator spreads (as defined 

in Rule 1.1). 

As provided in proposed Rule 

6.12A(b)(iii), PAR workstations also 

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Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Notices 65267 

16Rule 6.81 (Order Protection) forbids TPHs from 

effecting Trade-Throughs except as prescribed 

under Rule 6.81(b). 

17Rule 7.12(b)(ii) (Execution) provides that a 

‘‘PAR Official shall use due diligence to execute the 

orders placed in the PAR Official’s custody at the 

best prices available to him or her under the Rules 

of the Exchange.’’ 

18See, e.g., Regulatory Circular RG04–68 (Routing 

of Discretionary Orders to DPM PAR Workstations) 

(June 4, 2004). 

19See, e.g., Regulatory Circular RG03–29 (Market 

Linkage Implementation II) (April 17, 2003). 

20 15 U.S.C. 78f(b). 

21 15 U.S.C. 78f(b)(5). 22 Id. 

allow users to route orders to an OMT 

designated by the TPH that entered the 

order or otherwise return the order to 

the TPH or order entry firm. Proposed 

Rule 6.12A(b)(iii) is a reflection of 

current rules which permit PAR users to 

route orders to a designated OMT or 

otherwise return an order to its 

originator. Under proposed Rule 

6.12A(b)(iv), orders on PAR may also be 

routed to an away market for best 

execution in accordance with order 

protection rules under the Federal 

Securities Laws and the Rules 

including, but not limited to Rules 

6.81 16 and 7.12(b)(ii).17

Proposed Rule 6.12A(b)(v) describes 

the display functionality of a PAR 

workstation. CBOE PAR Officials may 

reflect bids and offers for orders, or 

portions of orders, in Hybrid 3.0 classes 

in the displayed CBOE BBO using the 

‘‘PAR in the Quote’’ feature. Currently, 

there are no CBOE PAR Officials on the 

trading floor in Hybrid 3.0 trading 

crowds. Accordingly, PAR allows the 

user to reflect the price and/or quantity 

related to an order or portion of an order 

in the displayed Exchange BBO in 

classes of options on the Hybrid 3.0 

Platform. This functionality allows PAR 

users to protect customer orders at 

specified price points while not 

displaying the full size of such orders 

(oftentimes customers may not want the 

full size of an order reflected in the 

quote). Proposed Rule 6.12A(b)(vi) 

would provide that unexecuted orders 

resting on PAR may be cancelled. All 

un-executed orders on PAR may be 

cancelled upon receipt of a cancel 

request from the order entry TPH or as 

prescribed in the routing parameters of 

the Exchange or order entry TPH. 

Proposed Rule 6.12A(c) would codify 

the ability of the Exchange to designate 

order types eligible to route to PAR and 

describe the types of orders that the 

Exchange may designate as eligible. 

Under the Exchange’s proposal, the 

Exchange would have the ability to 

designate any order type that it makes 

available to TPHs pursuant to Rule 6.53 

eligible to route to PAR. Current Rule 

6.53 describes and defines the order 

types that may be made available for 

trading on a class-by-class basis by the 

Exchange. Under the Exchange’s 

proposal, all order types specified in 

Rule 6.53 would be eligible to route to 

PAR, except that the order types defined 

in Rules 6.53(h), 6.53(o)–(r), and 6.53(t)– 

(v) would not be eligible to be routed to 

PAR. Proposed Rule 6.12A(c) is 

consistent with the current practices 

and Rules of the Exchange in that all of 

the order types listed in Rule 6.53 other 

that those listed in Rules 6.53(h), 

6.53(o)–(r), and 6.53(t)–(v) are currently 

eligible to be routed to PAR. PAR is a 

technology that supports the processing 

of order types authorized for trading on 

the Exchange under Rule 6.53. 

Accordingly, the Exchange may make 

future enhancements that would permit 

other order types to be processed on 

PAR or technological issues may 

prevent the Exchange from processing 

certain order types on PAR at any given 

time. Proposed Rule 6.12A(c) reflects 

the fluidity of the PAR technology as 

well as the fact that PAR is an order 

handling tool, which only gives TPHs 

the ability to process orders pursuant to 

the Rules. 

Finally, under proposed Rule 

6.12A(d) to the extent that any 

provision(s) of the proposed rule 

conflicts with any provision of any 

Regulatory Circular previously issued 

by the Exchange regarding the operation 

or functionality of PAR, the proposed 

rule would supersedes the limited 

conflicting provisions of any such 

Regulatory Circular. PAR has been in 

use for approximately a decade on the 

Exchange. Over the years, PAR has been 

enhanced and reconfigured and changed 

to reflect updates and changes in the 

Rules. Numerous Regulatory Circulars 

contemplate the use of PAR by DPMs 

rather than PAR Officials.18 Other 

Regulatory Circulars reflect old Linkage 

rules no longer in effect under the new 

Order Protection rules.19 Accordingly, 

to the extent that any provisions of any 

Regulatory Circular are in conflict with 

the proposed rule, such provisions 

would be superseded by the rule. 

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.20 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 21 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) 22 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange views PAR as an 

important tool that allows TPHs on the 

trading floor of the Exchange to manage 

and process orders. The Exchange 

believes that the adoption of rules 

regarding the functionality of PAR will 

contribute to fair and orderly markets by 

making the Exchange’s order handling 

processes more transparent and 

understandable for users. The proposed 

rules are intended to assist TPHs and 

order entry firms in their ability to 

efficiently manage, process, and execute 

orders on the Exchange as well as assist 

the Exchange in its ability to effectively 

attract order flow and liquidity to the 

market. The Exchange also believes that 

adding transparency and efficiency to 

the market are goals that benefit all 

investors. The Exchange believes that 

the proposed would further these goals, 

which the Exchange believes are 

consistent with the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange 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 that proposed Rule 

6.12A will promote competition by 

making the functionality of the 

Exchange’s order processing 

workstations more understandable to 

users and the general public. The 

Exchange believes that by better 

explaining its order management and 

order handling systems to PAR users 

and TPHs, PAR users and TPHs will 

better understand the Exchange’s 

systems. The Exchange believes that 

additional clarity and transparency in 

the Rules will make it easier for market 

participants to compete with one 

another on equal footing in the markets 

and ultimately benefits all investors. 

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65268 Federal Register / Vol. 79, No. 212 / Monday, November 3, 2014 / Notices 

23 15 U.S.C. 78s(b)(3)(A). 

24 17 CFR 240.19b–4(f)(6). 

25 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Guide is available at http://www.dtcc.com/ 

∼/media/Files/Downloads/legal/service-guides/

Settlement.ashx. 

4Terms not otherwise defined herein have the 

meaning set forth in the Rules. 

5Securities Exchange Act Release No. 72576 (Jul. 

9, 2014); 79 FR 41335 (Jul. 15, 2014) (SR–DTC– 

2014–06). 

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 written 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 23 and Rule 19b–4(f)(6) 24

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–2014–081 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–2014–081. 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– 

2014–081, and should be submitted on 

or before November 24, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26010 Filed 10–31–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73443; File No. SR–DTC– 

2014–10] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of Proposed Rule Change in 

Connection With the Modifications To 

Require Receiver Authorized Delivery 

Approval for DTC Processing of 

Institutional Delivery Transactions 

October 28, 2014. 

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 October 

16, 2014, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Item I, II and III 

below, which Items have been prepared 

by DTC. The Commission is publishing 

this notice to solicit comments on the 

proposed change from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

changes to the DTC Settlement Service 

Guide (the ‘‘Guide’’) 3 to require 

Participants to use the Receiver 

Authorized Delivery (‘‘RAD’’) function 

to accept (i.e., ‘‘match’’) any affirmed 

institutional delivery transaction (‘‘ID 

Transaction’’) prior to DTC processing 

of the related securities delivery.4

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

DTC 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. DTC 

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 

DTC proposes to modify the Guide to 

require Participants to use RAD to 

accept any affirmed ID Transaction prior 

to DTC processing of the respective 

delivery of securities. 

RAD allows a receiver of valued 

deliveries of securities (‘‘Receiver’’) to 

manage which deliveries to accept, or to 

reject, prior to further processing by 

DTC. Prior to the proposed rule change, 

pursuant to a recent rule change (the 

‘‘Prior RAD Change’’) 5 DTC has 

instituted the requirement that all 

Deliver Orders and Payment Orders be 

approved through RAD for further 

processing at DTC. The purpose of the 

Prior RAD Change and this proposed 

rule change is to establish a consistent 

internal ‘‘matching’’ system for bookentry deliveries at DTC, by which the 

agreement of the Participant delivering 

securities (‘‘Deliverer’’) and Receiver is 

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