65746 Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 

40 Id. 

41 Id. 

42 Id.; see also 17 CFR 242.600. 

43See Notice, supra note 3, 79 FR at 56424. 

44 Id. 

45 Id. 

46 Id. 

47 Id. 

48 Id. 

49 15 U.S.C. 78f(b)(5). 

50 15 U.S.C. 78s(b)(2). 

51 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)(iii). 

5See BATS Rule 11.16(d)(1)–(3); BYX Rule 

11.16(d)(1)–(3). 

states that allowing certain RHO orders 

(ISOs designated RHO) and all non-RHO 

orders to interact (and, in the case of 

non-RHO orders, to be added to the 

BATS Book where there is no contraside interest) during the period between 

9:30 a.m. Eastern Time and the 

occurrence of the Opening Process will 

create a more orderly opening and 

facilitate the price formation process 

because Users will have the option to 

enter orders that will either participate 

in the Opening Process or immediately 

interact with liquidity from the PreOpening Session, allowing trading to 

continue while the Exchange is waiting 

for the conditions necessary to complete 

the Opening Process.40

The Exchange also believes that 

certain features of the Opening Process 

and Re-Opening Process are consistent 

with the Act. The Exchange states that 

the proposed exclusion of BATS Post 

Only Orders, Partial Post Only at Limit 

Orders, ISOs, and Minimum Quantity 

Orders from participation in the 

Opening Process is consistent with 

Section 6(b)(5) of the Act because such 

order types do not make sense in the 

context of queuing orders for the 

Opening Process.41 Moreover, according 

to the Exchange, its proposal to allow an 

ISO marked RHO to execute against 

eligible Pre-Opening Session interest 

during the period between 9:30 a.m. 

Eastern Time and the occurrence of the 

Opening Process, and then convert the 

unexecuted portion of the order into a 

non-ISO for queuing for participation in 

the Opening Process, is consistent with 

the requirements of Regulation NMS.42

According to the Exchange, after 9:30 

a.m. Eastern Time, there may be a 

protected bid or offer displayed by the 

Exchange that a User who has submitted 

an ISO designated RHO would like to 

execute against, and this aspect of the 

proposal would permit such an 

execution to occur prior to the ISO 

being converted into a non-ISO and 

queued for participation in the Opening 

Process.43

In addition, the Exchange states that 

the proposed Contingent Opening 

Process is designed 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 because it will help to 

ensure that the Exchange opens trading 

in a fair and orderly manner by 

providing a means for opening trading 

in a non-BATS-listed security when 

there is no two-sided NBBO in the 

security for fifteen minutes after the 

beginning of Regular Trading Hours.44

The Exchange believes that fifteen 

minutes is a reasonable amount of time 

to wait for the establishment of a twosided NBBO because it marks a point at 

which the market in a security has had 

a sufficient amount of time to develop 

while simultaneously providing a 

reasonable cut-off point at which the 

Exchange may open the security for 

Regular Trading Hours trading.45 The 

Exchange also believes that handling all 

orders queued for participation in the 

Opening Process in time sequence after 

fifteen minutes will help to ensure that 

trading opens in as fair and orderly a 

manner as possible.46

Lastly, the Exchange states that the 

proposed Opening Process will provide 

Users with greater control and flexibility 

when entering orders in non-BATSlisted securities by allowing them to 

enter orders for participation in Regular 

Hours Trading during the Pre-Opening 

Session, rather than permitting them to 

enter such orders only after Regular 

Trading Hours have begun.47 According 

to the Exchange, allowing Users that do 

not want to participate in the PreOpening Session to enter RHO orders 

prior to Regular Trading Hours will 

simplify the order entry process for such 

Users and remove impediments to a free 

and open market.48

For the reasons noted above, the 

Commission finds that the proposed 

rule change is consistent with the Act, 

including Section 6(b)(5) of the Act,49

which requires, among other things, that 

the rules of an exchange be designed to 

promote just and equitable principles of 

trade, 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. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,50 that the 

proposed rule change, SR–BATS–2014– 

037, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.51

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–26231 Filed 11–4–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73476; File No. SR–EDGX– 

2014–24] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change to Rule 11.12, Limitation 

of Liability 

October 30, 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 

27, 2014, EDGX Exchange, Inc. (the 

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

Securities and Exchange Commission 

(‘‘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 this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 filed a proposal to 

amend Rule 11.12, Limitation of 

Liability, to harmonize its liability caps 

with those set forth under BATS 

Exchange, Inc. (‘‘BATS’’) Rule 11.16 and 

BATS Y-Exchange, Inc. (‘‘BYX’’) Rule 

11.16.5

The text of the proposed rule change 

is available at the Exchange’s Web site 

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

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 65747 

6 Id. 

7See Securities Exchange Act Release No. 71449 

(January 30, 2014), 79 FR 6961 (February 5, 2014) 

(SR–EDGX–2013–43; SR–EDGA–2013–34). 

8See Securities Exchange Act Release Nos. 73356 

(October 15, 2014) (SR–BATS–2014–045); and 

73357 (October 15, 2014) (SR–BYX–2014–027). In 

sum, BATS and BYX amended Rule 11.16 to align 

with Exchange Rule 11.12 to provide members with 

additional time within which to submit a written 

claim for compensation for ‘‘losses resulting 

directly from the malfunction of the Exchange’s 

physical equipment, devices and/or programming 

or the negligent acts or omissions of its employees’’ 

and add a new paragraph (g) to Rule 11.16 to permit 

the Exchange, subject to certain conditions and 

limitations, to compensate Members for certain 

losses incurred in connection with orders or 

portions of orders routed by the Exchange through 

its affiliated routing broker-dealer, BATS Trading, 

Inc., to Trading Centers where such losses are 

claimed by the Member to have resulted directly 

from a malfunction of the physical equipment, 

devices and/or programming, or the negligent acts 

or omissions of the employees, of such Trading 

Centers. 

9The Exchange understands that EDGA is to file 

a proposed rule change with the Commission to 

adopt similar requirements. 

10See supra note 5. 

11The Exchange notes that under renumbered 

Rule 11.12(g)(4) any compensation paid to Members 

from reimbursement recovered from a Trading 

Center for a routed order will not count against the 

Exchange’s liability limits set forth in Rule 11.12(d), 

nor any applicable insurance maintained by the 

Exchange. Securities Exchange Act Release Nos. 

71061 (December 12, 2013), 78 FR 76685 (December 

18, 2013) (SR–EDGA–2013–36) (Notice of Filing 

and Immediate Effectiveness of Proposed Rule 

Change To Amend EDGX Rule 11.12, Limitations of 

Liability); and 71062 (December 12, 2013), 78 FR 

76693 (December 18, 2013) (SR–EDGX–2013–45) 

(Notice of Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend EDGX Rule 11.12, 

Limitations of Liability). 

12See supra note 8. 

13 15 U.S.C. 78f(b). 

14 15 U.S.C. 78f(b)(5). 

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 amend 

Rule 11.12, Limitation of Liability, to 

harmonize its liability caps with those 

set forth under BATS Rule 11.16 and 

BYX Rule 11.16.6 Earlier this year, the 

Exchange and its affiliate EDGA 

Exchange, Inc. (‘‘EDGA’’) received 

approval to effect a merger (the 

‘‘Merger’’) of the Exchange’s parent 

company, Direct Edge Holdings LLC, 

with BATS Global Markets, Inc., the 

parent of BATS and BYX (together with 

BATS, BYX, EDGA and EDGX, the 

‘‘BGM Affiliated Exchanges’’).7 In the 

context of the Merger, the BGM 

Affiliated Exchanges are working to 

align certain rules, retaining only 

intended differences between the BGM 

Affiliated Exchanges. As part of this 

effort, BATS and BYX recently filed 

proposed rule changes with the 

Commission to amend paragraph (f) of 

Rule 11.16 to align with EDGA Rule 

11.12(d)(3) and (e) as well as EDGX Rule 

11.12(d)(3) and (e).8 Thus, the proposal 

set forth below harmonizes remaining 

sections of Exchange Rule 11.12 and 

BATS and BYX Rules 11.16 by aligning 

the liability caps in order to provide 

consistent member reimbursement 

requirements for users of the BGM 

Affiliated Exchanges.9

Rule 11.12 currently states that, 

except as provided in subsection (d) of 

the Rule, the Exchange and its affiliates 

shall not be liable for any losses, 

damages, or other claims arising out of 

the Exchange or its use. Exchange Rule 

11.16(d) provides a limited exception to 

its general limitation of liability that 

allows for the payment of compensation 

to Members for ‘‘losses resulting directly 

from the malfunction of the Exchange’s 

physical equipment, devices and/or 

programming or the negligent acts or 

omissions of its employees’’ (‘‘Exchange 

Systems Issues’’), subject to certain 

conditions. Subsection (d)(1) of Rule 

11.12 limits the aggregate limits of all 

claims made by all Members during a 

single calendar month to the larger of 

$500,000, or the amount of any recovery 

obtained by the Exchange under any 

applicable insurance maintained by the 

Exchange. 

The Exchange now proposes to 

renumber subsection (d)(1) of the Rule 

11.12 and adopt new subsections (d)(1) 

and (2) under Rule 11.12 to harmonize 

its liability caps with those set forth 

under existing rules of BATS and 

BYX.10 Under the proposed rule change, 

the Exchange would cap its liability for 

Exchange Systems Issues under 

proposed Rule 11.12(d)(1) and (2): 

(i) To a single Member at the greater of 

$100,000 or the amount recovered under 

any applicable insurance policy on a 

single trading day; (ii) to all Members at 

the greater of $250,000 or the amount 

recovered under any applicable 

insurance policy on a single trading day. 

Current Rule 11.12(d)(1) would be renumbered as subsection (d)(3) and 

continue to cap the Exchange’s liability 

to all Members at the greater of $500,000 

or the amount recovered under any 

applicable insurance policy in a single 

calendar month.11

The Exchange also proposes to amend 

Rule 11.12(d)(2) to align with the 

proposed liability caps for a single 

trading day. Specifically, proposed Rule 

11.12(d)(2) would be amended to clarify 

that, to the extent that all claims 

resulting from Exchange Systems Issues 

cannot be fully satisfied because in the 

aggregate they exceed the applicable 

maximum amount of liability provided 

for, then the Exchange proposes to 

allocate the maximum amount among 

all such claims arising on a single 

trading day or during a single calendar 

month, as applicable, based on the 

proportion that each such claim bears to 

the sum of all such claims. Rule 

11.12(d)(2) would also be renumbered 

as Rule 11.12(e). 

The Exchange also proposes to amend 

Rule 11.12(e)(4) to align with the 

amended liability caps as well as to 

renumber other sections within Rule 

11.12 to mirror BATS Rule 11.16 and 

BYX Rule 11.16. 

Implementation Date 

The Exchange intends to implement 

the proposed rule change on or about 

November 6, 2014, which is the 

anticipated operative date of recently 

filed BATS and BYX proposed rule 

changes to align BATS and BYX Rules 

11.16 with EDGA and EDGX Rules 

11.12(d)(3) and (e).12 The Exchange will 

announce the implementation of the 

proposed rule change via a trading 

notice to be posted on the Exchange’s 

Web site. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act 13 and furthers 

the objectives of Section 6(b)(5) of the 

Act,14 in that it is designed promote just 

and equitable principles of trade, 

remove impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest. The proposal, in effect, would 

allow the Exchange to ensure that 

compensation for a single incident did 

not exceed the monthly cap of $500,000, 

thereby providing [sic] enabling the 

Exchange to possibly compensate 

Members for instances on multiple 

trading days per month subject to Rule 

11.12(d)(3). The Exchange believes that 

mstockstill on DSK4VPTVN1PROD with NOTICES

65748 Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 

15See supra note 5. 

16 15 U.S.C. 78s(b)(3)(A)(iii). 

17 17 CFR 240.19b–4(f)(6). 

18 In addition, Rule 19b–4(f)(6)(iii) requires the 

Exchange to give the Commission written notice of 

the Exchange’s 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. 

19 17 CFR 240.19b–4(f)(6)(iii). 

20For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

the proposed rule change is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers. The 

proposed rule change is substantially 

similar to the existing rules of BATS 

and BYX.15 The proposed rule change is 

intended to align the liability caps for 

Member reimbursements with that 

currently provided by BATS and BYX in 

order to provide a consistent rules 

across the BGM Affiliated Exchanges. 

Consistent rules, in turn, will simplify 

the regulatory requirements for 

Members of the Exchange that are also 

participants on EDGA and EDGX. The 

proposed rule change would provide 

greater harmonization between EDGX 

and EDGA rules of similar purpose, 

resulting in greater uniformity and less 

burdensome and more efficient 

regulatory compliance. As such, the 

proposed rule change would foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities and would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change would not 

impose any burden on competition. The 

Exchange believes that the proposed 

rule changes will not burden 

intramarket competition because all 

Members would be subject to the same 

liability caps for claims resulting from 

Exchange Systems Issues. The proposed 

rule change is not designed to address 

any competitive issues but rather is 

designed to provide greater 

harmonization among Exchange and 

BATS and BYX rules of similar purpose, 

resulting in less burdensome and more 

efficient regulatory compliance for 

common members of the BGM Affiliated 

Exchanges. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has 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 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 16 and Rule 

19b–4(f)(6) thereunder.17 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 

for 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 and Rule 19b–4(f)(6) 

thereunder.18

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),19 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. Waiver of the 30-day operative 

delay would provide consistent rules 

across the BGM Affiliated Exchanges 

which will simplify the regulatory 

requirements for Members of the 

Exchange that are also participants on 

EDGA, BATS and BYX. In addition, the 

Commission notes that the proposed 

rule change is identical to the existing 

rules of BATS and BYX. Based on the 

foregoing, the Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest.20 The 

Commission hereby grants the 

Exchange’s request and designates the 

proposal operative upon filing. 

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 shall institute proceedings 

to determine whether the proposed rule 

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– 

EDGX–2014–24 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–EDGX–2014–24. 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–EDGX– 

2014–24 and should be submitted on or 

November 26, 2014. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 214 / Wednesday, November 5, 2014 / Notices 65749 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The System is the automated trading system 

used by the Exchange for the trading of options 

contracts. 

4The Exchange notes that, for singly listed series, 

the national best bid is equivalent to the Exchange’s 

best bid and the national best offer is equivalent to 

the Exchange’s best offer. 

5For example, the Exchange receives a market 

order to sell prior to the opening of a series and the 

series opens with a sell market order imbalance 

pursuant to Rule 6.11(e)(4). When the series opens 

the market order to sell, which was resting in the 

book prior to the opening of the series, will be 

routed according to the no-bid procedures in Rule 

6.12. 

6 If the order does not execute during the trading 

day as a limit order and remains outstanding after 

the close of trading (i.e., a GTC order), the System 

at that time will no longer consider the order as a 

limit order and will again handle the order as a 

market order to sell after the close of trading. The 

market order will stay on the Book until the 

opening of the next trading day (or until cancelled), 

at which point it may execute during the open or, 

if it remains unexecuted after the opening of 

trading, it will either execute with the best bid at 

the time or, if the series is still no-bid, again be 

handled pursuant to proposed Rule 6.12(h). 

7The acceptable APR parameter is determined by 

the Exchange on a class-by-class basis. See Rule 

6.17 and C2 Regulatory Circular RG14–020 

(Operational System Settings—APR and OEPW). 

8Rule 6.17 also provides that the System will not 

automatically execute eligible orders that are 

marketable if the execution would follow an initial 

partial execution on the Exchange and would be at 

a subsequent price that is not within an acceptable 

tick distance from the initial execution. The APR 

for purposes of Rule 6.17 is determined by the 

Exchange on a class-by-class basis and may not be 

less than $0.375 between the bid and offer for each 

option contract for which the bid is less than $2, 

$0.60 where the bid is at least $2 but does not 

exceed $5, $0.75 where the bid is more than $5 but 

does not exceed $10, $1.20 where the bid is more 

than $10 but does not exceed $20, and $1.50 where 

Continued 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–26233 Filed 11–4–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73488; File No. SR–C2– 

2014–020] 

Self-Regulatory Organizations; C2 

Options Exchange, Incorporated; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change Relating to the Automatic 

Handling Process in No-Bid Series 

October 31, 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 

22, 2014, C2 Options Exchange, 

Incorporated (the ‘‘Exchange’’ or ‘‘C2’’) 

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 amend its 

rules regarding its automatic order 

handling process. The text of the 

proposed rule change is available on the 

Exchange’s Web site (http://www.cboe.

com/AboutCBOE/CBOELegalRegulatory

Home.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 amend its 

rules regarding its automatic order 

handling process. The proposed rule 

change seeks to modify subparagraph 

(h) to Rule 6.12, which sets forth how 

the C2 System (the ‘‘System’’) 3 handles 

market orders to sell in option series for 

which the national best bid in the series 

is zero (‘‘no-bid series’’).4 Currently, if 

the System receives during the trading 

day or has resting in the electronic book 

(the ‘‘Book’’) 5 after the opening of 

trading a market order to sell in a nobid series, it handles the order as 

follows: 

• If the Exchange best offer in that 

series is less than or equal to $0.30, then 

the System will consider, for the 

remainder of the trading day, the market 

order as a limit order to sell with a limit 

price equal to the minimum trading 

increment applicable to the series and 

enter the order into the Book behind 

limit orders to sell at the minimum 

increment that are already resting in the 

Book. 

• If the Exchange best offer in that 

series is greater than $0.30, then the 

market order will be cancelled. 

Based on experience since the 

implementation of this parameter, the 

Exchange now proposes to change the 

parameter from $0.30 to $0.50. The 

Exchange believes that the automatic 

handling of market orders to sell in nobid series if the Exchange best offer is 

less than or equal to $0.50 would reduce 

the number of orders that are 

automatically cancelled. Additionally, 

the $0.50 threshold serves as a 

protection feature for investors in 

certain situations, such as when a series 

is no-bid because the last bid traded just 

prior to the entry of the market order to 

sell. The purpose of this threshold is to 

limit the automatic booking of market 

orders to sell at minimum increments to 

only those for true zero-bid options, as 

options in no-bid series with an offer of 

more than $0.50 are less likely to be 

worthless. 

For example, if the CBOE Hybrid 

System receives a market order to sell in 

a no-bid series with a minimum 

increment of $0.01 and the Exchange 

best offer is $0.01, the System will 

consider, for the remainder of the 

trading day, the order as a limit order 

with a price of $0.01 and submit it to 

the Book behind other limit orders to 

sell at the minimum increment that are 

already resting in the Book. At that 

point, even if the series is no-bid 

because, for example, the last bid just 

traded and the limit order trades at 

$0.01, the next bid entered after the 

trade would not be higher than $0.01.6

However, if the System receives a 

market order to sell in a no-bid series 

with a minimum increment of $0.01 and 

the Exchange best offer is $1.20 

(because, for example, the last bid of 

$1.00 just traded and a new bid has not 

yet populated the Exchange’s quote), the 

System will instead cancel the order. It 

would be unfair to the entering firm to 

let its market order trade as a limit order 

for $0.01 because, for example, the firm 

submitted the order during the brief 

time when there were no disseminated 

bids in a series trading significantly 

higher than the minimum increment. 

The Exchange believes the threshold 

of $0.50 is reasonable. The Exchange 

notes that this threshold is less than the 

current acceptable price range (‘‘APR’’) 

parameter for series with a bid price of 

less than $100.00.7 Pursuant to the price 

check provision in Rule 6.17 8 the 

mstockstill on DSK4VPTVN1PROD with NOTICES