66016 Federal Register / Vol. 79, No. 215 / Thursday, November 6, 2014 / Notices 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The CBOE Hybrid System is a 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 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. 

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 6.2B(e)(iii). 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 

6.13. 

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–2014–083 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2014–083. 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– 

2014–083 and should be submitted on 

or before November 28, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26342 Filed 11–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73487; File No. SR–CBOE– 

2014–067] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to the Automatic 

Order 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, 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 amend 

Exchange rules regarding the automatic 

order handling process in no-bid series. 

The text of the proposed rule change is 

available on the Exchange’s Web site 

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

CBOELegalRegulatoryHome.aspx), at 

the Exchange’s Office of the Secretary, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

rules regarding its automatic order 

handling process. The proposed rule 

change seeks to modify subparagraph 

(vi) to Rule 6.13(b), which sets forth 

how the CBOE Hybrid 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 CBOE Hybrid System receives 

during the trading day or has resting in 

the electronic 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 CBOE Hybrid 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 

electronic 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 

CBOE Hybrid System will route the 

market order to sell to PAR or, at the 

order entry firm’s discretion, to the 

order entry firm’s booth. If the market 

order is not eligible to route to PAR, 

then it 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 

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Federal Register / Vol. 79, No. 215 / Thursday, November 6, 2014 / Notices 66017 

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 good-til-cancelled order), 

the CBOE Hybrid 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 

electronic 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 6.13(b)(vi). 

7Routing the market order to PAR or the order 

entry firm’s booth provides for an alternative means 

through which the order may be executed before it 

is simply cancelled. 

8A ‘‘PAR Official’’ is an Exchange employee or 

independent contractor whom the Exchange may 

designate as being responsible for (a) operating the 

PAR workstation in a DPM trading crowd with 

respect to the classes of options assigned to him/ 

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

respect to the classes of options assigned to him/ 

her; and (c) 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. See Rule 

7.12(a). 

9See, e.g., Rule 7.12(b)(ii) (governing PAR 

Officials) and Rule 6.73(a). PAR workstations are 

only available on the trading floor; therefore, the 

use of a PAR workstation by a TPH User requires 

the TPH User to comply with Rule 6.73(a). 

10Bid-Ask differentials are determined by the 

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

8.7(b)(iv) and Regulatory Circular RG–14–117 (BidAsk Differentials). Currently, the opening rotation 

and open outcry quote widths for a series with a 

bid of less than $2.00 is $0.50 for all options 

classes, excluding LEAPS; EEM; NDX; PCLN; RUT; 

SPX; SPXPM; UltraShorts; UltraLongs; Direxion 3X; 

and DirexionShares 3X, which all have higher bidask differentials. Intraday Electronic Quoting 

Widths are also higher than $0.50. 

11The acceptable APR parameter is determined 

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

Rule 6.13(b)(v) and CBOE Regulatory Circular 

RG14–061 (Operational Systems Settings—APR and 

OEPW). 

12Rule 6.13(b)(v) also provides that the CBOE 

Hybrid 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 

6.13(b)(v) is determined by the Exchange on a classby-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 the bid is more 

than $20. An ‘‘acceptable tick distance’’ shall be no 

less than two minimum increments. 

13See CBOE Rule 6.13(b)(v)(B). 

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

the manual handling of orders and 

facilitate the CBOE Hybrid System’s 

automatic handling process. 

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 manual handling of market 

orders to sell in no-bid series 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 CBOE Hybrid 

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 electronic 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 CBOE Hybrid System 

receives a market order to sell in a nobid 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 CBOE Hybrid System will instead 

route the order to PAR (or, at the order 

entry firm’s discretion, to the order 

entry firm’s booth). Manual handling of 

the order prevents an anomalous 

execution price, since the next bid 

entered in that series is likely to be 

much higher than $0.01.7 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. To 

combat the potential unfairness outlined 

above, the order entry firm has the 

discretion to have the market order to 

sell routed to a PAR Official,8 the PAR 

workstation of a Trading Permit Holder 

(‘‘TPH User’’), or to the order entry 

firm’s booth. A PAR Official that 

receives such an order will review the 

terms of the order and handle the order 

as set forth in Rule 7.12 (e.g., the PAR 

Official may bring the order to the 

trading crowd or enter the order into the 

electronic book at the minimum 

increment). Currently, TPH Users that 

receive orders pursuant to the no-bid 

scenario are systematically blocked from 

booking the order into the electronic 

book. The Exchange proposes to allow 

TPH Users to review the order and 

handle the order in a similar manner to 

PAR Officials (e.g., bring the order to the 

trading crowd or enter the order into the 

electronic book at the minimum 

increment). The Exchange notes that 

PAR Officials and TPH Users must use 

due diligence to execute orders that they 

receive at their PAR workstations at the 

best prices available to them under the 

Exchange Rules.9

The Exchange believes the threshold 

of $0.50 is reasonable. The Exchange 

notes that this threshold is equal to or 

less than the bid-ask differential 

applicable to all options classes.10 The 

Exchange also notes that this threshold 

is less than the current acceptable price 

range (‘‘APR’’) parameter for series with 

a bid price of less than $100.00.11

Pursuant to the price check provision in 

Rule 6.13(b)(v) 12 the CBOE Hybrid 

System will not automatically execute a 

marketable order if the width between 

the national best bid and national best 

offer is not within the APR, which the 

Exchange has currently set at $10.00 for 

any bid price between $0.00 and 

$100.00. Instead, the CBOE Hybrid 

System will route the order to a PAR 

workstation or the order entry firm’s 

booth, or if the order is not eligible to 

route to PAR, it will be cancelled.13

Notwithstanding this provision, 

proposed Rule 6.13(b)(vi) allows for the 

potential execution of market orders to 

sell in no-bid series with offers less than 

$0.50 as limit orders at the price of a 

minimum increment. If the threshold in 

proposed Rule 6.13(b)(vi) were higher, 

the risk of having a market order trade 

at a minimum increment in a series that 

is not truly no-bid would increase. 

The proposed rule change will require 

the Exchange to modify the System in 

two installments. The first installment 

will change the $0.30 parameter to 

$0.50. The second installment will 

allow market orders to sell in no-bid 

series that were routed to a PAR 

workstation of a TPH User to be entered 

into the electronic book. After the rule 

change is effective, the Exchange will 

announce the implementation dates for 

the two installments in a Regulatory 

Circular to be published no later than 90 

days following the effective date. The 

implementation date for each 

installment will be no later than 180 

days following the effective date and at 

least two weeks after the publication of 

the above Regulatory Circular. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

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

the Exchange believes the proposed rule 

change is consistent with the Section 

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66018 Federal Register / Vol. 79, No. 215 / Thursday, November 6, 2014 / Notices 

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

16 Id. 

17 15 U.S.C. 78s(b)(3)(A). 

18 17 CFR 240.19b–4(f)(6). 19 17 CFR 200.30–3(a)(12). 

6(b)(5) 15 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Additionally, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 16 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the Exchange believes 

that the automated handling of market 

orders to sell in no-bid series if the 

Exchange best offer is $0.50 or less 

assists with the maintenance of fair and 

orderly markets and protects investors 

and the public interest because it 

provides for automated handling of 

these orders, ultimately resulting in 

more efficient executions of these 

orders. The Exchange believes that the 

$0.50 threshold also protects investors 

and assists with the maintenance of fair 

and orderly markets by preventing 

executions of market orders to sell in 

no-bid series with higher offers at 

potentially extreme prices in series that 

are not truly no-bid. The Exchange 

believes this threshold appropriately 

reflects the interests of investors, as 

options in no-bid series with offers 

higher than $0.50 are less likely to be 

worthless, and manual handling of these 

orders will lead to better executions for 

investors than would occur through 

automatic handling. The Exchange also 

believes that the $0.50 threshold 

promotes fair and orderly markets 

because market orders to sell in no-bid 

series with offers of $0.50 or less are 

likely to be individuals seeking to close 

out a worthless position for which 

automatic handling is appropriate. 

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. More 

specifically, the Exchange does not 

believe that the proposed rule changes 

will impose any burden on intramarket 

competition because it will be 

applicable to all TPHs trading on the 

Exchange trading floor. In addition, the 

Exchange does not believe the proposed 

changes will impose any intermarket 

burden because the Exchange will 

operate in a similar manner only with 

a more applicable no-bid series 

threshold. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: 

(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, it has become effective 

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

Act 17 and Rule 19b–4(f)(6) 18

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–2014–067 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–2014–067. 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– 

2014–067 and should be submitted on 

or before November 28, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26346 Filed 11–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73482; File No. SR–OCC– 

2014–803] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of No Objection to Advance Notice 

Filing to Better Manage Risks 

Concentration and Other Risks 

Associated With Accepting Deposits of 

Common Stocks for Margin Purposes 

October 31, 2014. 

On July 16, 2014, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

mstockstill on DSK4VPTVN1PROD with NOTICES