66014 Federal Register / Vol. 79, No. 215 / Thursday, November 6, 2014 / Notices 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–72271 

(May 29, 2014), 79 FR 32342 (June 4, 2014) (SR– 

CBOE–2014–046). 

4CBOE Regulatory Circular RG14–125— 

Implementation of SPX Combo Order Indicator 

(August 15, 2014). 

5SR–CBOE–2014–046 defines an SPX 

combination as a purchase (sale) of an SPX call and 

sale (purchase) of an SPX put having the same 

expiration date and strike price. 

6Currently, brokers must apply an SPX Combo 

Order designation for the purposes of price 

reporting. This is accomplished by endorsing a 

trade via PAR; however the system changes that 

allow a combo indicator to be applied upon 

systematization will remove the capability to 

endorse an order as an SPX Combo Order on PAR. 

7Securities Exchange Act Release No. 34–72975 

(September 2, 2014), 79 FR 53230 (September 8, 

2014) (SR–CBOE–2014–015). 

8RG14–125, supra note 4. 

9 If the broker failed to apply the combo indicator 

to the 2-leg order upon systematization, the CBOE 

system would view the order as a non-combo order 

and would not include a combo identifier for 

reporting purposes. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73479; File No. SR–CBOE– 

2014–083] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Delay the 

Implementation Date of the 

Requirement To Apply an Indicator to 

SPX Combo Orders Upon 

Systematization 

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 

31, 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 and II 

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 delay the 

implementation date of the requirement 

to apply an indicator to SPX Combo 

Orders upon systematization. There is 

no proposed change to the rule 

language. 

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 

On May 19, 2014, the Exchange 

submitted a rule change filing (SR– 

CBOE–2014–046), which became 

effective on that date, to amend Rule 

24.20, ‘‘SPX Combo Orders’’. Rule 

24.20, as amended, states: ‘‘For an order 

to be eligible for the trading procedures 

contained in this Rule, a Trading Permit 

Holder must apply an indicator to the 

SPX Combo Order upon systematization 

as provided in Rule 6.24.’’ 3 Pursuant to 

the rule change filing, the Exchange 

issued a Regulatory Circular requiring 

Trading Permit Holders (‘‘TPHs’’) to 

begin applying the combo indicator 

upon systematization on November 1, 

2014.4 Once the Exchange implements 

the combo indicator requirement, TPHs 

will be required to apply the combo 

indicator upon systematization. Orders 

that include the combo indicator but do 

not meet the requirements of an SPX 

Combo Order (i.e., orders must be at 

least three legs and include an SPX 

combination 5) will be rejected. 

Additionally, the Public Automatic 

Routing System (‘‘PAR’’) will no longer 

allow an order to be endorsed as an SPX 

Combo Order and reported to OPRA as 

such.6

On August 19, 2014, the Exchange 

submitted a separate rule change filing 

(SR–CBOE–2014–015) to amend, among 

other things, Rule 24.20 to include 

Interpretation and Policy .01.7 Proposed 

Interpretation and Policy .01, which has 

not yet been approved by the 

Commission, would require that any 

complex order, including an SPX 

Combo Order, for twelve (12) legs or less 

be entered on a single order ticket at 

time of systemization. In addition, a 

complex order, including an SPX 

Combo Order, that contains more than 

twelve (12) legs may be represented and 

executed as a single order, and for an 

SPX Combo Order in accordance with 

Rule 24.20 if it is split across multiple 

order tickets and the TPH representing 

the order identifies for the Exchange the 

order tickets that are part of the same 

order (in a manner and form prescribed 

by the Exchange). 

Pursuant to SR–CBOE–2014–046, a 

third-party vendor updated the 

Exchange provided Floor Broker 

Workstation (‘‘FBW) to support the 

combo indicator. Pursuant to SR– 

CBOE–2014–015, the Exchange, through 

a third-party vendor, is in the process of 

developing an enhanced version of FBW 

to support the entry of complex orders 

with up to twelve legs. The third-party 

vendor has indicated that it will not 

complete development prior to the 

current November 1st implementation 

date established in the combo indicator 

circular.8

The Exchange believes that if the 

combo indicator requirement is 

implemented on November 1st, brokers 

utilizing FBW to execute SPX Combo 

Orders with more than four legs will be 

negatively impacted. For example, if a 

broker wanted to execute an SPX Combo 

Order with five legs, the current FBW 

requires the 5-leg order to be split into 

two orders (e.g., an order with two legs 

and an order with three legs). Each 

order would be required to have the 

combo indicator upon systematization; 

have at least three legs, and have an SPX 

combination. Therefore, CBOE would 

reject the order with two legs.9

Additionally, a 6-leg SPX Combo Order 

that was split into separate orders with 

three legs would also be rejected if one 

of the 3-leg orders did not have an SPX 

combination. Therefore, the Exchange is 

proposing to delay implementation of 

SR–CBOE–2014–046 in order to allow 

the third-party vendor more time to 

complete development of the enhanced 

version of FBW, which will support the 

entry of complex orders with up to 

twelve legs pursuant to SR–CBOE– 

2014–015. 

Although the Exchange believes that 

users of FBW will be negatively 

impacted if the 12-leg order ticket is not 

available prior to the combo indicator 

requirement, the Exchange intends to 

implement the combo indicator 

requirement after this delay, regardless 

of the third-party vendor’s ability to 

deliver the enhanced version of FBW. If 

the enhanced version of FBW is not 

available by the next implementation 

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Federal Register / Vol. 79, No. 215 / Thursday, November 6, 2014 / Notices 66015 

10The Exchange notes that it will ensure TPHs 

have access to at least one Exchange provided 

technology (e.g., PULSe) prior to implementation of 

SR–CBOE–2014–46 and SR–CBOE–2014–015 that 

will enable TPHs to enter SPX Combo Orders with 

up to twelve legs and apply the SPX Combo 

indicator. 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(5). 

13 Id. 

14 15 U.S.C. 78s(b)(3)(A). 

15 17 CFR 240.19b–4(f)(6). 

16 Id. 

17For purposes only of accelerating the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

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

date, the Exchange believes it can 

mitigate the negative impact to FBW 

users by issuing another Regulatory 

Circular in advance of the future 

implementation date that provides FBW 

users with sufficient time to find and 

test an alternative system to input SPX 

Combo Orders with more than four 

legs.10 The Exchange believes that 

requiring the combo indicator on 

November 1, 2014, as is currently 

contemplated, does not give FBW users 

sufficient time to find and test an 

alternative system. The Exchange will 

announce the implementation date of 

the proposed rule change, as well as the 

Exchange’s intent to not delay 

implementation any further, in a 

Regulatory Circular to be published no 

later than 60 days following the 

effective date of this filing. The 

implementation date will be no later 

than 120 days following the effective 

date of this filing. 

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.11 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 12 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) 13 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 if the combo indicator requirement 

is implemented on November 1, 2014, 

brokers utilizing FBW to execute SPX 

Combo Orders with more than four legs 

will be negatively impacted. The 

Exchange believes delaying 

implementation of the combo indicator 

requirement will allow the third-party 

vendor the necessary time to develop an 

enhanced version of FBW to allow 

orders to be entered with greater than 

four legs. Furthermore, the Exchange 

believes that delaying implementation 

promotes fair and orderly markets and 

serves market participants because it 

will allow trading of SPX Combo Orders 

to continue uninterrupted. The 

enhanced version of FBW will also 

promote fair and orderly markets and 

serve market participants because it will 

provide an enhanced audit trail for the 

Exchange. Finally, if the third-party 

vendor is unable to develop the 

enhanced version of FBW prior to the 

next implementation date for the combo 

indicator, the Exchange will issue a 

Regulatory Circular that the Exchange 

believes will provide FBW users with 

sufficient time to find and test an 

alternative system to input SPX Combo 

Orders with more than four legs. 

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. 

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 

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 if 

consistent with the protection of 

investors and the public interest, 

provided that the self-regulatory 

organization has given the Commission 

written notice of its intent to file 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 proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 14 and 

Rule 19b–4(f)(6) thereunder.15

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. 

Under Rule 19b–4(f)(6) of the Act,16

the proposal does not become operative 

for 30 days after the date of its filing, or 

such shorter time as the Commission 

may designate if consistent with the 

protection of investors and the public 

interest. The Exchange has requested 

that the Commission waive the five-day 

pre-filing requirement and the 30-day 

operative delay period after which a 

proposed rule change under Rule 19b– 

4(f)(6) becomes operative. The Exchange 

states that waiver of the five-day prefiling requirement and the 30-day 

operative delay period is appropriate 

because the implementation date for the 

combo indicator is currently November 

1, 2014. The Exchange also states the 

proposed rule change does not present 

any new, unique or substantive issues 

that make the 30-day operative delay 

necessary. The Exchange notes that if 

the combo indicator requirement is 

implemented on November 1, 2014, 

brokers utilizing FBW to execute SPX 

Combo Orders with more than four legs 

will be negatively impacted. Based on 

the foregoing, the Commission has 

determined to waive the five-day prefiling requirement and the 30-day 

operative date so that the proposal may 

take effect upon filing.17

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: 

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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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