Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 72745 

16 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(7). 

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

filing also will be available for 

inspection and copying at the principal 

office of FINRA. 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–FINRA–2014–049 and 

should be submitted on or before 

December 29, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28641 Filed 12–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73715; File No. SR–OC– 

2014–06] 

Self-Regulatory Organizations; 

OneChicago, LLC; Notice of Filing of 

Proposed Rule Change Relating to 

Bilateral Block and Bilateral EFP 

Reporting Guidance 

December 2, 2014. 

Pursuant to Section 19(b)(7) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 notice is hereby given that on 

November 20, 2014, OneChicago, LLC 

(‘‘OneChicago,’’ ‘‘OCX,’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

OneChicago has also filed this rule 

change with the Commodity Futures 

Trading Commission (‘‘CFTC’’). 

OneChicago filed a written certification 

with the CFTC under Section 5c(c) of 

the Commodity Exchange Act (‘‘CEA’’) 

on November 20, 2014. 

I. Self-Regulatory Organization’s 

Description of the Proposed Rule 

Change 

OCX is proposing to issue Notice to 

Members (‘‘NTM’’) 2014–33, which 

provides guidance to market 

participants regarding bilateral block 

and bilateral Exchange of Future for 

Physical (‘‘EFP’’) reporting. NTM 2014– 

33 provides guidance relating to four 

aspects of bilateral block and bilateral 

EFP reporting. 

First, NTM 2014–33 defines the 

completion time of certain types of 

block trades. Specifically, the NTM 

relates to block trades in which a 

liquidity provider pre-hedges the 

customer’s futures block order by 

executing in a related product, such as 

the underlying equity. OCX is clarifying 

that those types of block trades must be 

reported upon completion of the 

customer’s full futures order quantity, 

and are not required to be reported in 

partial portions throughout the day. 

The second topic on which NTM 

2014–33 provides guidance is the order 

in which market participants may report 

a block trade. Specifically, for block 

trades that involve an order originator or 

customer on one side and a liquidity 

provider on the other, OCX is clarifying 

that it is acceptable for the liquidity 

provider to inform the order originator 

that the trade is complete, and for the 

order originator to then post the trade to 

the Exchange (after which time the 

liquidity provider would then accept 

the trade details in the OneChicago 

System). Previous OCX guidance was 

silent on this issue. 

Furthermore, OneChicago is 

proposing to update its reporting time 

requirements to account for the dualparty posting guidance described above. 

Generally, OCX requires the posting 

party of a block trade to post the trade 

within five minutes of execution, and 

the accepting party to accept the 

reported trade details within five 

minutes from the time it was posted. 

OCX is proposing to modify this 

requirement for pre-hedged blocks for 

two reasons. First, OCX has become 

aware that market participants may be 

unable to comply with a strict five 

minute deadline when executing a block 

that involves a hedge in a related 

market. Second, OCX is tailoring the 

reporting requirements imposed on each 

side of a block trade to allow the side 

with greater reporting requirements 

more time to meet those obligations. 

Finally, NTM 2014–33 states that 

block and EFP trades may be reported 

outside the time parameters described 

in the NTM only in extenuating 

circumstances. The NTM then provides 

a non-exhaustive list of scenarios that 

OCX may consider to constitute an 

extenuating circumstance. 

Block Trade Completion 

Generally, block trades in OCX’s 

products occur with one party (the order 

originator or customer) seeking 

directional exposure to a single stock 

future. The counterparty (the liquidity 

provider) hedges in a related product, 

such as the underlying equity, and then 

buys/sells the equivalent number of 

single stock futures from/to the order 

originator/customer. OCX considers this 

type of ‘‘pre-hedged’’ block trade to be 

complete when the liquidity provider 

hedges in the related market and then 

calculates the futures price by adding or 

subtracting the agreed upon basis from 

the hedge price. 

Under this interpretation, a block 

trade may be considered complete 

before the customer’s entire order 

quantity is filled. This interpretation has 

led to concerns among market 

participants regarding how to 

appropriately report amounts that meet 

the block trade minimum quantity 

threshold, but that do not satisfy the 

customer’s full order quantity. These 

situations generally arise when a 

liquidity provider has completed a 

blockable amount, but can no longer 

execute the remaining customer order 

due to the customer’s limit price being 

crossed, or because of a lack of liquidity 

in the hedge product. 

OCX is now clarifying in NTM 2014– 

33 that market participants are not 

required to report these ‘‘partial fill’’ 

amounts throughout the day. Rather, a 

block trade of this type is considered 

complete when the liquidity provider 

has completed the hedge for the 

customer’s full futures block order 

quantity. The NTM then lists certain 

requirements relating to the reporting of 

block trades pursuant to the NTM. First, 

if the liquidity provider is unable to 

complete the customer’s entire futures 

order quantity equivalent by the end of 

the day, the reporting firm should report 

the amount that the liquidity provider 

was able to complete, so long as that 

amount meets the minimum block trade 

quantity threshold. Second, if the 

liquidity provider was not able to hedge 

an amount at least equal to the 

minimum block trade quantity 

threshold, a futures block was not 

created, and thus no block trade may be 

reported. In such a situation, the 

liquidity provider may offset or 

maintain its long or short position in the 

hedge product. For example, a liquidity 

provider that bought stock to hedge its 

sale of futures may sell the stock if it 

was unable to hedge enough shares of 

stock to reach the minimum block trade 

quantity threshold. 

The NTM then describes a customer’s 

obligation to accept a pre-hedged 

amount greater than or equal to the 

minimum block trade quantity 

threshold. A customer is required to 

accept a futures block that the liquidity 

provider has completed by pre-hedging. 

In other words, once a liquidity 

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72746 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 

2For example, when an order originator sends an 

order to a liquidity provider, the order originator is 

not on notice as to when it will receive a message 

from the liquidity provider that the hedge is 

complete (or, alternatively, receive a message from 

the OneChicago System that the liquidity provider 

has inserted the trade details into the OneChicago 

System and that such details must now be accepted 

or rejected). Accordingly, requiring a ‘‘non-notice 

party’’ (such as the order originator in this example) 

to accept or post a trade within five minutes may 

be unreasonably burdensome, as the non-notice 

party may receive this message at any time in the 

trading day. 

provider has pre-hedged an amount in 

a related market, the customer may not 

refuse to accept the futures equivalent of 

that pre-hedge. Nonetheless, a customer 

may permissibly cancel the unexecuted 

balance of its order that has not been 

pre-hedged. In such a case, the firms 

simply report the futures equivalent of 

the completed pre-hedge amount, so 

long as that amount meets the minimum 

block trade quantity threshold. 

Dual Party Posting 

The OneChicago System requires 

dual-party posting. Specifically, one 

party to the block trade must report the 

details of the trade, while the 

counterparty must then accept the 

reported details of the trade. In the case 

of a block trade described above in 

which one party seeks directional 

exposure and the counterparty provides 

liquidity by pre-hedging in a related 

market, NTM 2014–33 proposes to allow 

either side to the trade (the customer/

order originator or the liquidity 

provider) to initially post the trade. 

Previous Exchange block trading 

guidance was silent on this issue. 

OCX recognizes that for business or 

operational purposes, market 

participants may prefer in certain 

instances for the order originator/

customer to initially report the trade 

and for the liquidity provider to then 

accept the trade details. Therefore, NTM 

2014–33 expressly permits market 

participants to report bilateral blocks in 

this manner. 

Updated Reporting Time Requirements 

OCX Rule 417 (Block Trading) 

requires that block trades be reported to 

the Exchange ‘‘without delay.’’ The term 

‘‘without delay’’ is interpreted by NTM 

2012–25 to mean within five minutes of 

completion of the hedge or, if there is 

no hedge involved, within five minutes 

of agreement to the terms of the trade. 

NTM 2012–25 clarifies that each party 

to the trade has five minutes to report 

the trade; that is, the party inserting the 

trade is required to enter the trade into 

the OneChicago System within five 

minutes of execution and the other 

party is required to accept the trade 

within five minutes of it being entered 

into the OneChicago System. 

OCX has determined that five minutes 

per side is not sufficient to allow parties 

enough time to accurately report their 

block trades when the block trade is of 

the type that involves a liquidity 

provider pre-hedging in a related 

market, because a trade of this type does 

not involve a single point of execution 

during which parties agree to the terms 

of a trade then immediately report the 

trade details to the Exchange. Rather, 

these block trades involve multiple 

steps. Also, because the point of 

execution depends on executions in a 

related market, parties to a block trade 

need time to respond to their block 

execution and report the trade to the 

Exchange. 

Accordingly, NTM 2014–33 proposes 

two alternative reporting time 

requirements depending on whether the 

liquidity provider or the customer/order 

originator is posting the block trade. The 

proposed reporting times have been 

made more flexible to account for: (1) 

The amount of time required for the 

liquidity provider to calculate the 

futures price based on its hedge price; 

(2) the amount of time required for the 

posting party to enter the trade details 

into the OneChicago System; and (3) the 

time it may take for a party not on 

notice to react to an inbound message or 

alert from a counterparty or the 

OneChicago System.2

Under NTM 2014–33, in cases where 

the liquidity provider is initially posting 

the block trade to the Exchange, the 

liquidity provider has fifteen minutes 

from the final execution of its hedge in 

the related market to calculate the 

futures price and then insert the trade 

details into the OneChicago System. The 

liquidity provider in this case has 

fifteen minutes rather than the standard 

five because the liquidity provider must 

calculate the futures price from its 

hedge price and manually enter the 

details of the trade into the OneChicago 

System. The order originator then has 

ten minutes to accept the trade in the 

OneChicago System. The order 

originator in this case has ten minutes 

rather than the standard five because it 

is considered a non-notice party in that 

it will not become aware that its 

obligation to post its side of the trade is 

running until it receives a trade report 

from the OneChicago System. 

Conversely, when the order originator 

will be posting the block trade, the 

liquidity provider has ten minutes to 

calculate the futures price based on the 

hedge price and then inform the order 

originator of the futures price. The order 

originator then has fifteen minutes to 

insert the details of the trade into the 

OneChicago System. The liquidity 

provider then has five additional 

minutes to accept the trade in the 

OneChicago System. In this case, the 

liquidity provider initially has ten 

minutes rather than the standard five in 

order to calculate the futures price. The 

liquidity provider here does not receive 

the full fifteen minutes, however, 

because it is not also entering the trade 

details into the OneChicago System, as 

was the case in the previous example. 

The order originator has fifteen minutes 

rather than the standard five because it 

is considered a non-notice party that 

also needs to insert the details of the 

trade into the OneChicago System. 

Finally, the liquidity provider then has 

the standard five minutes to accept the 

inserted trade because it is on notice 

that the trade will soon be posted and 

simply has to review the trade details 

and accept the trade, and therefore, does 

not require any additional time. 

NTM 2014–33 clarifies that for block 

trades where there is no hedge in a 

related market (both parties simply 

agree to a block trade then post to the 

Exchange), NTM 2012–25 controls, and 

the parties must report the block 

without delay. As such, the reporting 

party has five minutes to insert the trade 

details into the OneChicago System and 

the accepting party then has five 

minutes to accept the trade. OCX is also 

clarifying that the standard five minute 

reporting and five minute accepting 

requirements are also applicable to 

bilateral EFP trades, because those 

trades do not involve a pre-hedge like 

the block trades described in NTM 

2014–33. 

Delayed EFP and Block Trade Reporting 

OCX recognizes that in some 

instances parties to a block trade may be 

unable to report their blocks and EFPs 

within the timelines required by the 

Exchange. Accordingly, OCX is 

permitting market participants to report 

block or EFP trades outside the 

reporting requirements in certain 

situations that the Exchange considers 

extenuating circumstances. NTM 2014– 

33 provides a non-exhaustive list of 

scenarios that the Exchange may 

consider to be extenuating 

circumstances, including (1) a technical 

malfunction or systems outage; (2) 

disagreement between reporting parties 

on price or some other material term of 

the trade; (3) a firm is reporting or 

accepting multiple block trades within 

short time period; and (4) unusual or 

abnormal market conditions. 

The text of the proposed rule change 

is attached as Exhibit 4 to the filing 

submitted by the Exchange but is not 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Notices 72747 

3 15 U.S.C. 78f(b). 

4 15 U.S.C. 78(f)(b)(5). 5 15 U.S.C. 78s(b)(1). 6 17 CFR 200.30–3(a)(12). 

attached to the published notice of the 

filing. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

OneChicago 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 

self-regulatory organization 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 purpose of OneChicago’s filing is 

to provide its market participants with 

guidance regarding the method by 

which bilateral blocks and bilateral 

EFPs may be reported to the Exchange. 

Specifically, market participants have 

raised questions regarding various 

aspects of bilateral block and bilateral 

EFP reporting, including how to deal 

with partial fills and remainders when 

reporting a bilateral block, which party 

to a bilateral block must report the trade 

first, how much time parties have to 

report a block trade to the Exchange, 

and under what circumstances, if any, 

OCX would allow parties to a bilateral 

block or bilateral EFP trade to exceed 

the reporting time requirements. OCX is 

updating its guidance in NTM 2014–33 

to account for these questions that have 

been raised by market participants. 

2. Statutory Basis 

OneChicago believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,3 in general, and 

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

of the Act,4 in particular, in that it is 

designed to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, 

and remove impediments to and perfect 

the mechanism of a free and open 

market and national market system. 

OneChicago believes that providing 

guidance to its market participants 

regarding the reporting of bilateral 

trades allows market participants to 

engage in these types of trades with 

regulatory certainty. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

OneChicago does not believe that the 

proposed rule changes will impose any 

impact, or impose any burden, on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act, in that the NTM 

simply provides guidance regarding 

how to comply with OCX’s bilateral 

block and bilateral EFP reporting rules. 

The rule change furthers competition by 

updating its bilateral block and bilateral 

EFP guidance to account for the various 

ways market participants engage in such 

trades. The Exchange believes that the 

proposed rule change is equitable and 

not unfairly discriminatory because all 

of the amended rules apply equally to 

all market participants. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The rule change will become 

operative on December 10, 2014. 

At any time within 60 days of the date 

of effectiveness of the proposed rule 

change, the Commission, after 

consultation with the CFTC, may 

summarily abrogate the proposed rule 

change and require that the proposed 

rule change be refiled in accordance 

with the provisions of Section 19(b)(1) 

of the Act.5

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– 

OC–2014–06 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–OC–2014–06. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

offices 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–OC– 

2014–06, and should be submitted on or 

before December 29, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28642 Filed 12–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73720; File No. SR– 

NYSEArca–2014–117] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Designation of a 

Longer Period for Commission Action 

on a Proposed Rule Change To 

Remove the Exchange’s Quote 

Mitigation Plan as Provided by 

Commentary .03 to Exchange Rule 6.86 

December 2, 2014. 

On October 2, 2014, NYSE Arca, Inc., 

(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’), 

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