Document ID: SEC-2015-0973-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2015-06-10T04:00Z

[Federal Register Volume 80, Number 111 (Wednesday, June 10, 2015)]
[Notices]
[Pages 33003-33005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14136]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75109; File No. SR-CBOE-2015-053]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Intermarket Order Routing

June 4, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on May 28, 2015, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``SEC'' or ``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.14B regarding order routing 
to other exchanges to include certain references to provisions of Rule 
15c3-5 under the Act \3\ and make certain miscellaneous non-substantive 
changes to the existing text of Rule 6.20. The text of the proposed 
rule change is provided below. (additions are italicized; deletions are 
[bracketed])
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    \3\ See Securities Exchange Act Release No. 63241 (November 3, 
2010), 75 FR 69792 (November 15, 2010).
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* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 6.14B. Order Routing to Other Exchanges
    The Exchange may automatically route intermarket sweep orders to 
other exchanges under certain circumstances, including pursuant to Rule 
6.14A

[[Page 33004]]

(``Routing Services''). In connection with such services, the following 
shall apply:
    (a)-(g) No change.
    (h) Each routing broker is required to establish, document, and 
maintain a system of risk management controls and supervisory 
procedures reasonably designed to manage the financial, regulatory and 
other risks of providing Trading Permit Holders and their customers 
access to other exchanges, pursuant to Rule 15c3-5 under the Exchange 
Act. Pursuant to the policies and procedures developed by the routing 
broker to comply with Rule 15c3-5, if an order or series of orders are 
deemed by the routing broker to violate the applicable pre-trade 
requirements of Rule 15c3-5, the routing broker will reject the 
order(s) prior to routing and may seek to cancel any orders that have 
been routed.
    . . . Interpretations and Policies:
    .01 No change.
* * * * *
Rule 6.20. Admission to and Conduct on the Trading Floor; Trading 
Permit Holder Education
    (a)-(e) No change.
    . . . Interpretations and Policies:
    .01 Only those Trading Permit Holders who have been approved to 
perform a floor function are authorized to enter into transactions on 
the floor. Such Trading Permit Holders include Floor Brokers who are 
registered pursuant to Rule 6.71[, Board Brokers who are registered 
pursuant to Rules 7.2 and 7.3] and Market-Makers registered pursuant to 
Rules 8.2 and 8.3. While on the floor such floor Trading Permit Holders 
shall at all times display a floor Trading Permit Holder's badge.
    .02-.10 No change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose

Market Access Rule

    The Commission adopted Rule 15c3-5 (also referred to herein as the 
``Market Access Rule'') to require broker-dealers providing others with 
access to an exchange or alternative trading system to establish, 
document and maintain a system of risk management controls and 
supervisory procedures reasonably designed to manage the financial, 
regulatory, and other risks of providing such access.\4\ Broker-dealers 
routing orders on behalf of exchanges or alternative trading systems 
for the purpose of accessing other trading centers in compliance with 
Rule 611 of Regulation NMS,\5\ or in compliance with a national market 
system plan for listed options, are not required to comply with Rule 
15c3-5 with regard to such routing services, except with regard to 
paragraph (c)(1)(ii). Paragraph (c)(1)(ii) provides in relevant part 
that the broker-dealer's risk management controls and supervisory 
procedures be reasonably designed to systematically limit the financial 
exposure of the broker or dealer that could arise as a result of market 
access, including being reasonably designed to prevent the entry of 
erroneous orders, by rejecting orders that exceed appropriate price or 
size parameters, on an order-by-order basis or over a short period of 
time, or that indicate duplicative orders.\6\
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    \4\ Id.
    \5\ 17 CFR 242.611.
    \6\ See 17 CFR 240.15c3-5(b) and (c)(1)(ii).
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Proposal To Modify Rules Related to Routing Brokers

    The Exchange proposes to amend Rule 6.14B to make explicit that 
broker-dealers routing Exchange orders to other markets must establish, 
document, and maintain a system of risk management controls and 
supervisory procedures reasonably designed to manage the financial, 
regulatory and other risks of providing Trading Permit Holders and 
their customers access to other options exchanges and stock trading 
centers (as applicable), pursuant to Rule 15c3-5 under the Act. The 
proposed rule change would also state that pursuant to the policies and 
procedures developed by the routing broker to comply with Rule 15c3-5, 
if an order or series of orders are deemed by the routing broker to 
violate the applicable pre-trade requirements of Rule 15c3-5, the 
routing broker will reject the order(s) prior to routing and may seek 
to cancel any orders that have been routed. To the extent that any 
Exchange-affiliated routing broker determines, based on its procedures, 
that an order should be rejected, the routing broker may also seek to 
cancel orders that have already been routed away.

Proposal To Modify Rule 6.20 To Make Miscellaneous, Non-Substantive 
Changes

    The Exchange is also proposing certain non-substantive amendments 
to Rule 6.20 pertaining to admissions to, and conduct on, the CBOE 
trading floor and Trading Permit Holder education. In particular, the 
Exchange is proposing in Rule 6.20.01 to eliminate reference to the 
term ``Board Brokers'' as these market participants no longer exist.
 2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the section 6(b)(5) \8\ 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) \9\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \7\ 15 U.S. C. 78f(b).
    \8\ 15 U.S. C. 78f(b)(5).
    \9\ Id.
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    In particular, the Exchange believes that, by including specific 
references to the existing requirements of Rule 15c3-5 under the Act 
within the Exchange Rules, the Exchange is reiterating a routing 
broker's obligation under Rule 15c3-5. The Exchange also believes that 
the proposed rule change will benefit Trading Permit Holders because it 
provides clarity on the process

[[Page 33005]]

employed for away market routing consistent with the Market Access 
Rule. The Exchange believes that the changes to conform the text of 
Rule 6.14B (pertaining to options order routing to other exchanges will 
simplify the Rules and make it easier to administer having consistent 
provisions across both markets. Finally, the Exchange believes that the 
miscellaneous, non-substantive changes to Rule 6.20 will simplify and 
update the rules, and make them easier to read.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed rule change 
is technical in nature in that is designed to reiterate existing 
requirements under the Market Access Rule, which will provide clarity 
on the process employed for away market routing and make the Market 
Access Rule easier to administer consistently across markets. The 
Exchange's other proposal to make other miscellaneous, non-substantive 
changes to Rule 6.20 will simplify and update the Rules, and make them 
easier to read. For these reasons, the Exchange does not believe that 
the proposed rule change will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange also notes that another exchange, 
EDGA Exchange, Inc. (``EDGA''), has substantially similar provisions in 
its rules.\10\ To the extent that the proposed rule change may make 
CBOE a more attractive venue for market participants on other 
exchanges, such market participants may elect to become CBOE market 
participants.
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    \10\ See EDGA Rule 11.11(i).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \11\ and 
Rule 19b-4(f)(6) \12\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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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-2015-053 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-2015-053. 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-2015-053 and should be 
submitted on or before July 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14136 Filed 6-9-15; 8:45 am]
 BILLING CODE 8011-01-P