Document ID: SEC-2013-1729-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-10-03T04:00Z

[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61425-61427]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24158]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70540; File No. SR-CBOE-2013-089]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend CBSX Rule 53.22 Related to CBSX Remote 
Market-Maker Appointments

September 27, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 17, 2013, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') a 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.
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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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend CBOE Stock Exchange, LLC (``CBSX'') 
Rule 53.22 related to CBSX Remote Market-Maker (``RMM'') appointments. 
The text of the proposed rule change is provided below.
(additions are italicizeded; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 53.22 Appointment of CBSX Remote Market-Makers

    (a) [On a form or forms]In a manner prescribed by CBSX, a 
registered CBSX Remote Market-Maker (other than CBSX DPMs and CBSX 
LMMs) may [apply for]select an Appointment (having the obligations of 
Rule 53.23) in one or more non-option securities traded on CBSX. CBSX 
may also appoint a registered CBSX Remote Market-Maker in one or more 
non-option securities traded on CBSX. In making such Appointments, CBSX 
shall give attention to (1) the preference of registrants; (2) the 
maintenance and enhancement of competition among CBSX Remote Market-
Makers in each security; and (3) assuring that financial resources 
available to a CBSX Remote Market-Maker enable it to satisfy the 
obligations set forth in Rule 53.23 with respect to each security for 
which it is appointed. CBSX may arrange two or more securities into 
groupings and make Appointments to those groupings rather than to 
individual securities. CBSX may suspend or terminate any Appointment of 
a CBSX Remote Market-Maker under this Rule and may make additional 
Appointments whenever the interests of a fair and orderly market are 
best served by such action.
    (b)-(c) No changes.
* * * * *
    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
    The Exchange proposes to amend CBSX Rule 53.22 related to RMM 
appointments. A ``CBSX Remote Market-Maker'' or ``RMM'' is a CBSX 
Trading Permit Holder that has agreed to fulfill certain market-making 
obligations thus qualifying for defined benefits as set forth in the 
CBSX Rules.\3\ An RMM is an individual (either a Trading Permit Holder 
or nominee of a Trading Permit Holder organization) who is registered 
with CBSX for the purpose of making transactions as a dealer-specialist 
in the CBSX electronic trading system in accordance with the CBSX 
Rules. Registered RMMs are designated as specialists on CBSX for all 
purposes under the Securities Exchange Act of 1934 (the ``Act'') and 
the rules and regulations thereunder. RMMs may only operate in a remote 
capacity.\4\
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    \3\ See CBSX Rule 50.3(2).
    \4\ See CBSX Rule 53.20.
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    CBSX Rule 53.22 currently provides, among other things, that RMMs 
may apply for an appointment (having the obligations of CBSX Rule 
53.23) \5\ in one or more non-option securities traded on CBSX on a 
form or forms prescribed by CBSX. It further provides that in making 
such appointments, CBSX must give

[[Page 61426]]

attention to (1) the preference of registrants; (2) the maintenance and 
enhancement of competition among RMMs in each security; and (3) whether 
the financial resources available to an RMM enable it to satisfy the 
obligations set forth in Rule 53.23 with respect to each security in 
which it holds an appointment.
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    \5\ Under CBSX Rule 53.23, RMMs must, among other things:
     enter into transactions that constitute a course of 
dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market;
     not enter into transactions or make bids or offers that 
are inconsistent with such a course of dealings;
     with respect to each security for which it holds an 
appointment, continuously engage in, to a reasonable degree under 
the existing circumstances, in dealings for its own account when 
there exists, or it is reasonably anticipated that there will exist, 
a lack of price continuity, or a temporary disparity between the 
supply of and demand for a particular security;
     compete with other CBSX Market-Makers to improve 
markets;
     make markets which, absent changed market conditions, 
will be honored for the number of shares entered into the CBSX 
electronic trading system;
     engage in trading activity of which at least 75% of its 
total dollar amount traded on CBSX is in securities to which it has 
an appointment;
     with respect to securities in which an RMM does not 
hold an appointment, not engage in transactions for an account in 
which it has an interest that are disproportionate in relation to, 
or in derogation of, the performance of its obligations with respect 
to those securities in which it does hold an appointment;
     satisfy RMM obligations in a security in which it does 
not hold an appointment whenever an RMM submits a two-sided quote in 
that security; and
     comply with two-sided and minimum size obligations and 
pricing obligations for bids and offers.
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    The proposed rule change amends Rule 53.22 to allow RMMs to select 
appointments rather than apply for them and to allow CBSX to appoint 
RMMs in one or more securities (considering the same factors listed 
above). The proposed rule change will enable RMMs to manage their 
appointments with more flexibility and in a timelier manner. The 
Exchange believes this will provide RMMs with more efficient access to 
the securities in which they want to make markets and disseminate 
competitive quotations, which will provide additional liquidity and 
enhance competition in those securities. CBSX will retain the ability 
to appoint RMMs in order to maintain a fair and orderly market.\6\ RMMs 
will continue to be subject to the obligations set forth in Rule 53.23 
with respect to their appointments.
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    \6\ CBSX also retains the authority under Rule 53.22(a) to 
suspend or terminate any RMM appointment if in the interest of a 
fair and orderly market.
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    The proposed rule change is substantially similar in all material 
respects to the rules of other self-regulatory organizations.\7\
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    \7\ See, e.g. CBOE Rule 8.3(a)(i) and C2 Options Exchange, 
Incorporated Rule 8.2(b).
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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.\8\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \9\ 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) \10\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    In particular, the proposed rule change removes impediments to a 
free and open market, because it will enable RMMs to manage their 
appointments with more flexibility and in a timelier manner. The 
Exchange believes this will provide RMMs with more efficient access to 
the securities in which they want to make markets and thus more quickly 
begin disseminating competitive quotations in those securities, which 
will provide additional liquidity and enhance competition in those 
securities. CBSX will still have authority to suspend or terminate any 
RMM appointment in the interest of a fair and orderly market, including 
if necessary to prevent fraudulent and manipulative acts and practices 
and protect investors or if an RMM does not satisfy its obligations 
with respect to an appointment.
    The proposed rule change does not result in unfair discrimination, 
as it applies to all RMMs. The proposed rule change reduces the burden 
on RMMs to manage their appointments and thus provide liquidity to 
CBSX; however, RMMs must still comply with the obligations set forth in 
CBSX Rule 53.23, which will ensure continuous, two-sided quotations in 
its appointed securities. CBSX believes it is appropriate to provide 
RMMs with the ability to select appointments but not Designated Primary 
Market-Makers (``DPMs'') or Lead Market-Makers (``LMMs''). Because DPMs 
and LMMs are subject to more stringent obligations, for which they 
receive additional benefits, with respect to their appointments than 
RMMs, the Exchange believes it is appropriate to continue to approve 
DPMs and LMMs after a thorough application process to ensure that they 
have sufficient resources and capabilities to satisfy those 
obligations.

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 because it provides the same 
relief to a group of similarly situated market participants--RMMs. The 
proposed rule change reduces the burden on RMMs to manage their 
appointments and thus provide liquidity to CBSX; however, RMMs must 
still comply with the obligations set forth in CBSX Rule 53.23, which 
will ensure continuous, two-sided quotations in its appointed 
securities. CBSX believes it is appropriate to provide RMMs with the 
ability to select appointments but not Designated Primary Market-Makers 
(``DPMs'') or Lead Market-Makers (``LMMs''). Because DPMs and LMMs are 
subject to more stringent obligations, for which they receive 
additional benefits, with respect to their appointments than RMMs, the 
Exchange believes it is appropriate to continue to approve DPMs and 
LMMs after a thorough application process to ensure that they have 
sufficient resources and capabilities to satisfy those obligations.
    The proposed rule change is substantially similar in all material 
respects to rules of other self-regulatory organizations. The Exchange 
does not believe the proposed rule change will help RMMs to the 
detriment of market participants on other exchanges. RMMs are still 
subject to the same obligations with respect to its appointments; the 
proposed rule change is making the appointment process more efficient 
for RMMs.
    CBOE believes that the proposed rule change will relieve any burden 
on, or otherwise promote, competition, as it will enable RMMs to manage 
their appointments with more flexibility and in a timelier manner. The 
Exchange believes this will provide RMMs with more efficient access to 
the securities in which they want to make markets and thus more quickly 
begin disseminating competitive quotations in those securities, which 
will provide additional liquidity and enhance competition in those 
securities.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) \12\ thereunder. 
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 after the date of the filing, or such shorter time as the 
Commission

[[Page 61427]]

may designate, the proposed rule change has become effective pursuant 
to 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
believes that waiver of the operative delay is appropriate because the 
proposed rule change does not present any new, unique or substantive 
issues, but rather only changes the manner by which RMMs may obtain 
appointments. The Exchange also states that RMMs will continue to be 
subject to the same obligations with respect to their appointments. 
According to the Exchange, waiver of the operative delay will provide 
RMMs with more efficient access to the securities in which they want to 
make markets so that RMMs may more quickly begin disseminating 
competitive quotations in those securities, which will provide 
additional liquidity and enhance competition in those securities. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
doing so will allow RMMs to manage their appointments in a more 
flexible and timely manner. For this reason, the Commission designates 
the proposed rule change to be operative upon filing.\15\
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    \13\ Id.
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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-CBOE-2013-089 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2013-089. 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 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-2013-089, and should be 
submitted on or before October 24, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24158 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P