Document ID: SEC-2013-0993-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-05-30T04:00Z

[Federal Register Volume 78, Number 104 (Thursday, May 30, 2013)]
[Notices]
[Pages 32496-32498]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12796]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69629; File No. SR-CBOE-2013-054]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change To Amend Rule 
6.42

May 23, 2013.
    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 May 13, 2013, 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

[[Page 32497]]

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 Rule 6.42. 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 Rule 6.42--Minimum Increments 
for Bids and Offers--regarding minimum increments of bids and offers 
for complex orders. Currently, Rule 6.42(4) states that bids and offers 
on complex orders may be expressed in any increment regardless of the 
minimum increments otherwise appropriate to the individual legs of the 
order. This language allows for complex order bids and offers to be 
expressed in any increment whatsoever. The Exchange believes that 
setting a minimum increment for bids and offers on complex orders of 
$0.01 will ensure that there is a reasonable lowest minimum increment 
for bids and offers that makes it simple to monitor and participate for 
all market participants. As such, in order to limit this potential, the 
Exchange hereby proposes to state that bids and offers on complex 
orders, as defined in Interpretation and Policy .01 to Rule 6.42, may 
be expressed in any net price increment that may not be less than $0.01 
(as determined by the Exchange on a class-by-class basis and announced 
to the Trading Permit Holders via Regulatory Circular) regardless of 
the minimum increments otherwise appropriate to the individual legs of 
the order. The addition of the ``(as determined by the Exchange on a 
class-by-class basis and announced to the Trading Permit Holders via 
Regulatory Circular)'' language will allow the Exchange to establish 
such minimum increments on a class-by-class basis in order to ensure 
uniformity of minimum bid and offer increments within a class (as the 
Exchange may already do for bids and offers on complex orders in 
options on the S&P 500 Index (``SPX''), p.m.-settled S&P 500 Index 
(``SPXPM'') or on the S&P 100 Index (``OEX'' and ``XEO'')) as well as 
ensure that Trading Permit Holders are notified of such minimum 
increments via Regulatory Circular.
    For example, the Exchange could release out a Regulatory Circular 
stating that the minimum increments for complex order bids and offers 
within a certain class would be $0.01. Or the Exchange could release a 
Regulatory Circular stating that the minimum increments for complex 
order bids and offers within a certain class would be $0.025, or even 
that $0.01 and $0.025 increments could be used for complex order bids 
and offers within a certain class (if, for example, such a class is 
accustomed to trading on both penny increments and also 2.5-cent 
increments). The Exchange could not, however, release a Regulatory 
Circular stating that the minimum increments for complex order bids and 
offers would be $0.005, or anything lower than $0.01.
    The Exchange also proposes to make a similar change regarding 
complex orders in SPX, SPXPM, OEX and XEO (the ``Specific Options''). 
Currently, Rule 6.42(4) states that bids and offers on complex orders 
in the Specific Options, except for box/roll spreads, shall be 
expressed in decimal increments no smaller than $0.05 or in any 
increment, as determined by the Exchange on a class-by-class basis and 
announced to the Trading Permit Holders via Regulatory Circular.\3\ 
This ``any increment'' language would also allow for the Exchange to 
determine that the minimum increment for bids and offers on complex 
orders in one or more class of the Specific Options would be smaller 
than $0.01. The Exchange desires to prevent the entry of bids and 
offers on such orders from being smaller than $0.01 for some of the 
reasons described above as well as to set a reasonable floor for such 
bid and offer increments. As such, the Exchange proposes to amend this 
language to state that bids and offers on complex orders in options on 
the S&P 500 Index (SPX), p.m.-settled S&P 500 Index (SPXPM) or on the 
S&P 100 Index (OEX and XEO), except for box/roll spreads, shall be 
expressed in increments no smaller than $0.05 or in any net price 
increment that may not be less than $0.01, as determined by the 
Exchange on a class-by-class basis and announced to the Trading Permit 
Holders via Regulatory Circular. The Exchange proposes to delete the 
word ``decimal'' from before ``increments'' because the specification 
of decimal increments is no longer relevant.
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    \3\ See CBOE Rule 6.42(4).
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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.\4\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \5\ 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) \6\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange believes that 
setting a minimum increment for bids and offers on complex orders of 
$0.01 will ensure that there is a reasonable lowest minimum increment 
for bids and offers that makes it simple to monitor and participate for 
all market participants, thereby removing impediments to and perfecting 
the mechanism of a free and open market.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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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. The

[[Page 32498]]

Exchange believes that the proposed change will not impose an 
unnecessary burden on intramarket competition because it applies to 
bids and offers in complex orders from all market participants. The 
Exchange believes that the proposed change will not impose an 
unnecessary burden on intermarket competition because it applies only 
to CBOE. To the extent that setting the lowest possible minimum 
increment for bids and offers in complex orders at $0.01 may be 
attractive to market participants at other options exchange, such 
market participants are always welcome to become CBOE market 
participants.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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-2013-054 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-2013-054. 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 20549-1090, 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-2013-054, and should be submitted on or before June 20, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12796 Filed 5-29-13; 8:45 am]
BILLING CODE 8011-01-P