Document ID: SEC-2013-1799-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: CBOE Futures Exchange, LLC
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62817-62820]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24567]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70611; File No. SR-CFE-2013-005]

Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Notification and Reporting Provisions for Exchange of 
Contract for Related Position Transactions and Block Trades

October 4, 2013.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 20, 2013, CBOE 
Futures Exchange, LLC (``CFE'' or ``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 CFE. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons. CFE also has filed this proposed rule change with the 
Commodity Futures Trading Commission (``CFTC''). CFE filed a written 
certification with the CFTC under Section 5c(c) of the Commodity 
Exchange Act (``CEA'') \2\ on September 20, 2013.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    CFE proposes to revise the notification and reporting provisions 
contained in CFE Rules 414 (Exchange of Contract for Related Position) 
(``ECRP'') and 415 (Block Trading).
    The scope of this filing is limited solely to the application of 
the rule changes to security futures traded on CFE. The only security 
futures currently traded on CFE are traded under Chapter 16 of CFE's 
Rulebook which is applicable to Individual Stock Based and Exchange-
Traded Fund Based Volatility Index (``Volatility Index'') security 
futures.
    The text of the proposed rule change is attached as Exhibit 4 to 
the filing

[[Page 62818]]

submitted by the Exchange but is not 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, CFE 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. CFE 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
    CFE Rule 414 sets forth requirements relating to ECRP transactions, 
and CFE Rule 415 sets forth requirements relating to Block Trades. Each 
of these types of transactions occurs off-exchange, and CFE Rules 
414(i) and 415(g) each set forth notification and reporting 
requirements, which are substantially the same. The current proposal 
seeks to amend these provisions. The impetus for these proposed changes 
is the planned expansion of extended trading hours for CBOE Volatility 
Index (VIX) futures, which is planned to occur in two phases with the 
first phase to begin in late September and the second phase to begin in 
the weeks that follow.\3\
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    \3\ See CFE Information Circular IC13-029 for additional 
information regarding the expansion of extended trading hours for 
VIX futures. This rule filing is intended to address how the 
notification and reporting provisions for ECRP transactions and 
Block Trades will operate when CFE introduces a new 45-minute 
extended trading hours period for VIX futures. This new trading 
period of extended trading hours in VIX futures will be from 3:30 
p.m.-4:15 p.m. on Mondays through Thursdays.
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    Because CFE's Help Desk will be staffed during longer periods of 
time than previously, the Exchange is proposing to amend the 
notification and reporting provisions contained in CFE Rules 414 
(Exchange of Contract for Related Position) and 415 (Block Trades), 
which apply to all products traded on the Exchange.
    For purposes of efficiency, the Exchange will describe below the 
current notification and reporting provisions and the proposed changes 
to those provisions, which would apply equally to both CFE Rule 414 and 
CFE Rule 415.
    The current notification and reporting provisions require that each 
party to the transaction have an Authorized Reporter call or email the 
CFE Help Desk after the transaction is agreed upon to notify CFE of the 
terms of the transaction.\4\ These provisions are described in terms of 
when there is agreement to the transaction, which triggers the ten-
minute time period during which the transaction must be reported to the 
CFE Help Desk.\5\ Unless otherwise specified in the rules governing the 
relevant Contract:
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    \4\ For this purpose, agreement to the transaction includes, 
without limitation, agreement to the actual price or premium of the 
Contract leg of the ECRP transaction or Block Trade (except in the 
case of a trade at settlement (``TAS'') transaction that is 
permitted by the rules governing the relevant Contract, in which 
case agreement to the transaction includes, without limitation, 
agreement upon whether the price or premium of the Contract leg of 
the ECRP transaction or Block Trade will be the daily settlement 
price or an agreed upon differential above or below the daily 
settlement price). The Exchange is also taking this opportunity to 
make further explicit that agreement to the terms of an ECRP 
transaction or Block Trade includes agreement to the quantity of the 
Contract leg of an ECRP transaction or the quantity of the Block 
Trade.
    \5\ All times included in this filing and in CFE's Rules are 
Chicago time.

     If the transaction is agreed upon between the time that 
Trading Hours commence in the relevant Contract and 3:15 p.m., the 
notification to the CFE Help Desk must be made without delay and by 
no later than ten minutes after the transaction is agreed upon (in 
which event the CFE Help Desk will report the transaction to CFE's 
trading system and provide a written transaction summary on that 
day); \6\
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    \6\ Additional details regarding the written transaction summary 
prepared by the CFE Help Desk are set forth in CFE Rules 414(k) and 
415(i).
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     if the transaction is agreed upon between 3:15 p.m. and 
3:25 p.m., the notification to the CFE Help Desk must be made either
     on the day the transaction is agreed upon by no later 
than 3:25 p.m. (in which event the CFE Help Desk will report the 
transaction to CFE's trading system and provide a written 
transaction summary to the Authorized Reporters on that day) or
     on the following business day by no later than ten 
minutes from the time that Trading Hours commence in the relevant 
Contract (in which event the CFE Help Desk will report the 
transaction to CFE's trading system and provide and provide a 
written transaction summary to the Authorized Reporters on that 
business day); and
     if the transaction is agreed upon after 3:25 p.m. and 
prior to the time that Trading Hours commence in the relevant 
Contract on the following business day, the notification to the CFE 
Help Desk must be made on that following business day by no later 
than ten minutes from the time that Trading Hours commence in the 
relevant Contract (in which event the CFE Help Desk will report the 
transaction to CFE's trading system and provide a written 
transaction summary to the Authorized Reporters on that business 
day).

    The current proposal would extend the time frames during which ECRP 
transactions and Block Trades may be reported. Also, the notification 
provisions would be described in terms of the time of notification to 
the Exchange (instead of when there is agreement to the 
transaction).\7\
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    \7\ The Exchange notes that Authorized Reporters would still be 
required to notify the CFE Help Desk without delay and by no later 
than ten minutes after the transaction is agreed upon.
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    Specifically, based upon the time of notification to the CFE Help 
Desk of an ECRP or Block Trade, these Rules would be amended to include 
charts that specify the manner in which the notification of an ECRP or 
Block Trade must be provided to the CFE Help Desk, the Business Day for 
which the ECRP Contract leg or Block Trade will be submitted for 
clearing, and when the Help Desk will report the ECRP Contract leg or 
Block Trade to CFE's trading system. The CFE Help Desk will provide a 
written transaction summary to each Authorized Reporter on the Business 
Day for which the ECRP Contract leg or Block Trade is submitted for 
clearing. The Exchange notes that between 7:00 a.m. and 4:00 p.m. on 
each business day, notification may be made by phone or email. The 
Exchange proposes to limit the method of notification to email only 
during all other times. The proposed rule charts \8\ would be as 
follows:
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    \8\ A separate chart would be set forth in both CFE Rule 414 and 
CFE Rule 415 and each chart would set forth the same reporting and 
notification provisions. For purposes of efficiency, the Exchange is 
setting forth one chart in the purpose section of this filing.

----------------------------------------------------------------------------------------------------------------
                                                             Business day for which
    Time of notification to the      Notification method    contract Leg/Block Trade     When Help Desk reports
             Exchange                                        submitted for clearing     contract Leg/Block Trade
----------------------------------------------------------------------------------------------------------------
7:00 a.m.-3:15 p.m. Monday-Friday.  Phone or E-Mail......  Business Day of             As soon as practicable
                                                            transaction.                following required
                                                                                        notifications to Help
                                                                                        Desk.
                                                           Next Business Day for
                                                            Trade at Settlement (TAS)
                                                            transactions reported
                                                            after 3:12 p.m.

[[Page 62819]]

 
3:15 p.m. to 3:30 p.m. Monday-      Phone or E-Mail......  Calendar day of             As soon as practicable
 Friday.                                                    transaction or next         after trading next
                                                            Business Day, as            commences following
                                                            designated by Authorized    required notifications
                                                            Reporters.                  to Help Desk.
                                                           Next Business Day for TAS
                                                            transactions..
3:30 p.m. to 4:00 p.m. Monday-      Phone or E-Mail        Calendar day of             As soon as practicable
 Thursday \9\.                                              transaction or Business     following required
                                                            Day of transaction, as      notifications to Help
                                                            designated by Authorized    Desk.
                                                            Reporters.
                                                           Business Day of
                                                            transaction for TAS
                                                            transactions.
3:30 p.m. Friday to 7:00 a.m.       E-Mail...............  Next Business Day.........  As soon as practicable
 Monday.                                                                                after trading next
                                                                                        commences following
                                                                                        required notifications
                                                                                        to Help Desk.
4:00 p.m. to 4:15 p.m. Monday-      Phone or E-Mail......  Business Day of             As soon as practicable
 Thursday.                                                  transaction.                following required
                                                                                        notifications to Help
                                                                                        Desk (which may occur
                                                                                        either during first
                                                                                        period of extended
                                                                                        trading hours or after
                                                                                        trading next commences).
4:15 p.m. to 7:00 am (next          E-Mail...............  Business Day of             As soon as practicable
 calendar day) Monday-Thursday.                             transaction.                after trading next
                                                                                        commences following
                                                                                        required notifications
                                                                                        to Help Desk.
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    CFE also proposes to amend CFE Rules 414(i) and 415(g) by providing 
that the Exchange may modify the days and times during which the 
notification, reporting, and clearance submission provisions set forth 
in the chart above would be applicable in the event that the Exchange 
is not be open for business or has shortened Trading Hours in 
connection with a holiday or a period of mourning.
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    \9\ As described in footnote 4, the Exchange will be introducing 
a new trading period of extended trading hours in VIX futures that 
will be from 3:30 p.m.-4:15 p.m. on Mondays through Thursdays. 
Authorized Reporters are able between 3:30 p.m. and 4:00 p.m. to 
report the Contract leg of an ECRP transaction or a Block Trade for 
clearing on either the calendar day of the transaction or the next 
business day. However, after 4:00 p.m., Authorized Traders will only 
be able to report trades for clearing on the next Business Day. The 
Exchange is providing this detail as background as to why the chart 
does not line up directly with the new trading period of extended 
trading hours being introduced for VIX futures.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) \11\ in particular in that it is designed 
to foster cooperation and coordination with persons engaged in 
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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would benefit 
investors and market participants because it would enhance CFE's ECRP 
and Block Trade reporting provisions by extending the time frames 
during which ECRP transactions and Block Trades may be reported. The 
Exchange also believes that the proposed rule change is equitable and 
not unfairly discriminatory because amended CFE Rules 414 and 415 would 
apply to all TPHs and Authorized Reporters and do not discriminate 
between market participants.

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

    CFE does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act, in that the rule change makes enhancements to 
CFE's Block Trade and ECRP reporting process. In addition, the Exchange 
believes that the expansion of the ability to report Block Trades and 
ECRP transactions in security futures in conjunction with the expansion 
of trading hours in VIX futures will promote competition because it 
will provide for the reporting and dissemination of security futures 
Block Trades and ECRPs during additional time frames which will serve 
to promote additional transparency and thus potential further price 
competition.

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 proposed rule change will become operative on or after October 
7, 2013.
    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.\12\
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    \12\ 15 U.S.C. 78s(b)(1).
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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-CFE-2013-005 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-CFE-2013-005. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 62820]]

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-CFE-2013-005, and should be 
submitted on or before November 12, 2013.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24567 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P