Document ID: SEC-2012-1157-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-07-17T04:00Z

[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42040-42045]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17348]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67410; File No. SR-CBOE-2012-064]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Continuous Electronic Quotes

July 11, 2012.
    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 July 5, 2012, the 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 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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[[Page 42041]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Rules relating to continuous 
electronic quotes. 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.

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 purpose of the proposed rule change is to amend Rule 1.1(ccc), 
``Continuous Electronic Quotes,'' to reduce to 90% the percentage of 
time for which a Market-Maker is required to provide electronic quotes 
in an appointed option class on a given trading day. Additionally, the 
proposed rule change amends Rules 8.13, 8.15A, 8.85 and 8.93 to 
increase to the lesser of 99% or 100% minus one call-put pair the 
percentage of series in each class in which Preferred Market-Makers 
(``PMMs''), LMMs, Designated Primary Market-Makers (``DPMs''), and 
electronic DPMs (``e-DPMs''), respectively (Market-Makers, PMMs, LMMs, 
DPMs and e-DPMs are collectively referred to in this filing as 
``Market-Makers'' unless the context provides otherwise), must provide 
continuous electronic quotes. The proposed rule change is comparable to 
the rules of other options exchanges applicable to equivalent market 
participants.\3\
---------------------------------------------------------------------------

    \3\ The continuous quoting obligations for NASDAQ Options Market 
(``NOM'') market-makers and NASDAQ OMX PHLX LLC (``PHLX'') streaming 
quote trades (``SQTs'') and remote SQTs (``RSQTs'') (similar to 
Market-Makers) are generally as follows: (1) NOM Chapter VII, 
Section 6(d)--market-makers must enter continuous bids and offers in 
at least 60% of the series in options in which the market-maker is 
registered for 90% of the trading day (as a percentage of the total 
number of minutes in such trading day) or such higher percentage as 
NASDAQ may announce in advance; and (2) PHLX Rule 1014(b)(ii)(D)(1)-
SQTs and RSQTs must quote two-sided markets in 60% of series of the 
options in which they are assigned for at least 90% of the trading 
day (as a percentage of the total number of minutes in such trading 
day).
    The continuous quoting obligations for NYSE Amex LLC (``NYSE 
Amex'') and NYSE Arca, Inc. (``NYSE Arca'') directed order market-
makers and PHLX directed SQTs and RSQTs (similar to PMMs) are as 
follows: (1) NYSE Amex Options Rules 964.1NY--directed order market-
makers must provide continuous two-sided quotations throughout the 
trading day in issues for which it receives directed orders for 90% 
of the time NYSE Amex is open for trading in each issue (applies to 
all of the directed order market-maker's appointed issues 
collectively); (2) NYSE Arca Options Rules 6.88--directed order 
market-makers must provide continuous two-sided quotations 
throughout the trading day in issues for which it receives directed 
orders for 90% of the time NYSE Arca is open for trading in each 
issue (applies to all of the directed order market-maker's appointed 
issues collectively); and (3) PHLX Rule 1014(b)(ii)(D)(1)--directed 
SQTs and RSQTs must quote two-sided markets in the lesser of 99% of 
series listed on the exchange or 100% of the series listed on the 
exchange minus one call-put pair, in each case in at least 60% of 
the options classes in which they are assigned for at least 90% of 
the trading day (as a percentage of the total number of minutes in 
such trading day); once they enter a quote in an assigned class, 
they must maintain until the close of that trading day quotations 
for the lesser of 99% of the series of the option listed on the 
Exchange or 100% of the series of the option listed on the Exchange 
minus one call-put pair.
    The continuous quoting obligations for NYSE Amex and PHLX 
specialists and NYSE Arca lead market-makers (similar to LMMs, DPMs 
and e-DPMs) are as follows: (1) NYSE Amex Options Rules 925.1NY--
specialists must provide continuous two-sided quotations throughout 
the trading day in its appointed issues for 90% of the time NYSE 
Amex is open for trading in each issue (applies to all of the 
specialist's appointed issues collectively); (2) NYSE Arca Options 
Rules 6.37B--lead market-makers must provide continuous two-sided 
quotations throughout the trading day in its appointed issues for 
90% of the time NYSE Arca is open for trading in each issue (applies 
to all of the lead market-maker's appointed issues collectively); 
and (3) PHLX Rule 1014(b)(ii)(D)(1)--specialists are responsible to 
quote two-sided markets in the lesser of 99% of the series or 100% 
of the series minus one call-put pair in each option in which such 
specialist is assigned for 90% of the trading day (as a percentage 
of the total number of minutes in such trading day).
---------------------------------------------------------------------------

    Rules 8.7, 8.13, 8.15A, 8.85, and 8.93 impose certain obligations 
on Market-Makers, PMMs, LMMs, DPMs, and e-DPMs, respectively. These 
Rules require that Market-Makers generally maintain continuous 
electronic quotes as follows:
     Rule 8.7(d)(ii)(B) requires that Market-Makers provide 
continuous electronic quotes when quoting in a particular class on a 
given trading day in 60% of the non-adjusted option series of the 
Market-Maker's appointed class that have a time to expiration of less 
than nine months;
     Rule 8.13(d) requires that PMMs provide continuous 
electronic quotes when the Exchange is open for trading in at least 90% 
of the non-adjusted option series of each class for which it receives 
Preferred Market-Maker orders;
     Rule 8.15A(b)(i) requires that LMMs provide continuous 
electronic quotes when the Exchange is open for trading in at least 90% 
of the non-adjusted option series within their assigned classes;
     Rule 8.85(a)(i) requires DPMs to provide continuous 
electronic quotes when the Exchange is open for trading in at least 90% 
of the non-adjusted option series of each multiply listed option class 
allocated to it and in 100% of the non-adjusted option series of each 
singly listed option class allocated to it; and
     Rule 8.93 requires e-DPMs to provide continuous electronic 
quotes when the Exchange is open for trading in at least 90% of the 
non-adjusted option series of each allocated class.
    Rule 1.1(ccc) currently provides that a Market-Maker who is 
obligated by CBOE Rules to provide continuous electronic quotes will be 
deemed to have provided ``continuous electronic quotes'' if the Market-
Maker provides electronic two-sided quotes for 99% of the time that the 
Market-Maker is required to provide electronic quotes in an appointed 
option class on a given trading day. The rule also provides that if a 
technical failure or limitation of a system of the Exchange prevents 
the Market-Maker from maintaining, or from communicating to the 
Exchange, timely and accurate electronic quotes in a class, the 
duration of such failure will not be considered in determining whether 
the Market-Maker has satisfied the 99% quoting standard with respect to 
that option class. The Exchange may consider other exceptions to this 
continuous electronic quote obligation based on demonstrated legal or 
regulatory requirements or other mitigating circumstances.
    The Exchange proposes to amend the definition of continuous 
electronic quotes to mean 90% of the time a Market-Maker is required to 
quote in an appointed option class on a given trading day. The rule 
will still provide for automatic exceptions for technical failures or 
system limitations and discretionary exceptions based on demonstrated 
legal or regulatory requirements or other mitigating circumstances.
    The Exchange also proposes to increase the percentage of series in 
each option class in which PMMs, LMMs, DPMs and e-DPMs are required to 
provide continuous electronic quotes. The proposed rule change amends: 
(i) Rule 8.13(d) to require PMMs to provide

[[Page 42042]]

continuous electronic quotes when the Exchange is open for trading in 
at least the lesser of 99% of the non-adjusted option series or 100% of 
the non-adjusted option series minus one call-put pair \4\ of each 
class for which it receives Preferred Market-Maker orders; (ii) Rule 
8.15A(b)(i) to require LMMs to provide continuous electronic quotes 
when the Exchange is open for trading in at least the lesser of 99% of 
the non-adjusted option series or 100% of the non-adjusted option 
series minus one call-put pair within their assigned classes; (iii) 
Rule 8.85(a)(i) to require DPMs to provide continuous electronic quotes 
when the Exchange is open for trading in at least the lesser of 99% of 
the non-adjusted option series or 100% of the non-adjusted option 
series minus one call-put pair of each option class allocated to them; 
and (iv) Rule 8.93 to require e-DPMs to provide continuous electronic 
quotes when the Exchange is open for trading in at least the lesser of 
99% of the non-adjusted option series or 100% of the non-adjusted 
option series minus one call-put pair of each allocated class.
---------------------------------------------------------------------------

    \4\ A ``call-put pair'' consists of two individual options, one 
call and one put, which cover the same underlying instrument and 
have the same expiration date and exercise price. Failure to 
maintain a qualifying (90% of the time, as proposed in this filing) 
quote in just one call, one put, or in one call and one ``paired'' 
put, would not by itself (assuming all other series of a class are 
being quoted as required) constitute a violation of 99%-of-the-
series requirement.
---------------------------------------------------------------------------

    The proposed rule change also makes additional changes to create 
consistency among the continuous quoting obligations for all CBOE 
Market-Makers. The proposed rule change eliminates the separate quoting 
requirements for DPMs in singly listed and multiply listed classes. 
This will cause the quoting obligation for multiply listed classes to 
increase from 90% to 99% of the series and for singly listed classes to 
decrease slightly from 100% to 99%. The Exchange believes that is no 
longer necessary to have a separate, slightly higher requirement for 
singly listed classes given the increase in the obligation for multiply 
listed series. The proposed rule change also deletes the requirement 
that e-DPMs will alternatively be required to respond to 98% of the 
requests for quotes (``RFQs'') if the Exchange has enabled RFQ 
functionality in a class. The Exchange never enabled the RFQ 
functionality in any class for e-DPMs, and it is no longer available. 
Therefore, the Exchange believes it is appropriate to delete this 
provision from the e-DPM rules.
    The Exchange does not believe that the proposed rule change would 
adversely affect the quality of the Exchange's markets or lead to a 
material decrease in liquidity. Rather, the Exchange believes that its 
current market structure with its high rate of participation by Market-
Makers permits the lowering of the quoting time obligation without fear 
of losing liquidity. Market-Makers will continue to be required to 
provide continuous electronic quotes in 60% of each allocated class. 
Additionally, for PMMs, LMMs, DPMs and e-DPMS, the proposed reduction 
in required quoting time will be offset by the increase in percentage 
of series in each appointed class in which PMMs, LMMs, DPMs and e-DPMs 
are required to provide continuous electronic quotes. The proposed rule 
change to require PMMs, LMMs, DPMs and e-DPMs to quote in the lesser of 
99% of the series or 100% of the series minus one call-put pair in each 
class provides flexibility in assignments that contain relatively fewer 
series and avoids situations when failure to quote 90% of the trading 
day in merely one individual option or one pair breaches the quoting 
requirement.
    The Exchange Rules also impose a number of other obligations on 
Market-Makers that will continue to ensure that they create and 
maintain a fair and orderly market in the option classes to which they 
are assigned. The proposed rule change would not excuse a Market-Maker 
that is present on the trading floor from its obligation to provide a 
two-sided market complying with the bid/ask differential requirements 
in response to any request for quote by a floor broker, Trading Permit 
Holder or PAR Official.\5\ The proposed rule change would also not 
excuse a Market-Maker that is present on the trading floor from its 
obligation to provide an open outcry two-sided market complying with 
the bid/ask differential requirements in response to a request for a 
quote by a Trading Permit Holder or PAR Official directed at that 
Market-Maker or when, in response to a general request for a quote by a 
Trading Permit Holder or PAR Official, a market is not then being 
vocalized by a reasonable number of Market-Makers.\6\ Further, the 
proposed rule change would not excuse a Market-Maker from its 
obligation to submit a single quote or maintain continuous quotes in 
one or more series of a class to which the Market-Maker is appointed 
when called upon by an Exchange official if, in the judgment of such 
official, it is necessary to do so in the interest of maintaining a 
fair and orderly market.\7\
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    \5\ See Rule 8.7(d)(i)(C) (relating to a request for quote by a 
floor broker) and (ii)(C) (relating to a request for a quote by a 
Trading Permit Holder or PAR Official).
    \6\ See Rule 8.7(d)(iv).
    \7\ Id.
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    In support of this proposal, the Exchange notes that other 
competing options exchanges impose continuous quoting obligations on 
their market participants that have equivalent rights and obligations 
as Market-Makers, PMMs, LMMs, DPMs and e-DPMs that are comparable to 
the obligations proposed in this filing:

                                                  Market-Makers
----------------------------------------------------------------------------------------------------------------
                                                      % Time              % Series             Classes
----------------------------------------------------------------------------------------------------------------
CBOE (current rule)......................  99% of the time required to           60  Class-by-class.
                                            provide quotes on a
                                            trading day when quoting.
NOM......................................  90% of a trading day.......           60  All classes collectively.
PHLX (SQTs and RSQTs)....................  90% of the trading day.....           60  All classes collectively.
----------------------------------------------------------------------------------------------------------------

                                                      PMMs
----------------------------------------------------------------------------------------------------------------
                                                      % Time              % Series             Classes
----------------------------------------------------------------------------------------------------------------
CBOE (current rule)......................  99% of the time required to           90  Class-by-class.
                                            provide quotes on a
                                            trading day.
NYSE Amex (directed order market-makers).  90% of the time open for             N/A  All classes collectively.
                                            trading.

[[Page 42043]]

 
NYSE Arca (directed order market-makers).  90% of the time open for             N/A  All classes collectively.
                                            trading.
PHLX (directed SQTs and RSQTs)...........  90% of the trading day.....      99% (or  60% of classes (and any
                                                                         100% minus   classes in which they
                                                                          one call-   enter quotes during a
                                                                          put pair)   trading day).
                                                                                 60  Remaining classes.
----------------------------------------------------------------------------------------------------------------

                                                LMMs/DPMs/e-DPMs
----------------------------------------------------------------------------------------------------------------
                                                      % Time              % Series             Classes
----------------------------------------------------------------------------------------------------------------
CBOE (current rule)......................  99% of the time required to        90% *  Class-by-class.
                                            provide quotes on a
                                            trading day.
NYSE Amex (specialists)..................  90% of the time open for             N/A  All classes collectively.
                                            trading.
NYSE Arca (lead market-makers)...........  90% of the time open for             N/A  All classes collectively.
                                            trading.
PHLX (specialists).......................  90% of the trading day.....      99% (or  Class-by-class.
                                                                         100% minus
                                                                          one call-
                                                                          put pair)
----------------------------------------------------------------------------------------------------------------
* DPMs are required to quote in 100% of the series in a class for singly listed options. E-DPMs are
  alternatively required to respond to 98% of the RFQ if the Exchange has enabled RFQ functionality in a class.
  The proposed rule change eliminates both of those alternative requirements.

    As the above tables show, there are slight differences among the 
quoting obligations of these exchanges, including differences in the 
application of these obligations to appointed option classes 
collectively or on a class-by-class basis and slight differences in the 
percentages of series of appointed classes in which market-makers must 
provide continuous electronic quotes. However, the Exchange believes 
that despite these slight variations, upon effectiveness of the 
proposed rule change, Market-Makers will be required to provide 
continuous electronic quotes for the same amount of time in the same or 
a substantially similar percentage of series as market-makers at these 
other exchanges.
    To demonstrate this point, consider a Market-Maker with 10 
appointed classes, each of which has 50 series, for a total of 500 
series, quoting in each class during a regular 390-minute trading 
day.\8\ The following table shows the ``minimum total quoting 
minutes,'' which equals the number of required minutes in a trading day 
times the number of series required to be quoted,\9\ of CBOE Market-
Makers, NOM market-makers and PHLX SQTs or RSQTs (assuming 
effectiveness of the proposed rule change): \10\
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    \8\ The Exchange notes that Rule 8.7(d)(iii) provides that the 
continuous quoting obligation applies to a Market-Maker on a per 
class basis only when the Market-Maker is quoting in a particular 
class on a given trading day. For purposes of this example, the 
Exchange assumes that a Market-Maker is quoting in all of its 
appointed classes for an entire trading day.
    \9\ The ``maximum total quoting minutes'' in a trading day would 
equal 390 minutes times 500 series, or 195,000.
    \10\ Given CBOE's current 99% requirement, the minimum total 
quoting minutes for CBOE Market-Makers quoting in all classes for an 
entire trading day is 115,830 (386.1 minutes x 300 series), assuming 
they are quoting in all appointed classes for an entire trading day, 
which is higher than that of NOM market-makers and PHLX SQTs and 
RSQTs.

------------------------------------------------------------------------
                                            % series
       Exchange        % time required    required to     Minimum total
                           to quote          quote       quoting minutes
------------------------------------------------------------------------
CBOE.................  90%............  60%............  105,300
                       (351 minutes)..  (300 series)...  (351 minutes x
                                                          300 series)
NOM..................  90%............  60%............  105,300
                       (351 minutes)..  (300 series)...  (351 minutes x
                                                          300 series)
PHLX.................  90%............  60%............  105,300
                       (351 minutes)..  (300 series)...  (351 minutes x
                                                          300 series)
------------------------------------------------------------------------

    The following table shows the ``minimum total quoting minutes'' of 
CBOE PMMs, NYSE Amex and NYSE Arca directed order market-makers, and 
PHLX directed SQTs and RSQTs (assuming effectiveness of the proposed 
rule change):
---------------------------------------------------------------------------

    \11\ See supra note 3.

------------------------------------------------------------------------
                                            % series
       Exchange        % time required    required to     Minimum total
                           to quote          quote       quoting minutes
------------------------------------------------------------------------
CBOE.................  90%............  99%............  173,745
                       (351 minutes)..  (495 series)...  (351 minutes x
                                                          495 series)
NYSE Amex *..........  90%............  100%...........  175,500
                       (351 minutes)..  (500 series)...  (351 minutes x
                                                          500 series)
NYSE Arca *..........  90%............  100%...........  175,500
                       (351 minutes)..  (500 series)...  (351 minutes x
                                                          500 series)

[[Page 42044]]

 
PHLX * *.............  90%............  99%............  173,745
                       (351 minutes)..  (495 series)...  (351 minutes x
                                                          495 series)
------------------------------------------------------------------------
 *NYSE Amex and NYSE Arca rules do not specify a minimum percentage of
  series in which their directed order market-makers must maintain
  continuous electronic quotes in their appointed classes.\11\ The
  Exchange assumes for purposes of this example that the continuous
  quoting obligation applies to 100% of series in all appointed classes.
 **Phlx rules provide that directed SQTs and RSQTs must quote two-sided
  markets in the lesser of 99% of series listed on the exchange or 100%
  of the series listed on the exchange minus one call-put pair, in each
  case in at least 60% of the options classes in which they are assigned
  for at least 90% of the trading day (as a percentage of the total
  number of minutes in such trading day). Additionally, once they enter
  a quote in an assigned class, they must maintain until the close of
  that trading day quotations for the lesser of 99% of the series of the
  option listed on the Exchange or 100% of the series of the option
  listed on the Exchange minus one call-put pair. The Exchange assumes
  for purposes of this example that the directed SQT/RSQT enters quotes
  in all of its assigned classes during the trading day.

    The following table shows the ``minimum total quoting minutes'' of 
CBOE LMMs/DPMs/e-DPMs, NYSE Amex specialists, NYSE Arca lead market-
makers, and PHLX specialists (assuming effectiveness of the proposed 
rule change):
---------------------------------------------------------------------------

    \12\ Id.

------------------------------------------------------------------------
                                            % series
       Exchange        % time required    required to     Minimum total
                           to quote          quote       quoting minutes
------------------------------------------------------------------------
CBOE.................  90%............  99%............  173,745
                       (351 minutes)..  (495 series)...  (351 minutes x
                                                          495 series)
NYSE Amex *..........  90%............  100%...........  175,500
                       (351 minutes)..  (500 series)...  (351 minutes x
                                                          500 series)
NYSE Arca *..........  90%............  100%...........  175,500
                       (351 minutes)..  (500 series)...  (351 minutes x
                                                          500 series)
PHLX.................  90%............  99%............  173,745
                       (351 minutes)..  (495 series)...  (351 minutes x
                                                          495 series)
------------------------------------------------------------------------
* NYSE Amex and NYSE Arca rules do not specify a minimum percentage of
  series in which their specialists and lead market-makers,
  respectively, must maintain continuous electronic quotes in their
  appointed classes.\12\ The Exchange assumes for purposes of this
  example that the continuous quoting obligation applies to 100% of
  series in all appointed classes.

    As the above example demonstrates, upon effectiveness of the 
proposed rule change, the minimum quoting minutes for Market-Makers 
will be the same as those of NOM market-makers and PHLX SQTs and 
RSQTs.\13\ The minimum quoting minutes of PMMs will be slightly less 
than NYSE Amex and NYSE Arca directed order market-makers and the same 
as PHLX directed SQTs and RSQTs. The minimum quoting minutes of LMMs, 
DPMs and e-DPMs will be the same as PHLX specialists and slightly less 
than NYSE Amex specialists and NYSE Arca lead market-market makers.\14\
---------------------------------------------------------------------------

    \13\ In addition, because CBOE applies its continuous quoting 
obligation to Market-Makers on a class-by-class basis as opposed to 
all classes collectively as the other exchanges do, CBOE's rules 
ensure that Market-Makers, when they are quoting in all appointed 
classes for an entire trading day, provide liquidity in a 
significant number of series in each class in which they are 
quoting, whereas the other exchanges' rules could result in reduced 
or no liquidity in certain classes.
    \14\ The Exchange notes that for PMMs, LMMs, DPMs and e-DPMs, 
upon effectiveness of the proposed rule change, the ``minimum 
quoting minutes'' will be the same as it is currently for those 
Market-Makers (using the above example, the current minimum quoting 
minutes is 386.1 minutes x 450 series = 173,745 quoting minutes).
---------------------------------------------------------------------------

    The Exchange believes this proposal will make the quoting time 
requirements of Market-Makers more comparable to those at other options 
exchanges and is therefore essential for competitive purposes. CBOE 
believes it is disadvantageous to CBOE Market-Makers if they are 
subject to stricter timing requirements with respect to their 
continuous quoting obligations than market-makers at other options 
exchanges.
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.\15\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \16\ requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, to remove 
impediments to and to perfect the mechanism for a free and open market 
and a national market system, and, in general, to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes this proposed rule change 
promotes just and equitable principles of trade because it reduces 
burdens and unnecessary restrictiveness on Market-Makers. The Exchange 
still imposes many obligations on Market-Makers to maintain a fair and 
orderly market in their appointed classes, which the Exchange believes 
eliminates the risk of a material decrease in liquidity. While the time 
during which Market-Makers must provide continuous electronic quotes 
will be slightly reduced, Market-Makers will still be obligated to 
provide continuous electronic quotes for a significant part of the 
trading day in 60% of series of each appointed class. PMMs, LMMs, DPMs 
and e-DPMs will be obligated to provide continuous electronic quotes 
for a significant part of the trading date in an increased percentage 
(99% or 100% minus one call-put pair) of series of each appointed 
class. Additionally, all Market-Makers will continue to be obligated to 
quote the series when requested by a floor broker, Trading Permit 
Holder or PAR Official, or if the need otherwise arises.
    Accordingly, the proposal supports the quality of CBOE's markets by 
helping to ensure that Market-Makers will continue to be obligated to 
quote in series when necessary. With respect to PMMs, LMMs, DPMs and e-
DPMs, the benefit provided to these Market-Makers from the proposed 
reduction in required quoting time is offset by the proposed increased 
in required percentage of series in which these Market-Makers must 
provide continuous electronic quotes. Ultimately, the benefits the

[[Page 42045]]

proposed rule change confers upon Market-Makers are offset by the 
continued, and for PMMs, LMMs, DPMs and e-DPMs increased, 
responsibilities to provide significant liquidity to the market to the 
benefit of market participants. In addition, the proposal allows 
flexibility with respect to PMMs', LMMs', DPMs' and e-DPMs' assignments 
that contain relatively fewer series and reduces unnecessary rigidity 
in DPMs' quoting obligations with respect to singly listed series.
    The proposed rule change also protects investors and the public 
interest by creating more uniformity and consistency among the 
Exchange's rules related to Market-Maker quoting obligations and 
deleting a provision regarding functionality that is no longer used by 
the Exchange.
    Finally, the proposed rule change allows the Exchange to require 
its Market-Makers to provide continuous quotes in a percentage of 
series in their appointed classes for a portion of the trading day that 
is the same as that of market-makers at other exchanges, which the 
Exchange believes will ultimately make the Exchange more competitive 
and help remove impediments to and promote a free and open market.
    For the foregoing reasons, the Exchange believes that the balance 
between the benefits provided to Market-Makers and the obligations 
imposed upon Market-Makers by the proposed rule change is appropriate.

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 not necessary or appropriate in furtherance of 
the purposes of the Act. In this regard and as indicated above, the 
Exchange notes that the proposed rule change is comparable to current 
rules at competing options exchanges related to market-maker continuous 
quoting obligations \17\ and will ensure fair competition among the 
options exchanges with respect to these obligations.
---------------------------------------------------------------------------

    \17\ See supra note 3.
---------------------------------------------------------------------------

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

    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) \18\ of the Act and 
Rule 19b-4(f)(6) \19\ thereunder.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of this 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.

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-2012-064 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-2012-064. 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-2012-064 and should be 
submitted on or before August 7, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17348 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P